Ed, Need words of wisdom - Posted by Thomas

Posted by Thomas on May 14, 2001 at 22:01:57:

Thanks Bruce. I was tossing that idea around as well as taking over management of some of my associate’s properties for a percentage of the GRI. I’m not too familiar with flipping properties though. It sounds easy and I know people who do it all the time, but there’s always that fear of trying something new for the first time. But I agree with you. I think that would be a wise solution to my problem. Thank you for your input. Any other ideas are greatly appreciated as well. I’d ideally like to get my Debt to Income down to around 20%. That’d be REALLY nice!! :wink: Thanks again for your thoughts. I will definetly consider them.


Ed, Need words of wisdom - Posted by Thomas

Posted by Thomas on May 14, 2001 at 15:33:23:

One big problem that I’m stumbling on to quite regularly, is my debt to income ratio. As I’m out there buying properties, my income is increasing, and my credit is looking better and better. But, when I have to resort to institutional lending, my debt to income ratio can hold me back. I’ve yet to encounter the problem yet (my FICO scores seem to be stopping me right now), but as I watch my growth, I’m noticing my debt is accumulating faster than my income. sooner or later I’m going to put myself over the 50% mark. How do I increase my income while slowing the pace of my debt? I’ve already increased the income from my existing properties as much as I fell comfortable with. What should I look for on my next projects? I don’t want to disqualify myself from the institutional lenders, but I don’t want to pick up a job somewhere working for someone else either (don’t have time really). Any words of wisdom on this matter? It’d be greatly appreciated. Thanks


Re: Ed, Need words of wisdom - Posted by Ed Garcia

Posted by Ed Garcia on May 15, 2001 at 09:55:54:


Without having any information on you Tom, I can only be guessing, and I normally don’t like doing that. But I decided to take a stab at it even though I don’t have all of the information because I feel this is a common problem with some investors.

First, credit card debt can run your credit scores up.

Many people use their credit cards for fix up cost but then it takes a while to get it down.
What I would recommend in this situation is to try to keep your cost associated to a given property, on that particular property. You can do this by either refinancing the property after fix up, or paying off the expenditure after sale of the property when selling.

Secondly, most investors don’t plug in a 25% expense and vacancy factor when figuring their deal. Therefore when the bank is figuring you budget, they show that you have a higher debt then you show. This is important, most investors take their gross rent, subtract the monthly payment including PITI (payment, interest, taxes and insurance) and think that what is left over, is their positive cash flow. Not so.

Thomas, before I could discuss this any further, I would need to have more information. But at least you have something to think about.

Ed Garcia

Re: Ed, Need words of wisdom - Posted by Bruce Lawson

Posted by Bruce Lawson on May 14, 2001 at 19:54:41:

Hi Thomas,

Why not try flipping some properties you can turn some quick cash by flipping properties to another investor. If you do this your income will surely increase without making any additional debt.

Be cautious with your D/I reaching 50% you could messup what you have with the lender you are using. You need to sell more of your stock to show an increase in profit.


Bruce Lawson