All Forum Posts by: Michael R.

This Blog Post may help.  

Edit to add:  The Podcast referenced in the post was a good listen as well.

Great question and a great position to be in.  

I would list pros and cons and put a loose business plan together where each scenario plays out.  Off the top of my head - a paid off house sounds awfully nice to not have to worry about.  Even if you pay off a majority of your primary residence and finance a small portion, that may be advantageous.  The thought of having fewer monthly bills in my mind means you have to worry less about working to pay them off.  i.e. you can do what you want to do vs having to get work to pay the debt off.  

I hope that helps.

I agree with @Trevor Ewen in asking what your goals / investment strategies are here.  Do you own the house out right?  If not what is your equity position and is building equity important? Can you sell it and buy two houses that cash flow better? 

Get Pre-approved (as has been said).  The credit hit that your credit will take is lumped into one inquiry (Source-last paragraph) so that you can shop around for the best terms etc.

You don't want to be in the position to find a great place on a Friday afternoon at 5:00 PM just to have to wait until Monday to even submit for financing.  Financing in place will help you more than hurt you - and it will confirm you are shopping for what you can afford. 

I hope that helps.

I have a few companies coming out to provide me an estimate this month, but wanted to check and see if anyone in the Northern Virginia area had any recommendations for brickwork / re-pointing.  Also - are there any red flags I should look for in the estimates so that I can prevent getting taken advantage of?

@David S. - Would the purchase make sense if you closed the basement off and prevented any tenant access (i.e. locking the door)?

If it would - consider that option.  No one says you have to give them access.  You could rent it out as storage space - or complimentary storage space for each tenant in the building.  

Any sprinkler systems that could be leaking? I have had a water leak in one and the tenants didn't catch it right away. This was a rough winter so that came to mind.

I also had a wax ring go bad recently, but I think this volume of water would be visible.

I hope that helps.

You can write off rentals in your name - write offs are not exclusive to LLCs.  Do you have a CPA?

This is brave to acknowledge your situation and ask for help -- so good job there.

Do not cancel your credit cards -- the credit history is important and you should pay them off.  You spent the money.  So look at other things that you can modify to improve your situation by creating an executable plan:

What kind of car are you driving?  

What is your LLC, what does it do? Because saying it's 1 year old isn't an example of a strong business - 5 years is the benchmark.

What other ways can you increase cash flow?

What cable package do you have?

What truly non essentials are you spending on?

Do you have a CPA that can help you get the most of your deductions?

Debt Settlement is not a good idea from my experience. Your credit will take a hit.

Cost of Debt and Net  Worth exercise: 

Get a whiteboard and sit down with your significant other.  You both need to be on the same page with this.  You need to list all of your debt by balance and interest rate -- all of it.  Then realize how much your debt is costing you each year. 

An example is a $10K Credit card @ 10% is costing you roughly $1,000 dollars a year. I realize this is an estimate -- the idea is for you to get an idea of the average cost of this debt.  Your interest rate is an annuity to a credit card company.  

Take that balance of your debt -- 250K and run the ratio to your income $48K - and you see that with these numbers, your debt is equal to 520% of your income.  Where you want to be is 0% - 10-15% for general purposes.  But 0% of credit card debts.  

This exercise will teach you what your debtors see and it should make you ill.  The good news is - now you just need to put a plan in action and pay your debt off in order of what is costing you the most.  In some cases it will be what has the highest interest rate.  In some cases it will by the highest balance -- but in each case you need to run the numbers every two weeks (or every week if you make that many payments).  

This plan will include estimated payoff dates for you cards.  Why you maximize payments on your most expensive debt - ensure your payments are made on your other debts -- minimum payments are fine.

Along with this exercise - make a net worth statement and update it every week.  Know what your debt is costing you.  Sell all non essentials (i.e. that guitar you mean to play one day, or that patio set that you used twice last year).  

Debt is modern day slavery - without question. Take a hard look at what you spend on. 

Note that  my wife and I also input this info excel and hand our debt on our bathroom mirror.  Keep your debt in front of you at all times.  The psychology of this will modify your spending habits. 

I hope that helps.