Debt, no money, decent income - how to start

Debt, no money, decent income - how to start

Rental Property Investor · Buffalo, MO · Member since 2014 · 51 posts · 9 votes

Warning - this may be a long post - I will try to section it off.  I have an on/off relationship with RE as I've always been drawn to it and always screwed it up - and then listened to those in my life who told me that it was not for me and I should just quit.  I'm tired of being a quitter and something needs to change in my life - now.  I've made a promise to myself that this is the time to get this RE thing right and create wealth that changes my family tree and I intend to keep it no matter how many times I screw it up going forward.  I've finally got the mindset, but I have destroyed my credit, have no savings, decent income, but it's all being eaten up by debt payment.  I'm 37, spent my whole life working and I've got $100,000 in debt and a negative net worth to show for it.  RE represents a way out.

It all starts, however, with the first move. I have been looking at wholesaling until I have enough to fund my first deal. I would eventually like to get into doing BRRRR, but without being able to get the conventional refinance loans (due to bad credit), that would be out. Just trying to work out the best method to get this started.

Some Background:

I am a disabled Veteran.  I have physical issues that prevent me from doing most traditional work.  I have a wife that will be supportive once she sees the first check (until then she doesn't want me spending more than a couple hundred on anything related to this).  I have been a property manager (which I hated), worked for a buy and hold investor for a bit helping find properties and shadowing (which I loved), and just recently did a stint as a real estate agent (which I loved talking to people who weren't agents, but hated the politics in the office).  I have also bought and sold 5 properties, mostly breaking even over my small investing career.  I eventually learned that deal analysis and buying is where the money really is.

I have a wife and a 10-year-old son who lives with us and a 22-year-old daughter who is struggling a lot in her life.  Having a disabled dad who couldn't always be there for her (left the Air Force 10 years ago) didn't help, I'm sure.  I need to help her out financially, but cannot yet.  I also want to show my son a path to wealth-building that will allow him to live the kind of life he wants to live.  As he is 10, I don't think I have a whole lot of time left to really get that through to him.

Wife is a hair stylist and makes about $24,000/yr.  She would like to move to having her own salon or paying for her own chair, but we cannot afford that yet.  I bring in about $36,000/yr from disability and other sources.  I have a lot of free time to work on this.

Why Real Estate:

I love people and hearing their stories.  I am usually a listener and try to understand where someone else is coming from.  I am the type that will try to solve other people's problems, tending to think about solutions for not only a specific situation, but for the group of people that may fall into that type of scenario.

I also love numbers and spreadsheets.  If left alone, I could spend all day tweaking a spreadsheet.  I have had to learn over the years how to ensure that I focus on the 20% that gets 80% of the business.  However, I am great with numbers and can usually sense when the numbers are off even if I haven't completely worked out the math.

Lastly, being a military man through and through, I fell in love with systems.  I would much rather have a system with metrics that I know how to hit than blindly walking into something and just taking a guess.  It is my way to cut through the chaos that normally exists otherwise.  Over the past decade, I have had to work on being flexible while also adhering to a system.  It's still a work in progress, but I have gotten better.

How I would like to invest:

I recently saw the BP podcast with Joe Asamoah and loved his idea of buying a 3br, turning it into a 5br, fixing it up nice, and then going with Section 8 tenants. I would love to help poor people get great housing. My market here in Missouri is a little less good for that sort of thing, but I thought it was interesting and would really like to find that sort of solution around here. I am definitely hooked on the idea of BRRRR investing for building wealth and cashflow.

What I am looking for now:

I don't know how exactly to get from where I am now to doing BRRRR investing. Would wholesaling right now be a good way to increase my income? I've never done it before. Is there some other investment vehicles that would build me some income that I could do now? Are there any other suggestions / other stuff I might be missing? I am ready to do whatever I physically can to begin this. Do I need to knock on doors? Can do. Call people? No problem. Go to meetup groups? Already started. Any advice is very much appreciated!

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Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
6y

@Trevis Kelley  If I was you, I'd start by getting my finances in order and working on my credit score.  Why not make it a family thing?  You can teach your 22 year old daughter how to budget and handle money at the same time as your 10 year old son.  Make it a game where you set goals every month and the person who wins get a reward (ie the others make them their favourite dinner or dessert-something that does NOT cost a lot of money).  

Are there things you can do to increase your income or decrease your expenses?

See this reply in the discussion

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  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    @Trevis Kelley  If I was you, I'd start by getting my finances in order and working on my credit score.  Why not make it a family thing?  You can teach your 22 year old daughter how to budget and handle money at the same time as your 10 year old son.  Make it a game where you set goals every month and the person who wins get a reward (ie the others make them their favourite dinner or dessert-something that does NOT cost a lot of money).  

    Are there things you can do to increase your income or decrease your expenses?

  • Rental Property Investor · Buffalo, MO · Member since 2014 · 51 posts · 9 votes
    6y

    Teresa,

    Thanks for the reply!

    My daughter now lives halfway across the country from us with her fiance.  I have the budget put together, and we are down to bare minimum for stuff.  We live in a house on some acreage (paying $520/mo on a 20 year mortgage), raising chickens and planting veggies for our food.  We spend $250/mo feeding our family of 3.  Looking at everything, I have no idea how we could minimize much more.  We have been trying to do as much as we can from the Mr. Money Moustache blog.

    As far as earning more, my wife works full time and then comes home to do some of the farming stuff I can't do.  So a second job for her is probably out.  As for me, I have been unsuccessful at trying to return to work, mostly due to having a week or so of not physically able to get out of bed.  I return, and not too much later I don't have a job.  No reason given, though I know why it happens.  Don't blame them, as the last 10 years has confirmed that I can no longer do a conventional job.

    My son is involved, he's seen our budget and how we are doing things.  It's a good start and I think once he starts working he'll be able to save a good bit.  I'd love to be able to show him what to do with it and I think RE is a decent place to go with it.  I just want to have done it successfully myself first.  We are 10 years away from having enough of the debt paid off to be able to get our credit in line and could be another couple of years before the score comes back.  I was hoping to have RE help us accelerate that some so that I can teach him when the time comes.

    I guess I'm just looking for other ways to get a jumpstart.  I'm attending a few different meetups in my area, I'll see if some investors need some wholesale or something done.  Maybe I'll check for a hard money lender to do a flip or two.  I'm still going to continue reading and learning.  I haven't heard much about people in my position getting into RE, but there must be a way to do it.

  • Charlie CameronBusiness Member
    Investor · Niceville, FL · Member since 2017 · 450 posts · 366 votes
    6y

    @Trevis Kelley thank you for your service brother.  The 100K of debt you mentioned.  High interest?  What kind of debt?  I'm not a CFA (but I bet there are some awesome ones on here!), but paying down any high interest debt is going to be a worthwhile proposition.  That's what I'd do first before jumping in to real estate.  You also need a savings buffer in case things don't go as expected (spoiler alert: they just won't go as expected!).  

    I know this may not be the answer you want to hear, but I feel very strongly about steering new investors away from jumping in to deals if I feel like they are not financially able to handle some real estate mistakes and losses.  

    The RAL Room Assisted Living Mastermind
  • Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    6y

    I would find a way to increase your income before I’d jump into real estate . It doesn’t sound like your in a solid position especially if things went wrong in your investing career which always happens in this business . You said you have plenty of free time but disabled and make 36k a year . Your wife is a hair stylist she can do hair in the off hours right at your home for extra cash on the side . Find a way to increase that number by taking on Extra work to fill that time that is not labor intensive or manually stressful etc. regardless of what people tell you on here it takes real money to buy real estate . Even creative financing and the like requires substantial funds 

    Honestly though money is not that hard to get ..Your biggest hurdle is the wife . She has the wrong mindset and can really hinder your future plans if she panics over spending Much money on real estate. I couldn’t have accomplished the success I have now if it wasn’t for my wife supporting me in this crazy business . If she is not on board and there to push you when things get tough ( and they will I assure you) it will be far more difficult even more so than getting the money or deals . 

  • Rental Property Investor · Buffalo, MO · Member since 2014 · 51 posts · 9 votes
    6y
    Originally posted by @Charlie Cameron:

    I know this may not be the answer you want to hear, but I feel very strongly about steering new investors away from jumping in to deals if I feel like they are not financially able to handle some real estate mistakes and losses.  

    This is what I feared I would hear.  Do you have much experience with wholesaling?  Is that a technique that is not used much anymore?  I need to accelerate my ability to pay down debt so I can get into something sooner.  Maybe I need to find something else to make money and then circle back.

  • Rental Property Investor · Buffalo, MO · Member since 2014 · 51 posts · 9 votes
    6y
    Originally posted by @Dennis M.:

    I would find a way to increase your income before I’d jump into real estate . It doesn’t sound like your in a solid position especially if things went wrong in your investing career which always happens in this business . You said you have plenty of free time but disabled and make 36k a year . Your wife is a hair stylist she can do hair in the off hours right at your home for extra cash on the side . Find a way to increase that number by taking on Extra work to fill that time that is not labor intensive or manually stressful etc. regardless of what people tell you on here it takes real money to buy real estate . Even creative financing and the like requires substantial funds 

    Honestly though money is not that hard to get ..Your biggest hurdle is the wife . She has the wrong mindset and can really hinder your future plans if she panics over spending Much money on real estate. I couldn’t have accomplished the success I have now if it wasn’t for my wife supporting me in this crazy business . If she is not on board and there to push you when things get tough ( and they will I assure you) it will be far more difficult even more so than getting the money or deals .  

    I am trying to see the solutions here, as I don't like to focus on problems.  My wife cannot take on extra clients in our home unless we spend a lot to build out the space to do that or she wants to put her license at risk.  She is also already putting in 40-45 hours per week at her job, about 15 hours taking care of farm stuff, and then another 10 or so on general around the house work I cannot do.  She's about stretched to her limit at the moment.  This is partly why we need to find a way to replace her job income.

    As for money not being that hard to get, I used to be in that boat.  Since becoming disabled though, it's been a lot harder to see the solutions.  It used to be I could just get a side job lifting heavy things if I needed extra cash.  Now, it's not so much - unless someone has ways they can point me in.  I'm trying to find something that would be work from home that isn't writing (I have been told that my writing sucks) or call center (as they want a perfectly silent environment and I don't have one).

    My wife's mindset is that we have already taken thousands of dollars, stuck it somewhere for a long time, and didn't see much of a return (as opposed to just getting a nice, safe ETF or index fund).  She is aware that I learned a lot of valuable lessons on that journey, but she is not ready to just jump into doing that again.  She wants to see a proof of concept and then she will be much more interested in going back in.  I can understand her perspective there.  If I can find a way to make a few thousand dollars in a RE deal, she's all for taking that money to make more in RE.

    I may go poke around some other places to see if I can find a way to generate some income in other ways so that I can build a more solid foundation.  I just need to find something that I can actually do that will get me there.

  • Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
    6y

    @Trevis Kelley I think Dave Ramsey books and podcasts is your best strategy. You can't climb the mountain until you get out of your current hole. Dave Ramsey can help you with that for free, without credit, and without risk. 

    You want to help the poor, but you can't because you are broke. If you think RE is a way to get rich quick, you are sadly mistaken. A lot of people go broke trying to get rich quick. "Flipping" houses looks great on HGTV, but that isn't real. Once you are out of debt and have some money saved your life will become more peaceful. Right now, you can't afford to lose any money. 

  • Investor · Houston · Member since 2019 · 153 posts · 139 votes
    6y

    @Trevis Kelley a few things jumped out at me in your post about your current living situation. Acreage and farm. Do you have enough equity in your house for a HELOC? If so, are you in a location where putting up a pre-fab metal building and making it "barndominum" to rent out would make sense? Would it be viable as an air BnB eco-tourist rental? I know there's a niche market for that stuff, but that's the extent of my knowledge of it. Not sure if that's too outside of the box for you as an option but I'm a huge believer in working with what you've got to find creative solutions.

  • Member since 2019 · 19 posts · 6 votes
    6y

    Thank you for your service Travis, and don't allow yourself to get discouraged from doing what you feel will move you forward to live the life you want for yourself and your family. I would recommend that you begin by wholesaling as this requires little to no money and it will sharpen your skills in knowing what to look for in identifying a quality real estate deal to put under contract and then assign to an investor and take your $5/10/20K fee - while leaving the flipper-investor plenty of room to make his/her money on the deal. There are plenty of youtube videos and free books on doing this, and you'll need to be slightly tech-savvy to do this online (there is also affordable software to help you for a small investment) - but this is one of the most legitimate players in this market that may be what you need to get started. Check it out and best of luck to you my friend!

  • Member since 2019 · 19 posts · 6 votes
    6y

    Jerry Norton is his name if the link didn't transfer Travis. 

  • Investor · Philadelphia, PA · Member since 2017 · 64 posts · 22 votes
    6y

    @Trevis Kelley I am no expert but I would work on my credit. Credit is king it opens doors. Maybe with good credit you can open doors or look into. FHA loan or try learning to wholesale long distance.

  • Wholesaler · Arnold, MO · Member since 2013 · 348 posts · 183 votes
    6y

    @Trevis Kelley have you thought about cold calling for a RE investor? Cold calling is not fun for a lot of people, 

    including RE investors so I'm sure you could negotiate a payment plan that might get your foot in the door to

    where you eventually want to go.

  • Rental Property Investor · Buffalo, MO · Member since 2014 · 51 posts · 9 votes
    6y
    Originally posted by @Vince Mayer:

    @Trevis Kelley have you thought about cold calling for a RE investor? Cold calling is not fun for a lot of people, 

    including RE investors so I'm sure you could negotiate a payment plan that might get your foot in the door to

    where you eventually want to go.

     This is absolutely something I would be interested in.  I know that's one of the suckier parts for people, but I like asking questions and listening.  It was also one of the few parts of being an agent that I didn't mind so much.  I would want some metrics to hit for amount of calls made per day, amount of people talked to, how many lead to deals, etc.  I would also want to know what would qualify as a deal that would be interesting, etc.

    I have a decent grasp on how sales funnels work, but could always learn more on how to best move people through them.  The things I could learn doing that sort of job would be just as valuable as any sort of money I would make (though I would need some of that too).

    I would be interested in talking with anyone here about that.  I'm also going to jump on talking with some RE agents and some investors in my area to see if any of them need that kind of service.

    Thanks again for the suggestions!  This community has always been awesome!

  • Attorney · Portland, MI · Member since 2019 · 2 posts · 0 votes
    6y

    @Trevis Kelley your penchant for spreadsheets and numbers is where I would focus. I know if I had someone like that for any business I had I’d be very appreciative! Why not get paid for it?

  • Eastern Michigan · Member since 2018 · 81 posts · 144 votes
    6y

    This isn't something i would recommend often but have you looked into filing chapter 7 bk? NOT ch 13. Clear the slate,  don't go back into debt and then you can start moving forward. 

  • Rental Property Investor · Columbus, OH · Member since 2019 · 10 posts · 1 vote
    6y

    @Adam D Rinehart

    I love this idea!!

  • Rental Property Investor · Columbus, OH · Member since 2019 · 10 posts · 1 vote
    6y

    @Steven Roberts

    Glad you said this!! He needed to know that he shouldn’t be discouraged. ❤️

  • Rental Property Investor · Columbus, OH · Member since 2019 · 10 posts · 1 vote
    6y

    @Vince Mayer

    Hi Vince! If you don’t mind could you tell me what this is? Thank you.

  • Investor · Philadelphia, PA · Member since 2017 · 64 posts · 22 votes
    6y

    @Theresa Harris yes I must agree I doing that with my daughter know. She understands how to use credit cards and the doors she can unlock is unlimited.

  • Investor · Philadelphia, PA · Member since 2017 · 64 posts · 22 votes
    6y

    @Adam D Rinehart we must be friends that is genus I loved that idea it wonderful if he just has a website and fun activities work with people to advertise it money maker .

  • Wholesaler · Arnold, MO · Member since 2013 · 348 posts · 183 votes
    6y

    @Jas Evans Cold calling? That's calling people and asking if they want to sell their property. You obviously need a list of people that have that have a motivation to sell but you are calling them, uninvited, so you need to clear the list of people that are on the "no call" list.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    @Trevis Kelley  Based on what you wrote, your combined income is $60K/yr, so $5K/month; groceries are $250/month and your mortgage is $520/month which is great.  I know you have other bills, but after taxes that should leave a good amount of money on the table to either pay your debt or save.  I would down all of your expenses to see where the money is going.  You'll have property taxes, insurance, gas, utilities, etc.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y
    Originally posted by @Junon Celestin:

    @Theresa Harris yes I must agree I doing that with my daughter know. She understands how to use credit cards and the doors she can unlock is unlimited.

     When used properly, credit cards can be great; but too often people don't pay off the balance and that is where the problems begin.  I'm glad you are teaching her how to use them responsibly.

  • Real Estate Investor · East Bay, CA · Member since 2010 · 44 posts · 14 votes
    6y

    Trevis, my post was removed as "self promotion" (go figure), but I was offering to mentor you for free.

    Don't pay anyone for this.

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    @Trevis Kelley just a couple observations. First of all, your situation has been a strain on you and your family. Your wife probably more so than anyone. I am sure you know this, but I just wanted to put it in context. If she is concerned or feels your plan is risky, listen to her. 

    It sounds like you are being sensible and on a good path. Keeping a tight budget is important when you are trying to pay off debt and repair credit. Keep in mind that repairing credit is way more than paying off debt. In fact, debt helps build credit - that is on time debt payments. It seems you should be able to repair your credit faster than you are projecting. 

    One other thing to consider is how does your side income affect the disability checks? Just make sure whatever you are doing doesn't mess up your secure income stream.

    It does seem that finding someone to shadow for wholesaling may be a great place to start. Maybe you work out a deal where they buy the lists and you call on them. They could work out a deal where you get a finders fee and they train you. 

    Whatever you do, avoid anything that costs you money. Your families security is most important. It is one thing if you spend your time, but you can't afford to spend your money until you repair your financial situation.

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