How do you start from behind the starting line? REI Newbie

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It is going to come down to your Debt to income ratio which depends on what you do with the house. If you sell it and take a loss it will hurt your ratio If you hold it and rent it for a loss, it may hurt the ratio less as you're not experiencing the complete loss right away Maybe you could owner finance it to a non-conventionally qualified buyer for more favorable terms. If / when you do get out of this and into something else. Make sure it decreases your Debt to income ratio rather than hindering it further. Cheers, Mark

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Thank you sooo much for your replies. My DH and I are already diligently saving and paying down debt. I am actively reading sites like this and visiting the library and consuming various real estate investing books. I know that we are not currently in the position to invest - we are educating ourselves to be in the position to do so. Our goal is to have everything paid off (less the mortgage on the condo and student loans) within the next year. Year 2 will probably be more dedicated to savings, savings, savings, and getting the money that we would want to start investing in real estate. We definitely have a long term plan in mind. With that being said, I definitely appreciate the replies but would like to hear more specifically about what options are available when you have a property with negative equity. Our plan at the moment is to rent it out at some point in the next 3-5 years and ***hope*** that in the long-term maybe 10-15 years - we might recoup some of the value. However, I heard that to go from an owner-occupied property to a new mortgage on another owner occupied property that the first has to have 25-30% equity depending on the financing. I don't anticipate the market rebounding in time for that to be the case. So what potential exit strategies would be available to us?

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Gabrielle: Most financial books recommend setting aside 10% of your gross take home pay into an account that you will only use for your investing. If you can save 30-50% you will be much better off. This takes discipline and you must give up a lot of your impulse spending to get where you want to go. Robert Kiyosaki in one of his Rich Dad/Poor Dad books stated that a personal residence is NOT an asset. His definition of an asset is something that puts money into your pocket. A liability is something that takes money out of your pocket. When applying for a loan bankers like to put your home into the asset column. It is an asset to them as they have the money coming in - but as you are aware - it is a liability to you! Budget is a first step: Determine how much money is coming in and how much is going out. Look at all the expenditures going out and eliminate those that are just plain luxury items! To do a budget you must write down everything you spend every month! Set a goal of how much you want to save by when and then let you subconscious mind work on ways to reach that goal. Your goals should be written down and reviewed daily - weekly - monthly so you can stay focused! While saving to reach your set goal amount - get all of the self-education you can find. With the internet - there are many sites like this one to find real estate investing info. Don't forget the library - also known as the poor man's college. If not a very good selection of real estate books - check out the local book stores. Buy a cup of coffee and skim through the ones that appeal to you. This will help you decide exactly what area of real estate you want to specialize in! Hope these items help you on your investing trek!

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Hi Gabrielle, Thanks for sharing your story with us! Your concern is one of many who want to get started in this business. The best thing to do, as Stephen Covey says is to, "Begin with the end in mind." First get your personal finances in order, see how much is going on and how much is going out. And, from there figure out if you have any funds left over for investing. If you have a lot of debt, it's best to take care of that before you decide to invest. I see a lot of folks out there who are over leveraged, in debt, yet still try to invest - it's not a good idea. Once you have your personal finances in order, then you need to figure out your short term vs long term goals. What is your exit strategy? And, do you need to build up cash right now? Or, are you ready to buy and hold? These are just a couple questions that may come up. Above all, it's best to put your time and effort into educating yourself and having a good, solid foundation on personal finance. There are many good finance books out there, knowledge is power. Hope this helps!

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I think the best strategy is to first trim all the fat. And I mean all of it. When I first started, I had ZERO dollars (and debt). Not that I'm too far from that now :D But, I do feel like I'm headed in the correct direction. The BIGGEST thing that helped me was altering my lifestyle. That meant saying "NO" to friends when they were headed to the bar. Saying "NO" to myself when driving by my favorite crutch (Dunkin Donuts Iced Coffee). Every time I did this, I took the amount that I would have spent and I put it into an interest bearing ON-LINE bank account, and I did not give my self any card access to it. It was there for my first investment, and come hell or high water, I wasn't going to spend on anything but. At first I was embarrassing myself... checking the account so frequently, and not even having over $100... but it grew, and as it did, I found EVEN MORE things that I could cut out of my spending just to get that number increasing. It took me about 2 years to save enough to buy my first house, but it was worth it. My lifestyle is still very much toned down on the expense side, but we do set aside a little cash each year for a vacation. It is much needed in this stressful world we live in! Good Luck! Mark