All Forum Posts by: Chad Olsen

I agree, sell it and move to the next deal.

But for the sake of argument. If you really liked this property and the numbers were good. Go and look for either a credit or equity partner on the deal. Use a credit partner to refi and get a long term mortgage at reasonable rates. This gets you out of the HML and hopefully the credit card debt. Or get an equity partner to come in and purchase the debt from you. The 33k that you own the HML and your credit cards will get paid off, the house will then be free and clear. In both cases I would also recommend that you give your partner part of the deal, typically 50%, but that is up to you. In all cases, make sure that you have enough cash flow to cover all your expenses and still have something left over for yourself and your partner.

Never use debt for your down payment. The down payment is the first part of the value of the property to go away if something happens and you have to fire sale or something else. So I'll repeat, NEVER use debt for your down payment. The structure that you are thinking of, having an equity partner, is the best move you can make in coming up with down payment money.

Others also touched on that HML won't do these kinds of loans which is accurate. They typically won't go over 60-70% purchase price (maybe ARV) for a loan, and are expensive for origination and interest.

Hope this helps. Good luck!

Did this deal actually go through from Sept? Any update?

I come from the camp where Debt makes you Rich. I used to be of the mindset that debt is bad and that I should work to get rid of debt as fast as possible. But now that I've been on this financial education path for the last three years, I've changed. Debt is a most powerful tool when applied to real estate. There are a number of ways to look at it. 1) Through the return analysis. This is probably something that you would need to look at specifically knowing all the details about your portfolio and each property. 2) Through risk analysis. @Brent Coombs touched on a very valuable point. If you have your base money in the stock market and things go south, your entire real estate portfolio could be in jeopardy. I would recommend reading the book The Value of Debt by Thomas Anderson. 3) Through the business lense. Take a step back and think about what the big companies out there do. What does Apple or Chevron or any other company do when they need money? They take on debt at a marginal rate. Why? Because having cash on hand to show the bank that "Hey, I've done my homework and I think this is a good deal. But if something does go wrong, I have $X,000 in liquid cash sitting in your bank now." Banks will be much more likely to work with you.

I'd look into some portfolio lending on what you already have to free up the capital to purchase more and start a reserve fund. You may have to work around your entity structure some to accommodate, but in the end a number of properties will pay down your mortgage, further mitigating your risk, while giving you your capital back to do more deals.

Hope this helps. Good luck!