Where is the bottom? What's the worst that could happen?

[Kevin Armagno]

I am new to real estate, and though there is loads of amazing information here on how to succeed, I am looking for more information on how to fail (Not that I intend to!). So, given that there was a crash 10 years ago (and some people forecast another big one soon) and there are plenty of investors that do ultimately fail in healthy economic times, what does that look like, and how do you recover? A coworker of mine recently told me to only use conventional loans and not do "anything weird" (he owns a duplex) . I would like to feel like I knew what I was getting into if I did use private or hard money. Does failure count as experience? Does failure destroy your reputation and your credit? What happens/what does it look like if you can't pay a private or hard money lender? For that matter, what are the lasting personal effects of foreclosure? I apologize; I know it is an incredibly vague question. I just want to understand my risk and better understand the whole process.

[Michael Randle]

Lots of questions so lets just dive into them.

"I would like to feel like I knew what I was getting into if I did use private or hard money" - Very High interest rates, usually not as much concern for personal credit score etc (this will vary between lenders) and more looking into property and experience.

"Does failure count as experience" -Absolutely, as long as you learn from the failure and apply that knowledge to future endeavors. If you fail and say 'The gods are so cruel to curse me as such!' then it doesn't count as failure. (Sorry, just read Richest Man in Babylon and that writing style is stuck in my head).

"Does failure destroy your reputation and your credit" - Depends on the level of failure, if you get foreclosed on or have to declare bankruptcy then it is going to ruin your credit. If your failure is selling a house for a slight loss then no. All matters on the magnitude.

"What happens/what does it look like if you can't pay a private or hard money lender" - Well it isn't like the loan sharks of the mafia era so you can expect your kneecaps to remain in tact. But you can expect to lose any collateral and have your personal credit ruined.

"For that matter, what are the lasting personal effects of foreclosure" - Do not quote me on this but I believe it is on your credit report for 7 years and you cannot get a mortgage for at least 2 years.

Hope that helps you a little more. Good Luck!