In the Beginning (Warning, this is long)

I have been interested in real estate for awhile. I started catching infomercials on television when I was a teen. I thought it was interesting, but was warned by my Father about the infomercial, and that it was a scam.

But it stayed in my mind.

I remember once, riding in my parents car, thinking about something that didn't make sense.

These people would talk about refinancing a property, take out the money, and it was "free money" because there were no taxes. I thought duh, it's a loan, you have to pay it back. But in that car, I realized that if you have tenants, then no you don't. They pay it back.

The logic of it all was starting to settle in. Here it still didn't seem as logical to take out a loan, and reduce your income, short gain, long term you make less.

But the logic finally came to me again. You don't take the money to spend, but to buy more real estate. The reduction in income on one property results in the down payment for another property, to create another income.

But life and fear kept me out of real estate, until I was getting close to 30. I decided to take the plunge, and started looking. An Agent found a group of 5 houses for sale. I looked at them, and decided on 2, which produced the highest profit, and started negotiating.

But I wasn't ready. One day I went to the agents office to hammer out a deal, and was surprised to find a room with a bunch of agents. I am not sure why there were there, and felt overwhelmed, so I apologized, and excused myself.

I didn't have the money to put into these properties, so I may have saved myself some grief. At the time I just wondered what was wrong with me.

Once again life took over. Things were too tight for us, and I decided we needed to pay down our debt.

I created a spreadsheet, and came up with a plan. I was amazed at how quickly I could pay off debt, and with only $50 more then we were paying. I would add that to our smallest bill, then once that was paid off, I went for the next smallest.

I remember that in slightly more then a year, we would have 2 cards paid off, and have about $100 added to the monthly payment on a third.

I had not realized I created the Dave Ramsey debt snowball, at least a form of it.

Sent out the first payment, feeling great because I was doing something to improve our finances. But then, that same month, my wife came to me and said she was having issues breathing.

We seemed to struggle to get that extra $50, and now had to come up with as much as $400 to pay for her medicine. We had health insurance, but it was a year away from paying for prescriptions. And this didn't include all the medical bills.

We got behind on our bills. Miss one payment, and now you owe 2, plus the late fee. Now the payment is equal to 3 months, so you pay that one to get caught up, and that puts you behind on another card, and owe equal to 3 payments on that one.

We spiraled down after that. I fought to get these things paid, and made the mistake of working with creditors. At the time I wasn't aware how often they were violating the laws. One made an agreement with us where we authorized a monthly draft from our account. (Amazed now they only took that amount out.) With the agreement that by making these payments, all interest, and fees would be suspended.

Well after 6 months, and $270 in payments, our bill was actually higher. The fees and interest were still there. And it was about this time we quit answering the phone.

You can guess where we ended up.

Well everyone kept telling us we needed to "rebuild our credit".

WORST ADVICE EVER!

While I can blame the creditors for acting inappropriately, and my Wife's medical condition, the truth is it was our fault. If we had managed our finances better, then we would have had the money, and credit to pay for her medication until her insurance kicked in.

No matter what happened, we need to accept responsibility.

We also need to accept responsibility for listening to all the bad advice.

By thinking we needed to rebuild credit, we ended up with the worst cards available, with high interest, and fees. They even charged us for signing up with them. And once again we ended up with too much debt.

One year after the bankruptcy, we had plenty of money, but year 2 we were back to struggling.

We had moved into a more expensive apartment, because we could afford it. We also bought a decent car, because we thought we could afford it. But we moved out, and into a much cheaper apartment. It was in terrible condition, but our rent dropped by over $250 a month.

And then I lost my job.

It took me 6 weeks to get another, but it wasn't enough hours, and was offered another, so was working at least 4 days a week.

About this time I started listening to Dave Ramsey. I agreed with most of what he was saying, and spending a lot of time in my car, I caught hours of he show a week.

This got me on a budget, and paying off my debt. Our finances improved.

I finally dumped our car payment, and paid cash for something cheaper. Though I have to admit that was kind of a disaster, and went through a couple cars before getting one that ran.

But we were back on the debt snowball, and things were moving along.

At this time, our Daughter moved out, and then my Brother in Law, who was having his own financial burden moved in. He paid $200 of the rent.

This gave us another $200 to apply to our debt, and helped him out.

I began seeing our bills falling, and our debt shrinking. We were making headway.

Then the 2008 crash happened. My wife had a 401K, but I knew enough to just ignore it.

But at this time my pay dropped some, and my hours were cut. I was now working 3 to 4 days a week.

The first thing I did was cash in my vacation time, just in case. But then I found we were still making our budget, and still paying off debt.

Just in case we altered our pay off plan, but that resulted in our savings growing. We were paying off debt faster then ever, while our savings were higher then they ever were. All while others were complaining about how bad the economy was. I almost felt guilty.

A couple years later the stress of us all living together was too high, but our finances were well enough that we felt able to move into a better apartment.

My Mother had passed in 2006, and my Grandmother passed a few months later in 2007. My Grandmother had a little bit of a nest egg, and that passed to my Father. He unfortunately passed in 2011, less then a year after we moved in to our apartment.

Over the years I had learned that my parents didn't have a clue about finances. I do regret that they weren't able to enjoy the inheritance together, but I also know it would not have lased them very long.

When my Grandmother passed, my Father didn't go out and enjoy the money as he should have. He put it away, which was somewhat intelligent, but he put it away for me and my Brother. A gesture I truly appreciate.

But I could not believe how much debt he died with. He had the money making a guaranteed 7%, while he still had credit cards with 18-21% interest.

There is a strange feeling when you loose a parent, and gain in inheritance. You have a massive loss, and a financial gain at the same time. Two emotions hitting up against each other, and the result is guilt. I felt I was benefiting off the death of my Father, and it seems wrong.

Logically I knew there was no reason to feel guilty. This was what my Father had wanted. Also we had practically forced him into a nursing home, because of his health issues, and knew he needed help to take care of himself.

He was headed to a physical therapy session, when he collapsed. Trained Nurses were there, but couldn't revive him.

Everyone did what they could, but he still didn't make it. So again I knew there was no reason to feel guilty.

After things settled down, we ended up with an inheritance.

I have heard horror stories about people receiving a windfall, and ending up back to where they started, or worse. So I had often thought about what I would do if I ended up in this situation. Even planning how I would react depending on quantities. $50K, $100K, $250K, $500K, $1M, $50M+

Yes I actually had 6 different plans, and I hit above the third.

After freaking out about the size of our bank accounts, we paid off all of our debt. Then set aside an amount of "blow money" that I felt we could spend four our enjoyment, without negatively affecting the inherritance.

We purchased, with cash, 2 newer cars that were in great shape.

I planned on putting $50K into the stock market, with plans for real estate for most of the rest. But strangely enough, I got into the market, saw deals, and put double that in the market. It actually did quite well.

One of the things I didn't think I would do was take a leave of absence from work, which looks like it has turned into a more permanent event. But I made more in the market then I would have working.

Unfortunately I delayed my venture into real estate. I made sure I learned as much as possible, and finally, as I write this, I am in the middle of my first deal. This Friday will be the inspection.

This was my long winded history, but if I went into detail, it could have been a novel.

I wanted to start this blog before I actually own any real estate.

I am starting with some money, but even then it is still lower then what a lot of people have. The fact that I took time off from work is hurting my credit, at lest for conventional loans. I am a better candidate for a commercial loan, which you need for 5 units and up.

The rest of this blog will be about how I am moving into the realm of real estate investor. Deal by deal.