Posted by David Alexander on July 10, 2001 at 11:23:20:
is that if you wait until the credit is repaired etc… You will probably use your credit and it will cause you to do a bad deal… because you may not screen it as weel if you know you can take the deal down using your own credit.
If you dont use your own credit and money starting out the screening process is not only harder but you’ll have take it more seriously, not to mention.
David Alexander
Investor Ideas of the Week. - Posted by Tim Jensen
Posted by Tim Jensen on July 08, 2001 at 08:24:11:
Hi All,
Before I start this weeks post, I would like to thank all the people who have sent me e-mails about my weekly posting. It is nice to know that people are getting something out of these postings and that I am able to give back to this board. THANK YOU!
Well, as of late I have noticed that there are a number of posts on this site asking how to get started. So, I thought I would give my opinion on what you should do. The ideas I will be giving do not just apply to real estate, but to any other venture in life.
The first step to making it in real estate, has nothing to do with real estate at all. You need to evaluate your financial situation and yourself. This means taking a hard long look at what you do and how to change it for the better.
If you have a history of bad credit, that means you have a history of bad decisions PERIOD. Now you can try and explain it away, like I lost a job, car unexpectedly broke down, or a medical bill. Still, it is your fault. Why did you not plan for these unexpected things? At a young age, 20 I knew that you need to be prepared for unexpected things to come up. I always had some type of cash reserve. Please do not respond to this post that I do not understand your situation and the such, for I do! If you won?t take responsibility for your own life and what happens to you, I am going to bet that you will not be successful in life. Ever hear of a successful whiner or blame caster? Now the good news is that you can change the path you are on. Bottom line, take responsibility for your past bad decisions and that will start you on the right path.
Now that you have realized that you made bad decisions in the past, it is time to change. If you have a lot of needless debt(credit cards for example), bad-debt or live paycheck to paycheck, you need to get that under control. It is very simple, not easy, but simple. If you have bad-debt that is talk to the creditor and see if you can work something out. Maybe offer to pay them a small lump sum to settle the debt. If you have a lot of needless debt, you need to get that under control too. Start making more than the minimum payments. Also living paycheck to paycheck is a problem too. There are two solution to all of these problems. First you need to get more money, this can be accomplished by working overtime or get a second job of some sort. Heck, why not mow lawns or paint houses on the weekends. The second solution is to cut expenses. That may mean taking a lunch to work, renting movies instead of going to the theater, not eating out, buying your cloths at a second hand store, and going without the extras like cable and a cell phone. There is no point in working hard to get more money, only to keep making bad decisions and no keeping any of it. It may not be fun or easy, but you need to do it. I have never met a successful person who did not have good spending habits. They work hard for their money and they do things so that they keep. I have a daughter, and guess what? I get a number of her toys from the stuff my tenants leave behind and what people are throwing out. I make sure they are safe and clean them up, but I have saved well over $500 doing this. For example, I got my daughter a expensive wooden swing set/clubhouse, little tikes car, a large inflatable ball and a tricycle FREE! Now they were not junk, just things people no longer wanted. For myself, I have gotten Kirby vacuum, computer, desk, laptop, tools, and even a pair of nice boots. To name a few.
Finally, do not inure any more needless debt until you get your spending under control. If you have a high balance on your credit card, rip it up or take the card out of you wallet and only use it for emergencies. Only buy the things that are absolutely needed. Also, find a way to get more money, get a second job and use all that money to pay down debt. To help in this process, I would suggest going to the library and get some books on how to pay down debt, live frugally and money management. This going without will not last forever, just until you get things under control. Now some of you may be doing fine financially and think that this does not apply to you. GOOD JOB, however this post is still a good reminder of what to do.
The whole point here is to get your finances under control, it will take a bit of work, but it is the first step to becoming successful not only in real estate, but in any other endeavor. You need to lower your spending, increase your income and try and pay down needless debts. This is not the popular thing to say, but it is the truth. Once you get your finances under control, you can then start on your path to real estate riches. That will be next weeks post.
Take Care,
Tim Jensen
Re: Investor Ideas of the Week. - Posted by Sue
Posted by Sue on July 09, 2001 at 13:10:21:
You are absolutely right. If making more money just means spending more money, you will never have enough.
Even the wealthiest of people need to think about what they are spending, wasting and saving on a daily basis.
Save Your Way to Wealth… Ugghh… - Posted by David Alexander
Posted by David Alexander on July 08, 2001 at 19:48:31:
Although it is initially easier to get out of the Rat Race if your expenses are low it is not neccessary to cut up credit cards etc, to get ahead…
That’s No fun…
What is required is a fundamental knowledge of money.
For Instance lets starting out you need 3k month to live… and have 50k in debt(that’e figured into expenses). Then my first thing I would tell you is to get 3 months living expenses set aside. Once that is done then work on getting a year set aside in the next 3 months.
After that lets say your good at generating cash then you build up another 30k, if you were to take that and pay off the credit cards to never use them again then the money stops working for you. I think you pay a little more than required to pay off the credit in a reasonable amount of time and continue reinvesting the money.
The real way to wealth is by creating and building assets and holding them to maximum market, cashing out and buying more, until that point you choose to stop, if ever.
But I beleive you have to start from where you are and credit plays no real issue… I have not conventionally qualified for any money for the 6 years I have been investing. For me it’s not a matter of whether I could, but a matter of less complication, and speed, or maybe just plain the fact, giving that power away to be denied, based on system I have no real control over.
David Alexander
Re: Investor Ideas of the Week. - Posted by Jay_TN
Posted by Jay_TN on July 08, 2001 at 09:31:17:
Tim, good points. I made similar points in a recent posting and got lambasted. I don’t understand how a person who just filed for bankruptcy seriously believes he/she will just start making it big in the real estate investing arena. I think the “Get Rich Quick” mentality has something to do with it.
Kudos on your post. I agree and live your advice 100%!!!
Regards,
jay
Could You explain that to my Wife? (nt) - Posted by JT - IN
Posted by JT - IN on July 09, 2001 at 14:34:23:
$$
I think we are on the same page - Posted by Tim Jensen
Posted by Tim Jensen on July 08, 2001 at 20:45:43:
David,
I think you may have missed a point I made. I do not think that you should purge all debt, just needless or expensive debt like credit card. I still think it is wise to have a reserve for, but like you said put some aside for investing too. However, when you are paying 16%-18% in credit card debt you should get that down ASAP. Its just way too high.
I still stand by the fact that having good credit will help you in this business. As you know, I buy using cash. Because I have cash and can close in a matter of days, that allows me to get a deep discount. If I did not have that good credit, I would not have access to that cash. I think buying with straight cash makes things very simple. They give you good deed you give them money. No DOS clause or insurance issues or what have you to be concerned about, with subject-to deals.
Take Care and be Good!
Tim
Re: Investor Ideas of the Week. - Posted by J. Clifton
Posted by J. Clifton on July 08, 2001 at 12:20:18:
The reason you got some negative comments is that many of the contributors to the CREO boards HAVE gone from bankruptcy to fairly rapid financial success through RE, and know from personal experience that correcting “bad” credit is not the gigantic prerequisite you made it out to be. Good grief, even Thomas Jefferson filed for bankruptcy, look at where “bad” credit got him. If one paid all their bills on time, has perfect credit, and “has his finances under control,” lenders will still turn him down for a loan if they don’t like the investment. Anything that is perceived to increase risks to a bank is considered “bad” regardless of the issue of payment history.
Bad according to whom? If Corp X suddenly lays you off, and you choose to prioritize getting providing for your family versus paying on the charge card, did you make a “bad” decision? The same day I received my Amex gold card in the mail, I also received a letter turning me down for a standard Visa. Do I have “good” or “bad” credit? Depends on the business plan of the bank involved.
Millions of people, drones and gerbels are efficiently paying bills on time, “living within their means,” and are not at all successful. Financial success is not based on being a reliable bill-paying machine, as selectively measured by the consumer loan industry. The bigger picture is to stop centering one’s life around consuming, and to base it instead on acquiring assets (Rich Dad approach). That is the real first step to wealth, and the real truth.
Cheap money… - Posted by MatthewC
Posted by MatthewC on July 11, 2001 at 24:00:26:
I am not sure why people have such have an aversion to credit cards. I think they are great. The credit cards in themselves aren’t bad, it is how it is being used. If you load them up by buying junk, then it is expensive. But I used it for business/investing purposes as necessary.
Actually, I think 16%-18% is pretty cheap money if I allocate that money to be invested. My worst deal is 80% ROI. So, do I want to use all that cash to pay it down or do I let it ride and allocate the money into something that generates a greater ROI? It is a no-brainer for me.
In any case, none of my credit cards are even close to being that high. But if they were, I would still feel the same way. It is in the numbers.
And I contend… - Posted by David Alexander
Posted by David Alexander on July 09, 2001 at 01:44:17:
That if I need to do an all cash deal and didnt have available the cash resources then I could call my friend Tim up and say I ahve a deal, split it with you, have No risk and get 50% of the pie.
I dont need credit or cash just the ability to find deals and holler loud enough to tell everyone until I find a partner.
David Alexander
Re: Investor Ideas of the Week. - Posted by Tim Jensen
Posted by Tim Jensen on July 08, 2001 at 16:12:26:
J.,
I do not wish to speak for Jay, but I will put my two cents in.
First, yes there may be some people who have gone from bankruptcy to fairly rapid success, however, they are rare. Rapid success does not usually turn into lasting success, there are exceptions.
As for paying your bills on time and having perfect credit, they are very important. Yes you can make it in this business without them, but why make it that hard. If you have bad credit and a poor pay history, you are a bad risk to many lenders. Would you loan money to a person who has shown financial irresponsiblity? I wouldn’t. However, if a guy has his finances under control has a proven financial record a lender is more apt to lend that person the money on an investment. This is the rule and not the exception.
As for getting laid off, if you get laid off and do not have anything in reserves you made a BAD decision. Plain and simple. A charge card is needless debt. I use my card but carry a low to zero balance. That is the decision I made and if I get a financial setback, I will be prepared. As for the turn down on the visa card, maybe you have good credit, but visa feels you are over-extended or you applied for a lot of cards at once. Good reasons to turn down an application.
The bigger picture is to stop centering one’s life around consuming, and to base it instead on acquiring assets. This is something I agree with you 100%.
I think you may want to read the book “The Millionaire Nextdoor” This book is a study of the habbits of millionaires. You will be surprised at how many millionaires are frugal and live “Under their means”. This book is a good what to do book. Its an easy read too.
Take Care,
Tim Jensen
Are you challenging me… - Posted by Tim Jensen
Posted by Tim Jensen on July 09, 2001 at 09:17:20:
to a yelling contest at the next convention?
Be careful, I have a high-pitched voice.
Tim
And I contend you are both right… - Posted by ken in sc
Posted by ken in sc on July 09, 2001 at 07:19:03:
David, you are right in that a good deal attracts money so certainly you can find a partner and get “half the pie” with none of your own money.
However, Tim is right in that good credit gets money as well. And the ability to borrow from banks etc can get you MORE of the pie. It is cheaper to borrow from a bank at prime +1 than give away half a deal, or pay and “investor” 15%. Why not tell people out there to clean up their credit as well as have investors. Then they have more ways to do deals, and good credit to boot, as well as the education that cleaning up credit brings.
Ken
Re: Investor Ideas of the Week. - Posted by J. Clifton
Posted by J. Clifton on July 08, 2001 at 20:40:22:
I also think we basically agree. BTW, I would lend to the person without the payment history, based on the collateral. Historically, equity-based lending WAS the rule, not the exception—only in modern era have lenders piled on payment history, asset profile, income, character references, stability, credit balances, blah blah blah to the mix as the norm. I think creative people are restoring some balance, by re-introducing traditional lending criteria that is less one-sided.
Even if person carried NO debts but over-consumed out of pocket, they would not be financially successful, compared to “bad” credit investors who were building assets. The banks more often than not encourage over-consumption and the consumer loan mindset, while discouraging true wealthbuilding risk-takers. A nice overview of the loan business (from this perspective) was provided in The Bank Book by Ed Mrkvicka. The Millionaire Next Door is also good, but can create a false impression–i.e., most ultra-frugal, compulsive-obsessive savers do not end up millionaires; the few that do never had the typical cash-draining life crises (suits, divorces, major illness, kids-too-early, job loss or business failure) that interrupt the piggy bank plan.
And I do agree also… - Posted by David Alexander
Posted by David Alexander on July 09, 2001 at 11:58:41:
but to say you hahe to start there is absolutely not true… Learn to do deals and the money will follow… you have to start from where you are… and for someone to have to worry about there credit is not a must.
It will come back in time… Whereas the time spendt trying to rebuild it could be time spent doing deals…
And while they are doing deals they will have to learn how to deal with money and change habits lest it will bite… but the credit doesnt have to be clean to start over.
Once you have money you’ll have credit.
David Alexander
Re: Investor Ideas of the Week. - Posted by Jay_TN
Posted by Jay_TN on July 09, 2001 at 09:48:08:
I agree with all the comments here. My main gripe is that if a person has bad credit or bad financial standing, they need to make changes in their life to make amends. Investing isn’t going to change they fact they spend more than they make. I see nothing wrong with a person trying to make a buck. I do see a fundamental problem with a person trying to invest if they do not have the foundation upon which to build.
We are on the same page. It’s just that you’re reading from left to right and I’m reading from bottom to top and right to left. What can I say? I’m abnormal.
Regards,
jay
Re: And I do agree also… - Posted by Tim Jensen
Posted by Tim Jensen on July 09, 2001 at 22:27:42:
David,
What a better way to change you habits by trying to correct the errors of the past? The point is not having good credit, just changing the habits that gave you bad credit in the first place.
You need a good solid foundation before you build something, otherwise it will colapse under its own weight.
Take Care,
Tim