Just Got Rid Of Debt, How Do I Start Flipping : )
Hi,
I recently refinanced to get rid of some nagging debt (about 30K) and though I ate up half my equity, I am debt free. I know it will take some time for the credit to move up as I was in the low 600s when I did the refi.
I live in Southern California, and own a condo that based on current appraial estimates is about $220,000 and I owe about 160,000 on it. I want to buy in the area since I know it well. I want to know what I should do to prepare myself when in four months or so the credit report catches up. Should I look into getting an equity line of credit to use as a down?
Anyway, great board and just wondering what I should start looking into to get prepared. :-D
I'd suggest you keep reading as many posts on this website, and other like it, that you can. Start looking at properties, even if you're not planning on buying today. Get familiar with what's out there. You never know, you might run into some deals that you can pick up 'Subject To' and your credit won't matter.
Good luck!
To be a bit picky, you are far from debt free. With the refi you shifted from one form of debt to another.
Your credit score will likely change but it will be because of the shift in your profile, not because you reduced your debt.
As to investing options...
There are a few in your situation. Partially it will come down to how you want to search. Some methods are more about active marketing to a target area or a target group of people (subject to investing by farming an area, pre-foreclosure but following up on Notices of Default, bandit signs for someone who wants out - any reason).
Like someone else noted read up a bit on the different ideas posted in the different forums. Then consider you local market and the conditions. Also consider how much time you have and if you can afford to do some marketing to get folks to call you.
John
Quote:
On 2004-07-04 18:24, TheRanchHand wrote:
I recently refinanced to get rid of some nagging debt (about 30K) and though I ate up half my equity, I am debt free.
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21+ years experience investing in residential property and notes in three countries (multiple states in the US).[ Edited by active_re_investor on Date 07/04/2004 ]
Thanks for the responses so far...
Though I slightly disagree with not being debt free as the cash I used in my equity to pay my debt is still a liquid asset and not another loan per se. In otherwords, all I "owe" is the remainder on my condo (160,000) and the rest is equity, be it in my home or IRA or whatever. I would agree if I just transfered the money to another card or loan. But, I had a choice to either sell the place and pocket the 80,000 to 90,000 and use some of that cash to pay the debt (which would by most be considered paying off the debt) or leaving the same cash in my property and using it from there to pay the debt. Either way it is the same money. I would see it as not being "debt free" if the housing price suddenly plummeted to where I actually owe more on the house than I have paid off.
Bottom line, I only owe on the remainder of my home and have no debts secured or unsecured elsewhere. I have about $12,000 in my IRA, $5,000 in my bank and, as stated, about 50,000 to 60,000 left in my home. I would like to use the equity cash to go to work for me on another property and was wondering what most people here do to find these buys?
Being that the market is so crazy and prices are so high, do you subscribe to a forclosure list or just find something you can afford and grab it and try for a turn around in the next few months? Thanks for all the tips so far!
I've got to agree with active_re_investor on this one.
Old Situation
Condo 220k
Mort. -130k
other debt -30k
Balance 60k
New Situation
Condo 220k
Mort. -160k
Balance 60k
Your monthly debt service may very well be lower, but the balance of what you owe is the same.
There is still 160K of debt.
Jeff[ Edited by jeff12002 on Date 07/05/2004 ]
"Old Situation
Condo 220k
Mort. -130k
other debt -30k
Balance 60k"
"New Situation
Condo 220k
Mort. -160k
Balance 60k"
Truth still stands, if I have 60K in cash or 60K in equity, it's still 60K I own. If I use it to pay down a debt, credit card or something else, I am still paying off a debt.
As I said previously, I still owe money on the house but ONLY if I want to pay it off. Where as the debt on a credit card is owed no matter what. Many people forget the difference.
If I owe 100K on a house, I can sell it for 100K...end of debt. If I have 100K on a credit card....I can't sell it.
So, yes the debt is paid down and when and if I want to sell this place, I can (right now for a pretty penny too as it is about 100K more than when I bought it two years ago!)
Now that my credit is clearing up I am just wondering what the best step would be to buying another property. And should I go for foreclosures or look for regular MLS/public listings?
Thanks again!
Three people go to a hotel, needing a room. when they discover that there is only one room left in town, they agree to share it.
The deck clerk informs them that the price for the room is $25, and that he has no change.
Each person has only a $10 bill. They give it to the desk clerk. A total of $30.
Later, The desk clerk finds five $1 bills in the desk drawer. He calls the bell boy and gives him the $1 bills with instructions to take it to the three people in the room.
The bellboy tries to give the money to the three, and they decide that since they can't divide the money evenly, that they will each take $1 and give the bellboy the remaining $2.
If you've been paying attention, the three have paid $9ea , or $27 total for the room. There's the two that the bell boy has totaling $29.
WHERE'S THE OTHER DOLLAR?
As in the example above, you are using funny math to indicate that you are DEBT FREE. You are not debt free. Ask your lender. They will agree.
You now have 30k less in equity than you had before you refi'd. You are still on the hook for 160K of debt. Good debt, but debt the same.
With regards to possible investment strategies, I don't even know if you are still interested in anything I have to say, but here goes. There are several methods that you can use to invest. "Subject 2", and "Lease/Options" are a couple of the possibilities. You can, and should read more about both of them on this website. Both methods require none of your own credit to use.
Good luck, and best wishes,
Jeff[ Edited by jeff12002 on Date 07/05/2004 ]
Hi RanchHand,
At this point I know you are thinking that everyone is jumping on an unimportant point. That the point of your post was you want to know how to move forward. But this is NOT a question of semantics. It is about clearly understanding a basic financial principal.
Too many new investors get involved in very complicated deals, with out a solid foundation on the basics of finance. It is not a surprise when these investors fail.
Take it from people who understand: debt is debt.