Overwhelmed yet hopeful in Tucson

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Overwhelmed yet hopeful in Tucson

Sandra S.
Tucson, AZ · Member since 2016 · 14 posts · 1 vote

Hello All, 

We are an early 30's childless (except for two fur babies) married couple who recently moved to Tucson from New York City. We are new to investing, and trying to soak up as much information as possible. Feeling pretty overwhelmed at the moment but trying to stay upbeat. We fell into a dismal financial situation in NYC (medical bills, costly immigration fees, snowballing living expenses...) and decided to move to Tucson where the cost and pace of living is more manageable. After much thought and many tears, we decided to declare bankruptcy to discharge $60K in debt. While I feel like a huge failure for conceding to bankruptcy (we  worked so hard to always pay every single bill on time without fail and maintained 711 credit score until filing) the stress of the rat race was affecting our sanity and health. 

SO NOW.... I'm afraid that having declared bankruptcy leaves us very little options in the arena of real estate investing. 

We have $8K cash, and $30K in an IRA that I rolled over from 401K when I left my employer in NYC. So we don't have a lot.

Caveat to the bankruptcy: Only I am actually filing bankruptcy. My husband is not filing, however all debts will be discharged in both our names since they were incurred since we married. We still expect his credit to be decimated though.

My husband also has 1/3 ownership with his father & brother in a multi family building in London worth at least $1M, with a $400K mortgage which is more than covered by tenant rents. His grandfather owns a few other properties in London that are positive cash flow from tenant rents, and a $1M+ house that is owned outright as primary residence. His family is open to investing/helping us here.

Where do we start???

Or have we closed all avenues since declaring bankruptcy? (for the next 7 years at least).

My husband is currently working a sales management job (that he absolutely hates) with a $40K salary, and I am currently not working yet here in Tucson (though receiving $425 weekly in unemployment from NYC). We have exactly enough money to cover our monthly bills. Both of us are looking for jobs here we don't totally hate and will allow us to save at least something to put towards investing. (We left $80K jobs each in NYC so this is humble pie for us, however living expenses are much less here). We are renting a 1 bedroom for $765 (versus $2100 in NYC).

Just not sure what avenue to pursue now to maximize what (little) we do have and get kickstarted on the right path in real estate. ANY advice very much welcomed! 😊

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  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    I forgot to mention that I think our goal is cash flow/income...at least to start. But I am also questioning whether that should be our goal? (analysis paralysis, second guessing everything...)

    Also, I am not against using the IRA money for investing. I know that is typically a big no-no and has been much debated here in the forums, however I think it makes more sense for us to use the money to get ahead sooner rather than later.

    0Reply
  • Mark Nolan
    Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    10y

    @Sandra S.

    You may want to consider investing your IRA in a rental property. However, all the income would have to flow back to the IRA and it would grow tax deferred.

    0Reply
  • Eric HardingPro Member
    Investor · Tucson, AZ · Member since 2016 · 13 posts · 5 votes
    10y

    Are you looking for passive income and being more of a part time investor? Or would you eventually switch and make real estate a full time career? 

    0Reply
  • John Chapman
    Investor · Dallas, TX · Member since 2009 · 718 posts · 913 votes
    10y

    @Sandra S. You've done a good job explaining your personal situation, but perhaps you could tell us what aspect of real estate investing you are looking to get into?  (E.g. buy and hold, flipping, notes, ert.)  Or perhaps your goals?  (current income, capital, retirement income, etc.)  I think the advice would probably be more targeted and helpful to you with that information.

    0Reply
  • Dominic Jones
    York, PA · Member since 2015 · 199 posts · 58 votes
    10y
    Originally posted by @Sandra S.:

    Hello All, 

    We are an early 30's childless (except for two fur babies) married couple who recently moved to Tucson from New York City. We are new to investing, and trying to soak up as much information as possible. Feeling pretty overwhelmed at the moment but trying to stay upbeat. We fell into a dismal financial situation in NYC (medical bills, costly immigration fees, snowballing living expenses...) and decided to move to Tucson where the cost and pace of living is more manageable. After much thought and many tears, we decided to declare bankruptcy to discharge $60K in debt. While I feel like a huge failure for conceding to bankruptcy (we  worked so hard to always pay every single bill on time without fail and maintained 711 credit score until filing) the stress of the rat race was affecting our sanity and health. 

    SO NOW.... I'm afraid that having declared bankruptcy leaves us very little options in the arena of real estate investing. 

    We have $8K cash, and $30K in an IRA that I rolled over from 401K when I left my employer in NYC. So we don't have a lot.

    Caveat to the bankruptcy: Only I am actually filing bankruptcy. My husband is not filing, however all debts will be discharged in both our names since they were incurred since we married. We still expect his credit to be decimated though.

    My husband also has 1/3 ownership with his father & brother in a multi family building in London worth at least $1M, with a $400K mortgage which is more than covered by tenant rents. His grandfather owns a few other properties in London that are positive cash flow from tenant rents, and a $1M+ house that is owned outright as primary residence. His family is open to investing/helping us here.

    Where do we start???

    Or have we closed all avenues since declaring bankruptcy? (for the next 7 years at least).

    My husband is currently working a sales management job (that he absolutely hates) with a $40K salary, and I am currently not working yet here in Tucson (though receiving $425 weekly in unemployment from NYC). We have exactly enough money to cover our monthly bills. Both of us are looking for jobs here we don't totally hate and will allow us to save at least something to put towards investing. (We left $80K jobs each in NYC so this is humble pie for us, however living expenses are much less here). We are renting a 1 bedroom for $765 (versus $2100 in NYC).

    Just not sure what avenue to pursue now to maximize what (little) we do have and get kickstarted on the right path in real estate. ANY advice very much welcomed! 😊

    Welcome to BiggerPockets. How much do you know about real estate already? Have you already started your real estate education? We (the BiggerPockets community) definitely need more investment related information to help give you the best advice that we can. 

    Once we know what investment strategy you'll be looking to get into then as previously mentioned we can offer some better advice.

    The money doesn't seem to be an issue since your husband has some private funds that you guys can fall back on if necessary; however, you want to do your best to avoid that. So find your strategy, make sure it's the best one for you and your husbands life style / what you want and let us know what that is so then we can start to help you. 

    0Reply
  • Brandon Battle
    Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes
    10y

    Sandra,I don't understand something about what you wrote about you husband and his family.If your husband legally owns 1/3 of a property in London with $600,000 in equity,why didn't he sell his interest to his family or an outside investor for $200,000 or a little less? Is there a clause in their agreement that says he can't sell anything until his father and/or his brothers dies and he receives it from his will? Why let him get hurt in bankruptcy when they had the power financially to help him? Only now they are willing to invest here in America? I am truly sorry for all the pain you have experienced so far but,it will get better with time.I would seek out a certified financial planner for some good one  on one advice about what to do next about rebuilding your credit and financial future.Let them help you find what loans you could get and what it would take to qualify for them.Good luck.

    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    Hi!

    Thanks so much for taking the time to reply to my post!!! :) I'll try to address everyone's comments below. 

    Ideally, we want current income to supplement job wages, with the ultimate goal to no longer work 9-5 jobs as soon as possible (so says everyone, right!?) We are just done with working so hard for someone else instead of ourselves. We don't mind hard work and will work 24/7 to make something happen, but don't want to do that anymore for someone else.

    We need at a minimum $4,000 monthly income to cover ALL our living expenses (rent, food, electric, cell phone, etc.) in order to no longer HAVE to work 9-5. So I guess achieving that is the first goal. I think that is probably a pretty steep goal though, but if you can dream it.... :)

    I'm sure there are better/smarter ways to grow money in an IRA/tax deferred, but income is important to us now. We aren't really interested in trying to create a big nest egg for retirement while we scrimp and struggle with a 9-5 between now & then (honestly, we expect to eventually inherit a few million dollars of property in London years from now that will suffice for retirement).

    We do not own any property and never have (except my husband who owns jointly with family in London but he doesn't have any involvement in managing it while we live here). I think we know quite a bit about real estate in general, but nothing compared to what everyone on here knows! This place blows my mind :) I took a course in 2005 in New York City and got my real estate license there and worked briefly for a rental agent. We are now reading tons on here, watching the videos and podcasts.

    We are thinking perhaps trying to buy a 3 or 4 multi-family unit in which we live in one unit, and rent the other units might be a good starting point. Since we are currently renting at $765 a month, we feel we are just throwing that money away. However, we would still need to work 9-5 because we wouldn't make $4,000 a month on 2 to 3 rentals. Maybe we should just jump in and try for larger than 3 to 4 units in order to net $4,000? We are NOT handy whatsoever, so we would need to pay someone for any rehab/ongoing maintenance that would need done which is what scares me the most. 

    I think our biggest hurdle is our bankruptcy, at least in terms of financing. According to what I'm reading online, we couldn't get an FHA loan until at least 2 years after our bankruptcy is discharged. Not that we necessarily need to use an FHA loan, but seems what most people on BiggerPockets utilize/suggest. I'm not sure what the next best option would be. I guess it depends on how much funds we would need in addition to our $8K cash + $30K IRA + potential funds from husband's grandfather. We would want to approach him with a well thought plan if we ask for any money. I guess we are trying to devise that plan...and not even sure if we are going in the right direction.

    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    @Dominic Jones just wanted to say hello neighbor, I grew up in Hershey, PA!

    0Reply
  • Kyle McCorkel
    Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    10y
    Sandra S. Hi Sandra, PM me, I grew up in Hershey as well, moved around for a few years after college, and now live back in Hershey.
    0Reply
  • Kyle McCorkel
    Rental Property Investor · Hummelstown, PA · Member since 2015 · 638 posts · 653 votes
    10y
    I'd highly recommend listening to the bigger pockets podcasts. Great wealth of knowledge and inspiring. Good use of your time when you are driving to/from your "real" job
    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y
    Originally posted by @Brandon Battle:

    Sandra,I don't understand something about what you wrote about you husband and his family.If your husband legally owns 1/3 of a property in London with $600,000 in equity,why didn't he sell his interest to his family or an outside investor for $200,000 or a little less? Is there a clause in their agreement that says he can't sell anything until his father and/or his brothers dies and he receives it from his will? Why let him get hurt in bankruptcy when they had the power financially to help him? Only now they are willing to invest here in America? I am truly sorry for all the pain you have experienced so far but,it will get better with time.I would seek out a certified financial planner for some good one  on one advice about what to do next about rebuilding your credit and financial future.Let them help you find what loans you could get and what it would take to qualify for them.Good luck.

    Hi Brandon,

    Yes, I can definitely see how it seems like a strange situation regarding the family property, and I don't even have a very clear explanation to offer. 

    We honestly haven't asked for much help or inquired a lot about the properties because we just didn't really want to ask for help or impose. There is absolutely no way my husband could (or even would) sell his portion to an outsider investor, we couldn't even suggest it, they want to keep the property within the family, period. His grandfather came to London from Greece with pennies in his pocket as a young man and grew these assets for his family, there is an attachment that goes beyond just finances. It may be an old school mentality, but I do understand it even if it doesn't make the most financial sense. I'm sure they would be offended if we asked for $200K to buy my husband's interest. There is a sense that we were gifted that (Nov 2014) and to suggest selling it back would offend. It's just a tricky situation. They aren't really concerned we declared bankruptcy, except that the London property is protected, which is why only I am declaring bankruptcy and not my husband. Not because they are cold-hearted or don't care, it's more they are just far removed from us living here. For instance, my husband owns 1/3 of the property, however we don't necessarily receive 1/3 of the monthly tenant rents...they send us via Western Union some money each month and we don't demand an exact 1/3 share. None of his family works, everyone lives off the rental incomes...and sends us some money each month at their discretion. We are honestly just happy for whatever they send us.

    We do believe if we have a clear plan to invest and approach his grandfather though he will help us.

    0Reply
  • Lou Capone
    Investor · Norwalk, CT · Member since 2015 · 4 posts · 0 votes
    10y

    Sandra,

    Have you ever heard of Dave Ramsey?

    0Reply
  • Brandon Battle
    Real Estate Agent · Buena Park, CA · Member since 2016 · 743 posts · 424 votes
    10y

    So his entire family doesn't work at all and living on rental income while giving their son only a small allowance and not a full one third share.That is rough to hear,Ma'am,very rough indeed.They are equity rich and cash poor and it should be the other way around.I really wish your husband would scrap up enough money to fly home to London and face his family and tell them it's time to make a change in their game plan! That equity should be cashed out and reinvested in other properties and especially themselves.At the very least,let your husband cash out $80,000 and erase the bankruptcy by paying off all debts in exchange for credit repaired to good status for both of you.Yes,you can still get out of this mess with negotiating directly with the creditors who really want all their money back.

    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    I definitely here you Brandon, but I don't think going to London and asking the family to rearrange their entire financial situation to benefit us would win us an favors. It would rock the boat too much. The grandfather and his two sons  and daughter live completely off rental incomes. My husband and his brother were named on one property along with their father in Nov 2014. I believe the other son (husband's uncle) and daughter (aunt) each have their own properties and primary residences too (I forget the exact arrangement, I would have to check with my husband again) courtesy of their father.

    Let me correct myself and say that my husband's brother does work a job (very long hard hours while living in the family house with grandfather & father). He is saving to buy a house for himself. It's only the former generations that do not work (grandfather, father, uncle, aunt). I guess we feel it's not ours to ask for, and they aren't offering to rearrange in a more beneficial manner. It is sometimes difficult, considering how hard my husband and his brother work at jobs when it probably doesn't need to be that way.

    We wouldn't even know where to begin/how to approach the conversation, and certainly do not want to anger anyone.

    How would you envision it ideally should be arranged? When you say "the equity should be cashed out and reinvested in other properties", can you give me an example of what that would look like?

    We are likely going to London in Feb or March to visit (they offered to pay for our flights).

    It's kinda a messy situation...so regardless we want to do something here ourselves if possible. Since my husband owns some equity in the London property, can we use that as leverage here to purchase a property?

    0Reply
  • Dominic Jones
    York, PA · Member since 2015 · 199 posts · 58 votes
    10y
    Originally posted by @Sandra S.:

    @Dominic Jones just wanted to say hello neighbor, I grew up in Hershey, PA!

    Haha, hello neighbor! or, ex neighbor.

    Currently at work but I'll definitely swing back around to this thread and catch up on all the reading and respond appropriately. See ya soon.

    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    @Lou Capone, 

    Hello, yes I have heard of Dave Ramsey but have yet to delve into his website or books. Thank you for the suggestion, I will add it to my list of educational sources. Thanks!

    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    @Kyle McCorkel

    Wow, I can not believe I've already run into a fellow Hummelstown alumni on my first thread here! I went to Lower Dauphin high school, lived off of Grandview Drive...small world!!!

    0Reply
  • Sandra S.
    OP
    Tucson, AZ · Member since 2016 · 14 posts · 1 vote
    10y

    Watched the entire free BP webinar course today. Definitely took some notes, learned some new terminology, and wrote down the rules of thumb for assessing rentals and flips.

    Still have so much to learn though!

    My husband and I reviewed some paperwork this evening on the property in London that he owns with brother & father. The property is worth $1.7M GBP = $2.4M USD. Outstanding loan is for $430K GBP = $610K USD. So the equity is $1.2M GBP = $1.7M USD. We are not sure legally how that translates between him, brother & father...if he owns 1/3 of the property does that mean he is responsible for 1/3 of the loan ($200K USD) and owns 1/3 of the equity ($596K USD) ? The loan is being covered by the rental income (with leftover supporting family in London).

    We are wondering if we can use the equity my husband owns in the property to purchase another property here via a line of credit?

    I guess we should bite the bullet and pay a professional for advice?

    0Reply
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