Real estate investing and personal debt question - Posted by Phil

Posted by Jeff Bliven on February 10, 2001 at 12:16:38:


TOTALLY COOL!! Good for you!

No more need to say “Good Luck”, is there??
It’s now, “Good Work” isn’t it!!

Personally, that’s what I like to hear! Positive!!

Let me ask, I assume you mean to say $75 PCF each?? or is that total?? If it’s total, be careful, that’s a little close, one BIG expense, and there will be some, could hurt!!

Plus I hope that when you say pos-cash-flow, you are talking PITI+mngt+maint??

“Good Work” to you!


Real estate investing and personal debt question - Posted by Phil

Posted by Phil on February 09, 2001 at 08:46:31:

I need some advice, please. I know that the course is designed to give us the tools to help create wealth and positive cash flow. I also know that there are testimonials from people that were broke, in debt, etc. What I would like to hear feed back on are from people that were in debt and took on more debt by becoming involved in real estate. It seems to me that almost any investment property (no matter how small) is sure to increase a person’s debt load. How have you managed with this??? Thanks!

Secured vs. Unsecured Debt - Posted by Rolfe Kurtyka

Posted by Rolfe Kurtyka on February 11, 2001 at 24:02:06:

Real estate debt is “secured”, or backed, by the value of the property itself. If bought and financed correctly, the actual value of the property is over and above any associated debt. The difference between the property’s market value and the debt is equity, and the equity grows with appreciation and as the mortgage is payed down by the rents. “Positive leverage” is the use of debt to actually increase your rate of return.


Re: Real estate investing and personal debt - Posted by Dallas Allbritton

Posted by Dallas Allbritton on February 10, 2001 at 16:29:54:

you are correct that your debts will increase when you buy or contract on property BUT if you do your homework your DEBT LOAD (how much you pay against how much you owe) will go down.

Here is a simply example:
You buy a house, ignoring the price that has a monthly note of $1000. You rent or lease it out for $1500 or even $1200 and the buyers give you $5,000 at once or over a period of time. If you wrote the contract right they are responsible for most if not all of the maintenance so you stick 200 - 500 in your pocket each month. If the 5K is paid at once you will of course put at lease $2K aside as insurance on the note you have to pay and use the balance to pay down personal debts, thereby reducing your debt load.

Hope this helps


Help on your personal debt - Posted by Jason in Sacramento

Posted by Jason in Sacramento on February 09, 2001 at 14:50:21:

There is good debt and bad debt. Good debt is usually
a debt that someone pays for you (tenants), bad debt
is a liability (car,boat,toys). Let your assets pay
your liabilities and you are on your way to financial
freedom. Perhaps read RichDadPoorDad to get another
perspective on debts and assets.

Jason in Sacramento

Real estate=liabilities elimination - Posted by George

Posted by George on February 09, 2001 at 11:08:19:

There is a diference between real estate debt and consumer debt:

  1. Consumer debt (credit cards, cars, your own home) are liabilities because they DO NOT produce income. Even your home can be a liability because if you get in financial trouble, it will not give you an income, you may sell it or refinance but still does not produce income.

  2. Real estate is an asset in a few ways:
    a. If you buy income producing property, your tenants are paying your debt down.
    b. If you buy real estate to sell (flipping properties) you can get fast cash that you use to buy more real estate, invest in asset producing activities, earn an income and ultimaly you will eliminate your consumer debt.

Re: RE investing and personal debt question - Posted by TL ( Louisiana)

Posted by TL ( Louisiana) on February 09, 2001 at 11:07:07:

Hi Phil,

I’m in sort of the same position. I have student loans for myself and from my wife not to mention I’m still paying for credit card debt that I incurred while I was still in college. I can say that I did not do anything foolish with credit cards but I still have to pay them off. Jeff gave me direction down the road you’re considering. Right now I think I maybe just a traffic light ahead of you. It’s a new road for me and I can’t see around the corner, but I know what streets I have traveled and they led to dead ends. Maybe you understand me.
Good Luck
TL ( Louisiana)

Re: RE investing & personal debt question - Posted by Jeff Bliven

Posted by Jeff Bliven on February 09, 2001 at 10:27:32:

>How have you managed with this???

Quite easily… they earn income above and beyond the additional expense to sustain that added Debt!

My personal belief is that… DEBT IS GOOD!
No, let me re-phrase that… DEBT IS GREAT!!
NO, No… One more time here… DEBT IS REALLY GREAT!!

Why, because YOU, as my tenant, are going to pay it off for me! Thank You, I and my family love and appreciate you!

Not to mention the fact that as time goes by, my asset appreciates and the money I have to pay back is ERODED because of inflation!!

Think back from today, 20 years ago…

For me… Today, my neighborhood that I live in now is about $350,000 for a 1,000sf SFR. 20 years ago, it was 75-100K… that’s what I paid!

ALL things being equal, That 100K 20 years ago was just as expensive as today’s 350K!! If not more!!

Now let’s assume that I had a 20 year balloon on that note… $80,000! Wasn’t that worth a lot more 20 yrs ago, than it is today!! The buying power of that money simply isn’t as strong anymore… and think about this!!

20 years FROM NOW… that same $350,000 house may be well over $1,000,000 to purchase then! Makes that 350K purchase today look like a bargain… DOESN’T IT??

OR… You could worry about debt for the next 20 yrs, and say to yourself… GEE, I WISH I BOUGHT THAT HOUSE WAY BACK IN 2001… I’d be a million-aire today!!

Of Course if you had, 20 years from now being a Milloionaire probably won’t be a big thing at all… maybe a gallon of gas might be $45??

In my opinion, it’s just simply “keeping up with the Joneses”. It’s not till you own several that you really begin to get ahead of the GAME! … You know… The Game of Life!

Bear in mind… This isn’t a dress rehearsal, it’s the real deal… one show and one show only!! So make the best of it!!

Good Luck…


Debt question - Posted by Charles Steed

Posted by Charles Steed on February 09, 2001 at 09:29:40:

Yes, RE increases debt. But if you do it right, you incur debt on property that either produces cash flow, appreciates in value, or both. This kind of debt is a good thing. I’m guessing that you’re talking about debt on things that lose value rapidly.

Re: Help on your personal debt - Posted by stan

Posted by stan on February 10, 2001 at 24:31:55:

jason i am relatively new to this but here is what i have been able to do in a year…bought only 2 houses in the first 12 months…first house was purchased on a lease option…netting 100 per month pos cash flow…the second i bought was a foreclosure i paid 23k it appraised at 54k…so i refinanced for 42k…paid off existing loan…plus 19k worth of creditcards and car loans…now im in the best financial shpe ive been in for years…since jan of this year i have bought 3 more properties i will make 12k when i close on them this month and all 5 houses will make at least 75 per month pos cash flow…the key is buy buy buy assets(cash generating houses) and pay down your liabilities…believe me it works good luck

Re: RE investing & personal debt question - Posted by Scott K

Posted by Scott K on February 13, 2001 at 01:44:17:

I’m a beginer to REI, and with that comes a lot of doubt. I just wanted to let you know that in a world of people telling me, “You can’t do that!”, and “It just won’t work!”, your post comes as a very refreshing breath of air!

Scott K

Re: Help on your personal debt - Posted by Michele

Posted by Michele on February 12, 2001 at 15:39:24:

So when you paid 23K, did you have good credit to obtain a loan for that amount? What would you suggest for those of us with bad credit?