Debt or no Debt
Lexington, KY · Member since 2015 · 9 posts · 4 votes
So I feel like when my wife and I are ready to make our first investment happen that I will have this thought in the back of my head like "what am I doing? I still have debt on 2 vehicles and a mortgage."
How do you overcome this or should we wait until the vehicles are paid for?
By the way we are looking to flip a property when this time comes.
Don't wait until you pay off your two vehicles. If you're serious about investing in Real Estate and doing it with a sound financial footing, there is another way to start with no automobile debt.
Sell the two cars before the end of July. Buy two cheaper vehicles, for around $3K-$5k each. Buy your investment property. Maybe buy a second one. Then rethink your financial situation and see if you are in a better position to afford two high monthly car payments.
Good luck.
For what it's worth, I have two vehicles, both 2004 models, and zero car debt. I also have three SFR for income properties that I own with no debt, I'm a part-owner in a REI group, and I plan to purchase two more SFR by the middle of this fall.
You have to prioritize. You can wait until your current auto loans are paid off. Is that one year? Two years? Four years? Just realize you're crippling your ability to invest in Real Estate. Then again, maybe your income is so great that you can overcome high car payments and begin investing in RE immediately. I have to keep reminding myself that not everyone is in the same boat as I was/am.
As the thread is called debt or no debt, figured I would ask a question as I was literally thinking about this same topic this morning and was going to start a post for it.
How does the BP community feel about Student Loan Debt? My wife and I have ~25K in student loans that cost us ~$300 to service monthly and rates are either 2% or 6%? We pay this pretty comfortably.
Thoughts?
@Josh Gevedon Let me know if you'd like me to star a seperate thread
Originally posted by @Josh Gevedon:
James DeRoest how do I convince the wife to sell our child?
Show her the cost of college.
Very simple analogy but it is true.
Debt on Assets pay you, Debt on Liabilities pay them.
All the posts are excellent advice.
If you have not read this book then please give it a try. Total Money Makeover, Dave Ramsey. FYI: Read it from a money management standpoint then seek prudent counsel on ways to leverage asset debt in real estate.
End goal: Who pays Who and Who owes Who...
Keep up the hard work and it will pay off
Well I knew somebody would bring that infamous radio guru Ramsey. It's kinda ironic that Ramsey lost his shirt investing in Real Estate. Yes, he sure did. That's because the banks called in their loans on his property portfolio. That's his fault for putting too much trust in banks. So now he's been on this mission for years peddling his books and radio advice. Personally I found his radio show tedious and boring. Sure debt can grab you if you don't watch but really??? Do you need to be baby sat by the Ramsey's of this world.
Learn how to run a business. It's not rocket science. If a couple of car payments are going to stop you starting a RE business, then perhaps business in general is not for you. Sometimes taking a risk can pay off. Good luck.
Very simple analogy but it is true.
Debt on Assets pay you, Debt on Liabilities pay them.
All the posts are excellent advice.
If you have not read this book then please give it a try. Total Money Makeover, Dave Ramsey. FYI: Read it from a money management standpoint then seek prudent counsel on ways to leverage asset debt in real estate.
End goal: Who pays Who and Who owes Who...
Keep up the hard work and it will pay off
Well I knew somebody would bring that infamous radio guru Ramsey. It's kinda ironic that Ramsey lost his shirt investing in Real Estate. Yes, he sure did. That's because the banks called in their loans on his property portfolio. That's his fault for putting too much trust in banks. So now he's been on this mission for years peddling his books and radio advice. Personally I found his radio show tedious and boring. Sure debt can grab you if you don't watch but really??? Do you need to be baby sat by the Ramsey's of this world.
Learn how to run a business. It's not rocket science. If a couple of car payments are going to stop you starting a RE business, then perhaps business in general is not for you. Sometimes taking a risk can pay off. Good luck.
To add. I do not advocate any guru or particular business model. As with the famous qoute, "It takes a village to raise a child." I was referring to one aspect of the business. If you are going to be well rounded then I offer advice to study all success nd failures in a market industry.
I only recommended the Ramsey for the sake of strict conservative money management.
Thank you for the re-post. I apologize if I came across as a true advocate for only a Ramsey guru.
Just my two cents and probably not worth that much...
More importantly is the ratio of debt to reserves. It's ok to be in a sticky situation if you've prepared for it appropriately. Make sure that when you are in debt you have set aside a conservative amount of reserves. This will allow you to feel less stressed about the situation because you're preparing for the worst.
I also agree with having zero car debt but it depends on your goals. If you want to invest on the side and treat it as a smart alternative to spending your money on other things, then maybe you keep the cars you have. If you want to expand as quickly as possible, be open to your maximum number of options, then you need to have zero car debt.
Sell the cars - trade down - buy real estate and live below your means.
Leverage or no leverage, the single biggest road block for investors is Discipline. Most don't want change their lifestyle, put in additional time, look at deals after a long day of work - or drive a car that isn't brand new.
Skimming the numbers provided - you would give yourself a raise ditching the payments - another $5,500 to put toward your investing would be very helpful in your position.
Accumulate rental properties quickly and have them pay for your monthly expenses. Having monthly payments of a few hundred or few thousand dollars is not our problem. We focus to much on saving and monthly expenses. Income is the real problem. Focus and griw the income column.
Frank
I think everybody's debt tolerance will vary so we can't answer this question for you, but if you're questioning it I feel like you already know the answer. Make paying off the cars your first priority or downgrade to cheaper cars.
Very simple analogy but it is true.
Debt on Assets pay you, Debt on Liabilities pay them.
All the posts are excellent advice.
If you have not read this book then please give it a try. Total Money Makeover, Dave Ramsey. FYI: Read it from a money management standpoint then seek prudent counsel on ways to leverage asset debt in real estate.
End goal: Who pays Who and Who owes Who...
Keep up the hard work and it will pay off
Well I knew somebody would bring that infamous radio guru Ramsey. It's kinda ironic that Ramsey lost his shirt investing in Real Estate. Yes, he sure did. That's because the banks called in their loans on his property portfolio. That's his fault for putting too much trust in banks. So now he's been on this mission for years peddling his books and radio advice. Personally I found his radio show tedious and boring. Sure debt can grab you if you don't watch but really??? Do you need to be baby sat by the Ramsey's of this world.
Learn how to run a business. It's not rocket science. If a couple of car payments are going to stop you starting a RE business, then perhaps business in general is not for you. Sometimes taking a risk can pay off. Good luck.
To add. I do not advocate any guru or particular business model. As with the famous qoute, "It takes a village to raise a child." I was referring to one aspect of the business. If you are going to be well rounded then I offer advice to study all success nd failures in a market industry.
I only recommended the Ramsey for the sake of strict conservative money management.
Thank you for the re-post. I apologize if I came across as a true advocate for only a Ramsey guru.
Just my two cents and probably not worth that much...
Definitely not an attack on you and I'm sure you wouldn't take my comments personally.
There's a very important lesson here though. Ramsey left himself wide open by signing personal guarantees. A big No No in my book. many folks on this forum pound the same old path of going to banks for loans. Where does it say that you have to do that? How about using a bit more imagination.
As long as I live I will NEVER sign personal guarantees on a note secured by RE. People in general should seriously consider taking a different path and invest in RE without the use of banks. many of my colleagues are doing so every week/month and making a nice tidy living out of it. If that has piqued your interest then I urge you to investigate this avenue with aplomb. In fact IF you do so, you are tapping into a much bigger market than you would ever imagine. Good hunting.
No one can tell you what is right for you. If you like your cars and want to keep them then wait until they are paid off. Real estate is a fickle thing sometimes and presently the market is up and live, hot as they say. Who knows in a couple of years if there will be so much activity. Others will tell you that you have to strike while the iron is hot but in the end you should do what is right for you and what you will feel comfortable doing and allow you to live the life you want.
Some are very motivated at this time since we do have a very active market now that allows for negotiating good deal and that situation does not always exist. Still there is no point in getting in if you are only going to keep feeling uncomfortable about it. We do not all have the same goals.
Still there is the wisdom of knowing when to be in the market and buying up deals.
So I feel like when my wife and I are ready to make our first investment happen that I will have this thought in the back of my head like "what am I doing? I still have debt on 2 vehicles and a mortgage."
How do you overcome this or should we wait until the vehicles are paid for?
By the way we are looking to flip a property when this time comes.
Take on the debt. Think of a strategy that will pay your cars and mortgage with the cash flow if that is your biggest concern. The time and effort to learn and make money in real estate will out way the amount of focused time and effort you will put into getting your debt down with the right mindset.