Thanks for your input. I’m working on getting that mess paid down.
Lest you think I’m some schlub who couldn’t handle credit cards, I feel I gotta explain. My town (Grand Forks, ND) was flooded and burned in 1997, and even with the disaster loans I still had to put a lot of the repairs for my house and rental properties on credit
cards. Right now I owe about $66K on the mortgage for the rentals, $30K in SBA disaster loans, $12K on credit cards. I’m actuially contemplating getting a JOB. I quit working 4 years ago and was living entirely on my investments. The upside, I haven’t had any tax liability for the past 2 years.
I’ve been listing to R.LeGrand’s tapes on “How to get the money to fund your deals”, which includes a tape and info to convince people to lend you money. Its starting to have a bit of an effect on me from the other perspective.
Thinking I might need the cash for a DP (the deals all fell thru) I cashed in a mutual fund, and now have about $20K sitting in a passbook at 2%. I gotta do something with it. Why should I go thru the work of finding deals and all that, when I could just loan it at 15%? (LeGrand’s figure)
I’ve got a great payment history, but my 60% debt-income ratio makes getting a loan darn near impossible, at least with all the local lenders I’ve talked to, and I admit I’m getting discouraged. sigh
Side coment: The above mentioned tapes make several references to a “special report” in the “book”, aparently the tapes were from a larger seminar. Anybody have this “Report” they’d be willing to share?
Just a note regarding debt ratios and conventional loans. Many lenders are now utilizing Desktop Origination and Underwriting which is not as rules based, meaning the computer analyzes the whole picture, not each criteria separately. As a result many convential loan applicants with very high debt ratios are being approved. Conventional loans only go so far in this business, however, to those who are or want to use them, I would recommend finding a mortgage broker who is set up with a lender who uses Desktop Origination and Underwriting.
You need to find a hard money lender that bases their loan on the property and not your income and credit. Consider contacting a mortgage broker, title company, or RE attorney for names and phone numbers of these lenders.
As for loaning out the $20,000, I have 2 comments. 1) $20,000 is not a whole lot of money when it comes to the world of mortgages. Even at 50% LTV, the property would only be worth $40,000. Most investors would need to borrow much more than that, so you may not have a market to loan your money to. 2) Once the money is loaned it becomes illiquid unless you sell at a discount. I would rather have that money for emergencies or purchasing power myself.
I agree with paying down your debt. Why not consider eliminating some of your non-mortgage, consumer type debt? I do not know your financial situation, but maybe if you pay off $5,000-10,000 worth your financial picture will look brighter?
You might also consider focusing on quick flips or Lonnie deals. With $20,000 you have a great nest egg to do these deals with.
Just a thought of my own personal experience. You cannot get ahead in the future until you get your finances under control today (I learned that one the hard way). If you have a 60% debt to income ratio, you need to work on getting that to a more reasonable level. I’m not sure how much debt you’re looking at but if you have $20,000 or so, you may want to look at least paying down part of the debt and investing the rest.
Normally the idea is to invest money to make more money and pay off the debts but it doesn’t always work out that way. If you left your debt the way it is and invested all the money, you would have no operating margin in case of emergencies, and property owners always have emergencies.
Whatever you decide to do, don’t spend it on seminars, workshops, etc. That’s a sure way to lose it all!