Pay Off Debt

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Apache is functioning normally

According to the Federal Reserve, consumer debt in the United States in the second quarter of 2021 totaled more than $4.2 billion. So if you’re struggling with debt, you’re definitely not alone. If you’re looking for a way to dig yourself out of debt, a debt consolidation loan could help.

But what is a debt consolidation loan? Find out if it’s the right option for you by learning more about it, including pros and cons. You’ll also find information about other alternatives.

In This Piece

What Is Debt Consolidation?

Debt consolidation occurs when you bring multiple existing debts under a single umbrella. This usually means you use some type of credit or other financial tool to convert multiple debts into a single debt. Debt consolidation loans are one of the most popular ways to consolidate debt.

What Is a Debt Consolidation Loan?

A debt consolidation loan consolidates, or combines, your various debts under a single account.

Pros of Debt Consolidation Loans Cons of Debt Consolidation Loans
Potentially lower interest rates, especially if you now have the credit score to consolidate high-interest loans under better terms

May require good credit to obtain or get a good rate
A single payment, making it easier to manage your finances Might leave paid-off credit card and other revolving accounts open, creating an opportunity to run up even more debt than you started with
Your debt possibly spreading out over a greater amount of time, making each monthly payment more affordable Could potentially temporarily impact your credit score if it involves closing a lot of other accounts

What’s the Difference Between Debt Consolidation and a Personal Loan?

A personal loan is an unsecured loan that you can use for just about anything. In some cases, you could use the funds from a personal loan to consolidate some debts, making it a debt consolidation loan.

However, a loan specifically for the purpose of debt consolidation may be handled a bit differently. For example, in some cases, the lender may not pay the money directly to you. They might pay off your debts directly instead.

Alternatives to Debt Consolidation Loans

Your options depend on your credit, existing assets, and how much debt you want to consolidate. Some alternatives to debt consolidation loans are highlighted below.

1. Refinance Your Mortgage If You Have Equity

If you have equity in your home, you can refinance it or take out a home equity line of credit, or HELOC. These options give you cash you can use to pay down debt.

Pros of Refinancing a Mortgage to Consolidate Debt Cons of Refinancing a Mortgage to Consolidate Debt

Home equity loans and HELOCs tend to have much lower interest rates than personal loans and credit cards

You use your home as collateral for the debt, which means if you don’t pay it, the lender has a claim on your house
You may be able to deduct interest on home loans to reduce tax burdens Variable-rate loans could come with increased interest in the future
The total number of payments you need to manage each month is substantially reduced Credit cards you pay off could be run up again, leaving you with more debt than you started with
You’re less likely to forget to pay a debt related to your home  

Tip: Don’t pocket the money that refinancing frees up every month. Instead, use it to create an emergency fund. Once that’s set up, use the money as prepayment against your home loan or to boost retirement savings.

2. Use a Balance Transfer Card

Apply for a balance transfer card if your credit is in good shape, or call a card provider to ask if they’d be interested in offering you a balance transfer option on an existing card. This lets you transfer higher-interest credit card debt to a card with lower interest rates. Some balance transfer cards offer 0% APR for six to eighteen months on balance transfers for new account holders.

Pros of Balance Transfer Cards for Debt Consolidation Cons of Balance Transfer Cards for Debt Consolidation

Can substantially reduce the cost of credit card debt

Balance transfers usually come with fees of 3% to 5%—still less than your typical interest costs might be on high-interest credit card debt, but something to keep in mind
Makes it easier to pay off credit card debt It can be tempting to use your old credit cards again, running up more debt and ending up with double the debt you started with
Might let you consolidate multiple cards into a single account for easier management If you don’t pay off the debt in the introductory period, you could end up with expensive interest fees

Tip: Keep your old credit card accounts open for extra benefits to your credit score. It helps your credit utilization rates and credit age. But avoid using those accounts unless you have the money to pay them immediately.

3. Borrow from Retirement Savings

If you have retirement savings, you might be able to borrow from it to pay off debt. Remember, though, that you’ll need that money later. Only consider this option if you can pay back the money quickly so you don’t lose time building your retirement funds.

Pros of Borrowing From Retirement Savings for Debt Consolidation Cons of Borrowing From Retirement Savings for Debt Consolidation

Doesn’t require a credit check, so you don’t need a healthy credit file

You might owe taxes and penalties on the money if you withdraw early from your retirement
Interest rates are low, and you’re actually paying it back to your own account You can borrow against some employer-sponsored retirement plans, but debt consolidation might not be an allowed reason
  You could reduce how much money you have in retirement, especially if you can’t pay back the money

Tip: Consider this option as a last resort loan or if you have some money coming in soon, such as from a tax return. If you can pay the money back within a month or two, you don’t have as much to lose.

4. Ask a Friend or Relative for a Loan

If you know someone who has some extra money, it might be worth asking them for a loan at a low interest rate. You can use the money to pay off your debts and make one monthly payment to the person in question.

Pros of Asking Someone for a Loan for Debt Consolidation Cons of Asking Someone for a Loan for Debt Consolidation

No credit check or requirements

If you blow it, you might ruin an important relationship
Your family member or friend can earn some interest The IRS can be a real pain when it comes to family loans, so consult a tax professional
  Loan payments won’t be reported to your credit reports or potentially help your score

Tip: Treat the transaction as you would with a bank or other lender. Put everything in writing, agree to fees or penalties if you miss payments, and strive to make timely payments.

5. Try Debt Counseling

Debt or credit counseling with a reputable organization can help you create a viable personal budget and potentially negotiate with creditors for better terms. Debt counselors may help you understand how to better manage your income and expenses and leverage debt payoff strategies to get out from under your debt.

Pros of Debt Counseling Cons of Debt Counseling

Can provide you with some tools to better manage debt

May not reduce the overall cost of your debt
May help you see solutions that you didn’t see before May rely on you making personal sacrifices in your budget
Helps you pay off debt with your own resources, which can be satisfying If you don’t work with a reputable organization, you might be scammed out of large fees with promises that the company can’t keep

Tip: Don’t work with debt counseling companies that offer 100% guarantees to reduce or wipe out your debt or that charge excessive fees. These are red flags that could point to scams.

6. Enter a Creditor Assistance Program

Many creditors have assistance programs to help account holders who are experiencing financial distress due to sudden loss of income or an emergency. These programs range from mortgage modifications, which might reduce your interest rate or total monthly payment, to skipping a single payment and having it added onto the end of the loan penalty-free.

Pros of Creditor Assistance Program Cons of Creditor Assistance Programs

May not require good credit, especially if you have a solid payment history with the creditor

Aren’t always available
Could offer a fast, convenient solution to short-term cashflow issues You can typically only take advantage of these tools once or once every so often

Tip: Anytime you’re experiencing financial distress or might be late with a payment, don’t ignore the issue. Call your creditor to find out what they might be able to do to help.

7. Bankruptcy

Bankruptcy is a last-resort option that can help you discharge or restructure your debts and make a new start in a few years.

Pros of Bankruptcy Cons of Bankruptcy

If successful, you can have all or many of your debts discharged

Bankruptcy can be a long and stressful process
You may be able to keep certain assets, such as your home or car It can dramatically impact your credit in the short term
Filing for bankruptcy establishes an automatic stay, so creditors can’t continue to attempt to collect or foreclose unless the bankruptcy is dismissed Depending on what type of bankruptcy you file, you may not be able to get credit for a while

Tip: Talk to a bankruptcy attorney about this option before you take action. Most provide free consultations to help you understand if bankruptcy is a good choice for you.

The Bottom Line on Debt Consolidation

If you’re struggling with debt, you’re not alone. And you do have options. Look into a debt consolidation loan or one of the options above to start working on financial stability for the future.

Source: credit.com

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Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

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Warehouse, HELOC, AMC, Rate Lock; Automation, POS Products; Insurance and Disaster News

By:
Rob Chrisman

4 Hours, 46 Min ago

One of the topics here in Tennessee is how lenders can help real estate agents or clients. Wanna maybe help your client or favorite real estate agent grappling with inventory? HUD has a “Home store” of houses. Worth a shot at 3.5 percent down properties! For something to really start your synapses firing on a Monday morning ahead of a five day work week, the CEO of the California MBA, Susan Milazzo, sent, “The latest effort to pass legislation to address California’s insurance crisis has died. Assembly Democrats felt that the bill favored insurance companies over consumers, and they wanted to add a provision that would prohibit insurance companies from not renewing any business through the end of next year. With no real guarantee of when the commissioner would do the emergency regulations or the contents of those regulations, it amounted to a poison pill.” (More insurance news below in the “disaster” section.) (Today’s podcast can be found here and this week’s is sponsored by SimpleNexus, an nCino Company, and award-winning developer of mortgage technology for modern lenders. Hear an interview with J.D. Power’s Craig Martin on the U.S. Mortgage Servicer Satisfaction Study.

Lender and Broker Software and Services

Credit unions, it’s time to make your mark at the 2023 ACUMA Annual Conference from Oct. 1 – 4. Secondary marketing experts from Optimal Blue will be on-site and ready to discuss ways you can up your game and do even more to maximize success. Whether you’re working to get your members the best possible rates, trying to more effectively mitigate pipeline risk, or aiming to better understand the value of your MSR assets – we’re ready to help you reach your goals. Stop by our booth to learn more.

Your online loan application should win you business, not scare prospective borrowers away. Win borrowers here.

Attention TMC Members! Join Capacity CEO David Karandish and Mike Metz of VIP Mortgage for an exciting 3:15 p.m. session on Monday, September 11th. Learn how VIP Mortgage is springboarding their AI pursuits. Book one-on-one time with our team at TMC Fall, or join the session to learn about our personalized, in-depth AI Assessments. Whether you already use automation tools or you’re just starting to explore, Capacity’s AI Assessments offers a unique way to scale your tech initiatives. Over three meetings, our team will learn about your business needs, identify automation and AI tools opportunities, and provide in-depth resources to guide you through your AI roadmap. Want to jumpstart your AI journey? Meet Capacity at TMC Fall.

“OptiFunder Bringing the Primary and Secondary Markets Together. Nearly 15% of all warehoused loans now go through OptiFunder for warehouse selection and automated funding, shipping, and purchase advice. Since 2019, our mission has been to bring mortgage bankers and warehouse lenders together to optimize selection and streamline the historically manual process of funding mortgage loans. Nearing the top of Inc. 5000’s list of fastest-growing private companies, it’s safe to say we’ve been successful in that mission. As we continue to grow, we’re working on additional opportunities to bring the primary origination and secondary markets together. We’ve spent the last few years making the lives of originators easier; it’s time to put some focus on warehouses. Join the OptiFunder community on Linkedin to keep up with what we’re doing or visit our new website to learn more about OptiFunder.”

Does it feel like your current point-of-sale vendor has lost focus on mortgage? As a mortgage-specialized partner, Maxwell is committed to giving lenders a competitive advantage in a tough mortgage market. Compared to a top competitor, Maxwell Point of Sale averages a 5.9% higher pull-through rate from rate-lock to close. For the average lender using Maxwell POS, this equates to $42MM in additional loan volume. Maxwell also focuses on providing an excellent borrower experience, with a 17% faster turn-time from application submission to conditional approval. Schedule a call with the team to learn how Maxwell Point of Sale can start working for you and your borrowers quickly.

Are you tired of having to adjust head count every time the market changes? The Mortgage Automation Suite, brought to you by Richey May and Zoral, can help. With scalable automated solutions that improve accuracy while reducing repurchases and costs, your business will be well-equipped for any market cycle. Leveraging this powerful automation will allow your team to close loans more easily, helping to retain your best staff. Plus, it adds the extra layer of stability needed during difficult times; something we could all use a bit more of these days! Find out how the Mortgage Automation Suite from Richey May & Zoral can help you today. Email [email protected].

In this market, hustle is everything. You can’t afford to waste a single deal – or a single minute. That’s why ReadyPrice has launched Shop. Lock. Deliver.® It’s an innovative new platform designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders – and all on a single platform, at no cost to brokers. It’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check out ReadyPrice today.

Attention Lenders and Real Estate Appraisers: In a September 6th article found in Housing Wire, it was pointed out the 1/2 of all appraisers claimed “fee pressure” by AMCs was their biggest challenge this year. Also included were “technology fees” appraisers are forced to pay has become a major issue. AMCs are taking an increasing cut of the appraisal fees and at the same time selecting appraisers who are willing to work for relatively lower fees. The Private Asset & Management Group, LLC has launched its new platform allowing retail and wholesale lenders the ability to use they’re ‘own’ roster of approved appraisers, with realistic fees for their market areas, self-manage the process with 1 dashboard from a state-of-the-art software system with absolutely “NO” cost! And it reduces the appraisal fee to the borrower by 25%-35%. For further information contact David Cedar (631-319-6161).

TPO Programs for Correspondents and Brokers

In this most challenging of rate environments for the industry, Luxury Mortgage (“LMC”) continues to show steadfast commitment to all its business partners. LMC strives to offer competitive rates and products to assist brokers in closing more loans. Due to overwhelming popular demand, LMC is stepping up again and extending last month’s unprecedented purchase specials. Full and Alt Doc loans (including Bank Statement, 1099 Only, and Asset Qualifier) will receive up to a 100-bps price improvement (yes, you read that correctly!), and DSCR loans will receive a 50-bps price improvement! Click here for complete details of these special offers. If you are not yet an approved broker, now is the perfect time to become one. Click here to begin the process of becoming an approved wholesale broker.

Sometimes, your clients’ needs are as simple as a safety net. A HELOC is a perfect product to provide them with financial liquidity, stability, and support – especially in today’s market! Symmetry’s HELOC offers your borrowers the ability to purchase a home with less cash down, afford home renovations or repairs, purchase a 2nd home or investment property, consolidate and pay off debt, and many more benefits… Not sure how to best present Symmetry’s HELOC to your borrowers? Contact your area manager to build a plan that works for you!

Disaster Updates

Several top insurance companies (like Farmers, State Farm and Allstate) have reduced their footprint in California over the last several months. State Farm and Allstate say they’re not writing any new homeowner insurance policies in California moving forward due to it being too expense. And just ask a homeowner in a low-lying area of Florida, Louisiana, or the Carolinas how it’s going.

Last month the Biden administration urged a federal judge to reject a challenge by Florida and other states to an overhaul of the National Flood Insurance Program that has led to higher premiums for many property owners.

Meanwhile, the FDIC sent out, “The Federal Deposit Insurance Corporation, the Federal Reserve Board, the National Credit Union Administration, the Office of the Comptroller of the Currency, and state financial regulators, collectively the agencies, recognize the serious impact of Hurricane Idalia on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

“The agencies encourage financial institutions to work constructively with borrowers in communities affected by Hurricane Idalia. Prudent efforts to adjust or alter terms on existing loans in affected areas are supported by the agencies and should not be subject to examiner criticism. In accordance with U.S. generally accepted accounting principles, institutions should individually evaluate modifications of existing loans to determine whether they represent troubled debt restructurings or modifications to borrowers experiencing financial difficulty, as applicable. In making this evaluation, institutions should consider the facts and circumstances of each borrower and modification. In supervising institutions affected by Hurricane Idalia, the agencies will consider the unusual circumstances these institutions face. The agencies recognize that efforts to work with borrowers in communities under stress can be consistent with safe-and-sound practices as well as in the public interest.”

FEMA Disaster Declarations are in the news. Georgia Hurricane Idalia – DR-4738-GA. Florida Hurricane Idalia – 4734-DR-FL, Amendment 001, Amendment 002, Amendment 003.

AmeriHome spread the word that on August 31, 2023, with DR-4734, the Federal Emergency Management Agency (FEMA) declared that federal disaster aid with individual assistance has been made available to counties in Florida to supplement recovery efforts in the areas affected by Hurricane Idalia from August 27, 2023, to September 4, 2023. On September 1, 2023, with Amendment No. 1, FEMA granted Individual Assistance to 6 additional counties. On September 3, 2023, with Amendment No. 2, FEMA granted Individual Assistance to 1 additional county.

On September 4, 2023, with Amendment No. 3, FEMA announced an Incident Period End Date of September 4, 2023. On September 9, 2023, with Amendment No. 5, FEMA granted Individual Assitance to 2 additional counties.

On 9/3/2023, with Amendment No. 2 to DR-4734, FEMA declared federal disaster aid with individual assistance has been made available to an additional Florida county, Pinellas, affected by Hurricane Idalia from 8/27/2023 and continuing. See AmeriHome Mortgage Disaster Announcement 20230902-CL for inspection requirements.

On 9/4/2023, with Amendment No. 3 to DR-4734, FEMA provided an Incident Period End Date of 9/4/2023, for Florida counties affected by Hurricane Idalia from 8/27/2023 to 9/4/2023.

See AmeriHome Mortgage Disaster Announcement 20230903-CL for inspection requirements.

On 9/7/2023, with DR-4738, FEMA declared federal disaster aid with individual assistance has been made available to 3 Georgia counties Cook, Glynn, and Lowndes affected by Hurricane Idalia on 8/30/2023. See AmeriHome Mortgage Disaster Announcement 20230905-CL for inspection requirements.

Capital Markets

There’s anxiety (isn’t there always?) over the Federal Reserve turning more “hawkish” and impacting investor sentiment, and therefore bonds and stocks. While the Fed is largely considered to be nearing the end of its hiking cycle, the “terminal rate” is still unknown, of course. Federal Reserve speakers, typically the presidents of each district, are in a blackout period ahead of the FOMC meeting scheduled for September 19-20, which will give this week’s economic reports extra weight.

So, what is the financial press yammering about? Student loans having to be repaid, the latest jump in oil prices in the past few days driven by longer-than-expected production cuts by key oil nations Saudi Arabia and Russia, and data showing a tight labor market in the form of initial jobless claims falling for a fourth straight week.

Think about it. Despite the rapid rise in interest rates and restrictive monetary policy, the U.S. economy remains resilient. August’s employment report and last week’s ISM Services Index provided evidence that the post-pandemic economic expansion continues. The ISM Non-Manufacturing PMI Increased From 52.7 in August to 54.5 in September, its highest level since February, highlighting continued growth in sectors accounting for the majority of U.S. economic activity such as: services, mining, construction, and public administration. This series has been in expansion territory for all of 2023. There was a small increase in the prices paid index due to higher fuel costs, indicating that services inflation is far from returning to pre-pandemic levels.

The Fed’s Beige Book also reported an uptick in economic activity from July to August. However, unlike the ISM indices, the Beige Book showed inflation moderating in some parts of the country. A revision to unit labor costs – which gauges wage inflation – showed a 2.2 percent annualized increase compared to the initial estimate of 1.6 percent while productivity growth was revised down to 3.5 percent from the initial estimate of 3.7 percent. It is likely not the last revision for these data series from the Department of Labor as they are difficult to measure in real time. Elsewhere, the trade deficit has narrowed over the last few months but remains wider than pre-pandemic levels.

Even with a slight decrease last week, mortgage rates have ticked back up over the last couple weeks. The market has priced in “higher for longer” rate expectations from the Fed and are about one percent higher than the lows seen in February. Mortgage applications have declined six of the last seven weeks as higher rates erode affordability. Mortgage purchase applications reach a low not seen since April 1995. This week includes the $99 billion mini-Refunding as well as key inflation reports with CPI on Wednesday, PPI and retail sales on Thursday, and import / export prices as well as Michigan sentiment on Friday. No Fed speakers are currently scheduled with the FOMC in blackout period ahead of the September 19/20 FOMC meeting. Today’s economic calendar is limited to a Treasury auction of $44 billion 3-year notes. We begin the week with Agency MBS prices slightly worse, the 10-year yielding 4.29 after closing last week at 4.26 percent, and the 2-year at 4.98.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

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One of the critical strategies involved in purchasing and owning rental properties is using leverage. In a perfect scenario, you will purchase a property primarily using borrowed money. Then, the rent income from the property will not only pay the mortgage, but it will also provide you with a small profit. Over many years, that profit will grow, and your mortgage will shrink. Eventually, you will have a property that’s a virtual cash machine.

But there may be times between now and then when you will consider whether or not you should ever pay off the mortgage on your rental property early. It’s not an easy decision, and here are some considerations.

Why You SHOULD Pay Off Your Rental Property’s Mortgage Early

1. When You Have a Negative Cash Flow on the Property

If the monthly mortgage payment makes you lose money on the property, you effectively subsidize your tenant’s residency. But if you can turn that into a positive cash flow by paying off the mortgage, the property will instantaneously become a successful investment, and more so as the future cash flow builds.

A positive cash flow is important because repairs are an inevitable part of owning a rental property. Keeping cash aside for those repairs means staying ahead of the game.

2. When You Need an Income More Than a Tax Write-Off

Many times, the reason for owning rental property is to generate tax write-offs. Those write-offs reduce your tax liability on other sources of income.

One of the reasons rental property can be so effective in generating tax write-offs is that the taxable loss of the property is usually related to depreciation. That means you have a “paper loss” on the property rather than an actual loss.

For example, let’s say that you break even on the property based on actual rent income and cash expenses. But because of depreciation, it generates a tax loss of $5,000 for the year. Even though it isn’t a real loss in terms of dollars, it can be used to reduce your tax liability on other income sources.

But if you need an actual income property, it may be better to pay off the mortgage. For example, let’s say that you have a $100,000 mortgage on the rental property. By paying it off, you’ll have an actual cash income of $800 per month. That would be an excellent reason to pay off the mortgage on the rental property.

Related: Investing in commercial real estate with RealtyMogul is an exciting way to multiply your investment in ways that aren’t often possible with small-scale real estate.

3. If It’s Time to Retire

As a general rule, debts of all types should be paid off once you reach retirement. Just as is the case in the example above, by paying off the mortgage on the rental property, you will maximize the monthly income that it produces. In addition, if you decide to sell the property after you retire, you will receive more cash on the sale of the property if it has no mortgage on it.

4. When the Return on the Paid Mortgage Is Higher Than What Else You Can Invest In

This is where you have to crunch some numbers. Let’s say that the mortgage on the rental property has an interest rate of 6%. You have also been averaging an annual rate of return of 4% on your investment portfolio over the past several years.

Since the interest rate on the mortgage is higher than the rate of return on your portfolio, you’ll come out ahead by paying off the mortgage. You may be exchanging money invested in your portfolio at 4% per year to pay off a 6% mortgage. That will represent a return on your money that is 2% higher than what you are currently getting.

Related Question: Should You Invest or Pay Off Debt?

That strategy might actually make sense in today’s super low-interest rate environment. In truth, it’s much more valid to compare the rate of return on fixed-rate investments with the interest rate you are paying on a mortgage. That’s because both rates are certain.

Returns on a stock portfolio may not be entirely valid because they fluctuate over time. There are years in which stocks will easily outperform the rate you’re paying on the mortgage. There are others when they will seriously underperform.

In that regard, paying off the mortgage on your rental property may be an even better long-term bet. This is especially true if you believe that the stock market is heading down or is entering what could prove to be a long-term bear market trend. Paying off a 6% mortgage on a rental property could prove to be a windfall when compared to a market in which you may lose 25% or more of your stock portfolio over the next three or four years.

Related: 8 Ways to Pay Off Your Mortgage Early

Why You Should NOT Pay Off The Mortgage Early

1. If You Need Leverage to Buy More Rental Properties

The most basic problem with paying off the mortgage on a rental property early is that it requires capital. In fact, it usually requires a lot of it. Once you pay off the mortgage, you lose access to that cash. It represents capital that can be used to purchase other rental properties.

If you have one rental property that’s providing a comfortable return on the investment, you may want to purchase other rental properties in the future. Paying off your current rental property early will certainly improve the cash flow on that particular investment. However, it may deny you the ability to purchase similar investments in the future.

2. When You Need a Tax Write-Off

If you do need a tax write-off to reduce taxable income sources, you may not want to pay off the mortgage early. Of course, this usually only makes sense when the loss on the rental property is the type of paper loss that we discussed earlier. That’s the kind where you’re at least breaking even on the property on a cash basis, but depreciation expense is creating a taxable loss.

If that tax loss is important to your income tax situation, you’ll almost certainly want to keep the mortgage outstanding.

3. You Have a Positive Cash Flow, Even With the Mortgage

If you have an actual positive cash flow on the property even with the mortgage – meaning that the rental income more than covers the mortgage payment, property taxes, insurance, maintenance, and other expenses – you probably won’t want to pay it off.

Related: The 1% Solution – How to Determine if a Rental Property is a Good Investment

The basic idea is that the rental income is both providing you with a monthly profit while at the same time gradually paying down the mortgage until it is paid in full when your cash flow will really take off. That’s a successful real estate investment. It’s also one that’s probably best left undisturbed by major strategies – like paying off the mortgage early.

4. You Can Earn a Higher Return on Your Capital Than You’re Paying in Interest on the Mortgage

Let’s say you’re earning 7% on your investment portfolio, and the property’s mortgage has a rate of 6%. By paying off the mortgage early, presumably by liquidating part of your investment portfolio, you’ll actually lose money on the exchange. That’s because the rate of return on your investment portfolio is higher than the interest rate on the rental property mortgage.

Just be careful that you’re comparing “apples to apples” when doing this. In other words, be sure that the rate of return you will receive on your investment portfolio represents at least a relatively stable income. That means primarily your interest or dividend income. Since higher-yielding investments, including interest and dividend-yielding securities, tend to be riskier at higher returns, you also have to factor your current level of portfolio risk into the mix.

Related: A Step-by-Step Guide to Rebalancing Your Investments

The Bottom Line

If you’re considering whether to pay off the mortgage on your rental property early, you’ve got some thinking to do. It will all depend upon your personal circumstances. You should take into account the rate you’re paying on the mortgage. And, of course, ask the opportunity cost question of, ”What else could I be doing with the money?” other than paying off the mortgage.

And if you decide to pay off the mortgage and realize that it was a mistake, you always have the fallback option of taking equity out of the home. It’s a touch expensive, but available in a pinch.

Source: doughroller.net

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Hello! Today, I have a great debt payoff story from a reader, Ashlee Binderim. This is how she paid off $162,000 in debt. Enjoy! When you get married, you’re supposed to ride off into the sunset and live happily ever after, right? Well, not for us. That “honeymoon phase” came to a screeching halt when…

Hello! Today, I have a great debt payoff story from a reader, Ashlee Binderim. This is how she paid off $162,000 in debt. Enjoy!

When you get married, you’re supposed to ride off into the sunset and live happily ever after, right?

Well, not for us. That “honeymoon phase” came to a screeching halt when we quickly realized our financial situation wasn’t ideal (to say the least).

Let me set the stage for you – we were in our early twenties, still going to college full-time, and working part-time jobs when we said “I do”.

We were barely making ends meet and money was really tight.

We knew that we were walking into this marriage with debt, but we didn’t actually know how that would impact our financial future. 

My husband was in that sweet spot where his parents made too little money to send him to college but too much money to qualify for financial aid. This resulted in him taking out $150,000 in student loans.

During his time in college his student loans accrued $15,000 in interest. Bringing his grand total to $175,000 in student loans.

I put myself through college and was able to qualify for financial aid and I also received some scholarships but it didn’t cover everything. I took out $11,000 in private loans and $20,000 in student loans. I worked part-time and was able to pay back about $10,000 while in college, leaving $21,000 that I brought into our marriage.

Finally, we decided to purchase a brand new car at $29,000. 

Bringing the grand total to: $225,000 in debt.

We were barely old enough to legally drink and had $225,000 in debt. 

With an income of less than $3,100 a month starting out, our debt felt like we were chipping away at Mount Everest with a pickaxe. 

These loans were holding us back in just about every area of life. We were already paying a mortgage payment for a student loan, so we knew that we couldn’t afford to purchase a house. 

We were trying to pay off debt as quickly as possible which meant investing took a backseat. 

We had to say no to just about everything that we wanted to do or buy. Especially during the first year of our marriage because we could barely afford to eat.

So, how did we pay off $162,000 in debt in 6 years? I’m going to walk you through year-by-year our income and approximately how much we put towards debt each year. 

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How we paid off $162,000 in debt in 6 years

2016 –  I made around $25,000 that year and my husband made $35,000. We brought in $3,100 a month – collectively. With rent on a small one bedroom apartment at $1,050 which is the cheapest place that we could find. That left us with $2,050 for the rest of our basic necessities. My husband and I were still in college so we didn’t have a student loan payment yet. We knew that we wanted to pay off debt as quickly as possible so we put all of our extra income (which wasn’t much) towards debt. That first year, we were able to pay off $13,800 in student loans. 

2017 – I graduated college and got a full-time job as an Instructional Designer where I made $51,000 a year. My husband worked part-time and attended college full-time. He made about $35,000 a year. Which brought our collective income to $86,000 a year or $5,100 take home a month. 

In 2017, we also moved from our apartment to a larger apartment. Well, apartment may not be the right word, it was the converted hayloft of a barn. We had an agreement with our landlord that we would do things around the property, like yard work, maintenance, and other miscellaneous things. This agreement meant that we only paid $760 for rent and utilities. 

We had to pause our financial goals for a couple months during 2017 because my husband was experiencing loss of vision which resulted in dozens of doctors appointments and specialists to diagnose a rare medical condition. Luckily, we had insurance with a low deductible so we only had to pay a very small amount out of pocket and any travel expenses.

That year we put $22,100 towards paying off debt and saving to pay off my husband’s student loans. 

2018 –  My husband graduated college and was hired full-time as a Project Manager for a construction company with a starting salary of $71,000. With my $51,000, we made a combined income of $122,000. After medical insurance, taxes, and retirement our monthly take home was around $7,500.

We refinanced my husband’s student loans from his parents name to his, because that was the verbal agreement that they had upon him entering college. 

Quick note from Michelle: Companies, such as Credible, help you to refinance your student loans. With refinancing, the average person can save thousands of dollars on their loan, and that’s incredible! You can save a lot of money with student loan refinancing, such as with Credible, especially if you have high interest federal or private loans.

The best interest rate we could get was 6.5% on $175,000 – which meant that over half of the monthly payment of $1,315 went towards interest. According to our student loan provider, we should’ve been in debt for 15 years but knew that we needed to get out of debt as quickly as possible. After doing the math, we were looking at paying over $135,000 in interest alone over the lifetime of the loans.This would’ve brought the total amount of the loan to $310,000 – which as you can imagine, we weren’t ok with. 

So, in 2019 we really buckled down and linked arms to make major changes to our finances and put everything we had towards paying off debt which also meant making some hard decisions.

We put $24,229 extra towards debt in 2018 on top of our monthly payments of $1,315 bringing the total towards debt to $40,009 (but remember, only half of our payment was actually going towards the principal). 

2019 – This year we got really serious about paying off debt. We were making the most money that we had ever made and we were honestly really tired of saying no to everything. We knew that it was going to take some hard decisions and we needed to refocus our priorities but we knew that it was going to be worth it in the end.

My husband and I both received a raise and were now making a collective $139,000 a year. Monthly take home was around $7,900. 

We cut back much of our spending in many areas including insurances, monthly streaming services, and we made one of the hardest financial decisions – we sold our car back to the dealership. 

It was a really humbling experience. The car salesman was pretty surprised that we wanted to sell our brand new car back but in just a couple of hours we paid off $21,393 and walked out of the dealership with a paid for car that ran just fine for $1,500. It didn’t have all the fancy bells and whistles but it drove and meant we were able to achieve our financial goals faster. I still drive this car around today and love it!

Again, we experienced another financial setback due to health issues. I received a diagnosis that required several specialized treatments that our insurance didn’t cover. Despite this setback, we were still able to knock down our debt. 

We put $57,820 in debt in 2019 alone (a big portion of that was the car that we sold back to the dealership).

Through our debt journey I learned that I really have a passion for helping other people reach their financial goals and decided to pursue a financial coaching certificate and started to build a financial coaching business. 

Because we were paying off debt left and right our credit score dramatically increased and we decided to refinance our student loans for a lower interest rate of 4% but kept our monthly payments the same.

Refinancing for an interest rate just 2% smaller drastically changed how much money was going towards the principle. We went from paying about $600 a month in interest to $250 from a 20 minute phone call with our student loan provider. 

2020 – I quit my job in February to pursue working full-time on my financial coaching business – our income took a huge hit as world events hit the U.S. in March of 2020 and I focused on helping people for free during this tumultuous time. Although we didn’t pay off as much debt as we wanted to, I knew I was helping people gain some semblance of security during an unprecedented time and that was worth our financial goals taking a small backseat.

By November we were under $100,000 in debt and for the first time our debt finally felt more tangible and like we were making serious headway in becoming debt free! 

That year we brought in $106,000 and our monthly take home was around $6,000. We received several stimulus checks that we also put towards debt which really helped and my husband also received a company car which cut down on our monthly insurance payments and gas budget almost completely. 

In 2020, we put about $33,488 towards debt during such an unprecedented time which we were very grateful for making any progress towards our goals because we knew that wasn’t the case for a lot of families out there.

2021 –  As of today, our income is around $112,000 with a monthly take home pay of $6,400. Now that we’re in the home stretch – we’re doing everything that  we can to pay off the remainder of debt. This year we’ve sold a travel trailer, small fishing boat, extra vehicle, and many other miscellaneous things around the house. I also started a fine art painting business to sell some paintings that I’ve done over the years.

We just refinanced our student loan again to get an all time low interest rate of 2.25% which will save us about $1,500 a year that will go directly to the principal instead of interest! 

Literally anything and everything we can do to pay off this debt – we’re doing it!

By the end of this year, we’re looking at approximately $42,000 in debt and we have a goal of becoming debt free by September 2022! 

As you can see, there were a lot of things that came up during paying off debt. But I wanted to give you a really clear and honest picture of what our payoff story looked like!

I feel like there’s a lot of stories out there that don’t show you the hard parts of paying off debt – which for us, there were several moments where we felt like we were stalled out and not gaining any forward momentum.

But, each and every month that we put money towards debt we feel just lighter, more secure in our future, and that much closer to hitting our goals. Despite the setbacks, it’s still worth it. 

Let’s dive into the three specific things that we did to pay off $162,000 in debt in 6 years and not lose sight of our goals. 

1. Get on the same page 

This is one of the most important steps that you can take if you’re married or in a committed relationship.

If you’re not on the same page with finances, you’re going to pull in opposite directions and make little progress.

But, when you both agree on working together and in the same direction, you’ll gain momentum faster and also hold each other accountable to achieving your financial goals. 

In order to get on the same page, I recommend that you sit down at the beginning of the month to create a budget and have that budget readily available to look at.

Hang it on the fridge if you need to.

This way it’s a constant reminder of what you’re working towards and will keep you moving forward together with momentum.

2. Set priorities 

You can’t accomplish everything in a year, so set your top 3 financial priorities that you want to focus on in that given year and only focus on those three things. 

For example, let’s say you make $65,000 a year and your priorities are paying off $15,000 in debt, taking a $4,000 vacation, and saving $3,000 in an emergency fund. 

You can’t, however, max out your retirement, Roth IRA, take 3 luxurious vacations, save $100,000 for a down payment on a house, and do everything else that I mentioned above.

It’s just not feasible. 

Not only that, but you would be setting yourself up for failure because your goals are not realistic and probably would feel very overwhelming and limit you from taking any steps forward.

By focusing on our top three priorities, it helped us to say no to things that didn’t fit into our priorities and kept us on track to hitting our financial goals.

3. Still have fun

As a financial coach, I’ve done a ton of research on human psychology around money. I’ve learned that your brain’s sole job is to keep you safe – to your brain, that means the same.

Because anything different from what you’re doing is scary, uncomfortable, and maybe even a little painful and your brain will do anything to make sure you don’t feel those feelings to keep you safe.

So, let’s say that you have a goal to pay off $50,000 in the next 2 years.

In order to do that, you will likely have to do a couple of things: ask for a raise, cut your spending back, sell things around the house you don’t use anymore, or pick up a side job.

All of these things are outside of your normal routine which means the brain goes on high alert and you might feel stressed out.

When you feel stress over something, your brain will try and keep you from feeling those uncomfortable emotions so it’ll have you focus on something else instead.

When you feel stress, your brain will get you to do something else that brings you happiness or at least procrastinating from the feelings that you’re feeling – like scrolling on social media, binging Netflix, eating that pint of ice cream, etc. Then you feel stress that you didn’t make any forward progress and you rinse and repeat.

Achieving your financial goals doesn’t have to be so difficult when you help your brain understand the benefits to achieving that goal.

To circumnavigate human psychology, it’s important that you still have fun while you’re going after your financial goals. I’m not talking about taking a luxurious vacation every month.

But I am saying that you need to set aside a little money to have fun! This will actually help your brain adapt to new habits and help you achieve that financial goal faster because you’re not fighting against your brain.

It also helps to know that it’s going to be a marathon, not a sprint.

Financial goals, especially large ones, are going to take some time. Unless you win the lotto (that you likely don’t even play), it’s going to take an extended amount of time to accomplish your goals and that’s a good thing!

Long-term financial goals can teach us the importance of patience, delayed gratification, and finding joy in the little things.

This can be translated to everyday life. You learn to say no to the little things because you’re so focused on the long term goal.

Because my husband and I have paid off over $162,000 in debt we know that we can tackle any financial goal that we set for ourselves and we’re actually stronger and a better team because of it!

There are several areas where we saved money that might help you as well – 

  1. Car insurance – We were able to lower car insurance by shopping around regularly. If we felt like our car insurance was too expensive or when they raised the prices after a year, we would shop around for a better quote. On average we save $700 a year by shopping around.
  2. Phone bill – We switched from Verizon to PureTalk to cut our phone bill by $120 a month! Now, I only pay $31 a month for the same service. 
  3. Sold stuff – We sold many many things over these 6 years. We sold a total of 4 cars, a travel trailer, small fishing boat, furniture, vegetables from our garden, old artwork from college, and many other things that I’m sure I’m forgetting! 
  4. Get creative with housing – The housing market is insane right now so I know how hard it can be to find affordable housing. When you think outside the box and find creative solutions you’ll be surprised with how much money you can actually save. You can live in a mother-in-law suite, buy a trailer and rent someone’s backyard to park it on, live in a van, or do a work-trade for discounted housing like we did. 
  5. Refinance student loans – A fun fact about student loans is that you can refinance them as much as you want to. We refinanced our student loans 3 times to get a better interest rate and it’s usually pretty painless.

When we first refinanced our student loans the best interest rate that we could get was 6.5% meaning that about $600 a month was only going towards interest and not even touching the principle. When we refinanced our student loan again a year or so later we were able to save about $350 a month!

As you can see our journey in paying off $162,000 in debt wasn’t a clear path.

It had bumps in the road, things came up that we couldn’t foresee and that’s okay. That’s life! But, you shouldn’t let those bumps completely halt your progress.

We never exceeded $140,000 a year in our income and were still able to pay off our debt in half the time. I’m not saying that it’s easy, but it’s possible. We got on the same page, focused on our main priorities and still had fun in the process.

We’ve traveled to Texas, Montana, Oregon, Utah, Colorado, Nevada, Washington, and California while paying off debt. 

I hope that reading through our journey to paying off $162,000 in debt has been inspiring and given you hope. 

If you want to watch our journey to become financially free by September 2022 and pay off $63,000 in debt, you can follow us over on Instagram where we’ll be giving regular updates! 

Author bio: Ashlee and her husband started their marriage with over $225,000 in debt. They were both working part time, going to college full time, and barely making ends meet. After years of struggling they finally figured out how to link arms and tackle financial goals together. Current debt payoff: $162,000 to date! Now, she’s a certified financial coach and on a mission to help other couples reach their goals by getting on the same page with their finances so they can set up a secure future. You can find her on her website Beyond Millions as well as on Instagram.

Do you have debt? Are you trying to pay it off?

Source: makingsenseofcents.com

Apache is functioning normally

Robert Kiyosaki, Robert Allen, and Loral Langemeier would have you believe that in order to get rich all you need to do is throw your money into real estate, sit back, and let the profits come. It’s not that simple. There’s risk involved. You have to know what you’re doing.

Jon forwarded a link to what he calls “a personal finance trainwreck”. He writes: “If this guy is for real (and there appears to be some suspicion about that) then, wow. Unbelievable.” Casey at iamfacingforeclosure.com thought he could make a killing at real estate. He wanted to reach Financial Independence quickly.

I’m a 24-year-old aspiring real estate investor from Sacramento, California. After going to few seminars I bought eight houses in eight months across four states with no money down. I fixed and sold two and then ran out of cash. I am now facing foreclosure on six five houses. I’m learning my lessons, finding solutions and blogging about it.

Casey’s story is fascinating. Here’s a young man who read Kiyosaki and Allen, and who is trying to find riches by following their advice. He’s trying to make money quickly, and is struggling, but is willing to share the gory details. In one entry, Casey writes that he and his wife are running out of money. They’ve been living on credit cards, which are now maxed out. He’s afraid he might have to get a job.

I can’t just do a job. I do not want to give up my dream of financial independence. If I get a full-time job, I will continue doing my business and investing on the side. Finding time to do both will be hard (tried it before many times). If I must do that, I will. But it will probably take much longer to reach my goals.

An hourly job has limited earnings potential. Getting a 3% raise every year is not my idea of upwardly mobile. Making $25/hour writing code seems like a waste of time when I can sell a real estate contract for $5,000 after doing 5 hours of work = that’s $1000/hour!

So if I can work really hard for one month and find just 2 deals, I can make $10,000. That’s much better return on my time.

Casey received many responses (the comments are the best part of the site), some helpful, some angry, some flabbergasted. Some are all of these at once.

You’ve just nailed the difference between fantasy and reality. […] You are in the process of learning the difference between GAMBLING and INVESTING. Everything you’ve done so far has been gambling. Investing requires that one balance the risk with the rewards, diversify, and be dedicated. Some investments will fail, but a wise investor won’t have too much tied up in any single thing (like real estate purchased on a guru-drunken binge). Investments are made with money that one could stand to lose. Investing is not done by leveraging oneself up to the eyeballs and beyond, hoping for a miracle.

You can see television interviews with Casey (choose “House Flipper Part One” or “House Flipper Part Two” from the menu in the middle of the page). His story is also featured in two articles from the San Francisco Chronicle:

Langemeier, Kiyosaki, and Allen are inspirational. Some of their ideas may even be useful. (Prlinkbiz — who I’m sure will have something to say about this entry — is a huge Kiyosaki fan, and seems to be making his principles work for her.) But these folks preach that their methods are sure-fire ways to wealth and success. They overpromise in an attempt to sell books and seminars. Langemeier says she’s created 200 millionaires, and that she can make one out of anybody. Yet I can find no independent evidence that this has occurred. I’m not saying that it hasn’t happened, but I’m skeptical.

The only sure-fire way to wealth and success is to spend less than you earn, to save the difference, and to invest that savings for growth.

Follow-Up on Casey Serin, the Man Who Would Be Rich

Casey stopped by Get Rich Slowly yesterday and had this to say:

I don’t see why a person CANNOT get rich quick… but still do it in an honest and safe way. Whenever you hear “Get Rich Quick” you think somethhing bad.

And yes, if you read my story, it DOES sound like i’m just a big screw-up. AND YES.. I did do some stuff that I am NOT proud of (liar loans). However, I am learning my lessons and hoping to make a comeback.

I am determined to find a way to make an honest buck in real estate in a down market. My mentor “Rich Dad” did it. It took him only about 10 years. Now he has 20K+/mo in PASSIVE income from REAL ESTATE.

Is 10 years too quick? What about 5 years?

That’s an interesting question. How quick is too quick?

It’s not impossible to get rich quickly — the day before I wrote about Casey, I shared advice on how to handle sudden wealth — but it’s dangerous to focus on quick wealth as a goal. I’m convinced that people get rich quickly by chance, not by intention. If get rich quick schemes worked, more people would do them. You’d read and hear documented tales of success. But they don’t work. They’re mostly scams designed to transfer money from saps like Casey into the hands of others.

My advice for Casey is this:

If you have a burning passion to make these sorts of plans succeed, then pursue them with only a portion of your finances. Follow tried and true personal finance wisdom with most of your money. Take 90% of what you earn, and do the boring stuff with it: pay off debt, start an emergency fund, invest for retirement. You are so young right now, that if you would invest just $5000 each year until you’re 50, you could retire then as a millionaire. (Assuming 10% returns.) This is with almost no risk. Why try to get rich all at once? Why not ride it out?

If you’re dead-set on trying to get rich quickly, then don’t use all of your capital to do so. Do the safe stuff with 90% of your money. Save the remaining 10% to make real estate purchases. If you strike it rich, great. But if you don’t, then at least you haven’t mortgaged your future. This isn’t ideal for most people, but you have the drive and desire, so it gives you something to play with. But this means that you’ll have to work in order to meet your goals.

I don’t want to kick Casey’s dreams. Dreams are good, and I think people should pursue them with gusto. Too many people make a practice of telling others why their plans won’t work instead of lending support. But when your dreams are at odds with reality, you need to re-evaluate.

$2 Million in Debt in Two Years

Casey Serin of I Am Facing Foreclosure held a two-hour conference call to take questions from readers and to explain his situation. I didn’t hear the call, but I did read the entire transcript (part one, part two).

For those of you unfamiliar with him, Casey Serin is the Napoleon Dynamite of real estate investing. He took real estate seminars from Russ Whitney and read books by Carleton Sheets. He bought into the “get rich quick” mentality. In October, the San Francisco Gate wrote:

After spending a year and upward of $15,000 (borrowed on credit cards) going to real estate seminars and buying home education courses from everyone from Russ Whitney to Bruce Norris and, of course, the aforementioned Robert “Rich Dad, Poor Dad” Kiyosaki, Serin embarked on his brilliant career as a real estate flopper, er, flipper. “I wanted to move toward financial independence,” he told me by phone from his home in Sacramento, referring to “passive income,” a key tenet of the “Rich Dad, Poor Dad” scriptures (“Don’t work for money, allow money to work for you”).

Most people take these seminars and read these books but never do anything. Serin heeded the advice of these gurus. In his own words, he “bought 8 houses in 8 months in 4 states with no money down looking to fix ‘n flip.” He bought these houses between October 2005 and May 2006, after the U.S. real estate market had already begun to decline. He ended up $2.2 million in debt, and he’s been blogging about it ever since.

Serin’s story bugs a lot of people. He made many mistakes. He lied on his loan applications (and continues to rationalize this by saying it’s “industry standard policy”). He exhibits no regret. He continues to live a normal (even lavish) lifestyle despite being deep in debt. He refuses to pay anything on his debt because he doesn’t think it’ll make any difference. He refuses to take a job. He doesn’t take any action to improve his situation. He seems to be a publicity whore. Despite his failures, he believes that he can still get rich quick in real estate if he only finds some sweet deals.

I don’t get angry at Serin. I just think he’s dumb. He continues to pursue a way of life that is just not tenable. He’s trying to bypass the “hard work” portion of the American Dream. I consider his story a stark counterpoint to my message of “get rich slowly”. (Trivia: Casey went to high school with Ramit of I Will Teach You to Be Rich. The former tried to get rich quickly and failed. The latter teaches sensible entrepreneurship and personal finance advice, and has succeeded.)

As I said, I read the entire transcript of Serin’s two-hour conference call. It’s an amazing glimpse into the mind of a young man who wants wealth now. Since I know most people don’t have the time to wade through the entire thing, I’ve culled the best parts to share here.

The first thing that strikes you when reading Serin’s stuff is that he doesn’t seem to have learned his lesson. He’s two million dollars in debt, but he’s still convinced that there’s a quick fix for this mess.

Besides real estate, I’m also looking at other opportunities. With this exposure I’ve had, I’ve made a lot of interesting contacts in different industries, not just real estate. I’m talking with a gentleman in Southern California who’s a silver broker, for example. The silver and gold and precious metal market right now is on the rise, and whenever there’s turbulence, or any kind of a war, or anything crazy with the economy, that’s a good place to put your money. I’m definitely looking at that. I’m looking at stocks, but individual stocks, not mutual funds — the performers, the companies that are about to take off, that you’re able to make some money; for example, with penny stocks.

I want to mail Serin a box of personal finance books. I want to send him Dave Ramsey, Your Money or Your Life, the words of John Bogle. I want him to read real personal finance advice that works. But I’m afraid the books would go unread. (Does anyone have his address or know how to get it? Maybe I really will send him some personal finance books.)

At times Serin seems to have learned something. Regarding “no money down” deals, he says:

If I was putting my own cash down, I would have been a lot more careful. That’s what happens when you have a real down payment. Anybody out there who’s looking to do a no money down deal, I say, you have to be careful. Don’t treat the no money down as just a free deal for you.

But other times it seems he hasn’t learned a thing:

I love those no doc loans, they’re the best because you’re never stating anything so no one can ever go back and say you were lying on your application.

One caller tried to explain the concept of “buy low, sell high” to Serin, but he didn’t want to hear it.

CS: Well, you know, if you’re going to do flipping in a down market, here’s the biggest thing. Buying is going to be easy. There’s tons of people giving houses away, including myself. You come to me; I’ll give you my houses away. Just take them over, or whatever; save me from foreclosure. So, buying is not going to be the hard part. Selling is the tough part. You have to get really good at selling your properties, and in a down market, you probably don’t want to buy anything that’s not a first-time-buyer home.
[…]
SC2K2: I just can’t handle how brainwashed you’ve been by all those seminars.
CS: Oh, yeah?
SC2K2: The way you make money in a down market, is you wait for the prices to bottom; you buy in paying very little; and then you sell when they’ve gone way up. Yeah, your Rich Dad probably —
CS: That’s the long-term strategy. Are you saying you can’t do quick flips on the way down?
SC2K2: You know, Casey, there’s no way you would be able to handle quick flips.

Serin isn’t interested in a long-term strategy. He wants his money now. He doesn’t see that this is precisely where he’s going wrong. While he’s focused on quick riches, he’s neglecting basic personal finance. For example:

I thought at the beginning it would be such an awesome story, a comeback story and show so much success to be able to pay everything back, but at the same time I think I had a bit of a wishful thinking going on, because I didn’t realize when I first started what kind of a hole I was in. The hole’s so big that at this point, I’m really out of options.

Yeah, but here’s what’s going to happen. I pay a credit card — even fifty bucks — that doesn’t do anything to the collection process. Here’s what happens: it’s going to go and get discharged, and then they’re going to try to sue me and try to get that money. So that fifty bucks could have been used better in something where I can actually make money, perhaps doing another deal —

And:

GDS: What’s your FICO now?
CS: I actually don’t know because I haven’t logged into Washington Mutual in a while and I probably should have done that before this call, but last time I checked it was in the high 400’s, 490 I believe or something along those lines. It might be lower now because I’m going to have two official foreclosures showing up on my record any time.
GDS: Well, it doesn’t go below 450, so it doesn’t get much —
CS: It might be interesting to see if I might be a person that actually gets a 450 FICO score. I might be one of the few amongst some of my friends. I’m hoping other people don’t do the same thing I did.

The end of the conference call is the best part. A caller named Nacho tries to push Serin to think about his situation, about the things he’s done.

CS: Not everyone’s going to be successful and self-employed. But don’t you know self-employed doctors or lawyers or successful realtors or anybody who doesn’t have a W-2 but still makes money? It’s not like W-2’s the only…
NACHO: But you haven’t been successful! So isn’t it time to try something else? Supplement your side jobs with a real job.
CS: Well, you know, I never said I’m not going to get one. I’m definitely considering that, and since I do still have money coming in through some of those other sources, it allows me to stay flexible so I can still kind of be in real estate a little bit, and other opportunities.
NACHO: Do you understand that the real estate market is tanking? Do you have a grasp of that?
CS: Oh, yeah. That’s why I’m looking at other investing opportunities, not just real estate.
NACHO: And do you understand that you bought in at the worst possible time? You do understand that, right?
CS: It’s not like you can’t make money in a down market. My local Rich Dad, he made his fortune in the last downturn in California. But of course he had a lot more experience.
NACHO: Did he have decent credit? Was he able to secure loans?
CS: Well, he could secure loans. He had money partners. He had mentors. See, I kind of started off without any mentors guiding me, and that’s kind of one of my problems. And I didn’t have any construction experience.
NACHO: You know what, Casey? I don’t think mentors is your problem. I think you’ve got enough with these guru mentors. I think that that’s the last thing you need. What you need is a swift kick in the ass, from somebody who’s going to tell you the truth. Seriously. Someone who’s going to tell you the truth.
CS: I appreciate you being upfront and giving me a little dose of reality, as you said.
NACHO: Well, that’s how I roll. I’m always trying to keep it real. I’m just trying to let you know, man, that you need to start looking at things differently. You’ve been going a certain way and it’s not working out for you, and you really need to change the way you’re viewing life.
CS: Well, I appreciate it.
NACHO: Because everybody that you owe money to is going to get shafted, and then, in turn, taxpayers are going to have to pay — you know, foot the bill.
NACHO: Are you worried about going to jail?
CS: I’ve already kind of addressed it, but the thing is, if I live my life in fear, what good is that going to do?
NACHO: And you don’t think that you deserve to go? You don’t think that what you did was basic thievery?
CS: Well, the thing is I wasn’t out to rob banks, I was out to make a business, and I screwed up.
NACHO: But Casey, you got everything fraudulently. Come on, you knew in your heart that that was the wrong thing to do.
CS: Part of me was thinking that maybe I shouldn’t be doing stated income loans, because even though everyone seems to be OKAY with it, I had a little bit of a gut instinct. I should have listened to it; you’re right.
NACHO: And you understand that when you do things wrong like that, sometimes you have to pay the piper?
CS: Oh, yeah. And do you think I’m paying the piper?
NACHO: No, not yet. Not by any means, no.
CS: You don’t think that all the financial stress and the issues I’m going through is not enough?
NACHO: Absolutely not, Casey. I think you should be out there working your ass off — two jobs if necessary — paying five bucks a month on every single bill if that’s what it takes to pay this stuff down. I think you should be calling your creditors and making some sort of payment arrangement for you to —
CS: You know what? Check this out; put yourself in my shoes. Even if I get three or five or ten jobs right now I’m not going to be able to catch all my loans up, so they’re going to go to collections, and they’re going to start suing me. So if the only good thing I can really do right now is bankruptcy protection or refinance all those loans.
NACHO: If you pay five dollars a month on any bill, they can’t send it to collection, Casey, do you understand that?
CS: Sure, they can.
NACHO: No, they can’t.
CS: If I don’t pay the full monthly payment — I can’t just keep letting them go… That means I can just pay a dollar on all my loans and they’ll just keeping indefinitely. They’re not going to do that.
NACHO: I’m not talking about the foreclosure loans, I’m talking about the credit card bills.
CS: Even the credit cards.
NACHO: Casey, you have to do something to try and right this wrong. Who’s the guy who has the blog – I am [$334,442 in unsecured debt. I am 23. Will I make it ?] dollars, whatever the hell it is, in debt.
CS: Yeah, the guy eating Ramen and stuff. Yeah, he’s eating Top Ramen; he’s doing all this other stuff.
NACHO: He’s doing the right things. If you would do those things, people would be behind you. People would be giving you suggestions and telling you what to do. Do you understand that?
CS: Well, you might have a good point there. But I wonder if that guy’s really for real, though. Do you think a person can survive on Top Ramen for six months?
NACHO: Oh, yeah. Sure.
CS: Do you think he can eat that crap and still be healthy and still be safe?
NACHO: Yeah, throw some vegetables in there. Casey, the last thing you need to worry about right now, seriously, is eating your vegan — your mildly vegan — seriously, you throw some vegetables and a little bit of whatever, some chicken in the Top Ramen, and it’s fine. Have some beans and rice; that’s fine. Buy a big-ass bag of beans and a big-ass bag of rice and cook it up. Have oatmeal for breakfast —

Casey Serin may or may not be a good guy. I can’t tell. He seems likeable enough. But he has succumbed to the idea that the best way to make money is through tricks and games. I’m not saying that you have to be a wage slave all your life in order to get money to save for retirement. But there are clear, safe paths to wealth and happiness. They take time. They take effort. My goal is explore these paths with you. It’s too bad Casey’s not along for the journey.

Source: getrichslowly.org