SHOULD I GET INTO REAL ESTATE INVESTING
TO GET OUT OF DEBT?

by Donna Robinson - www.RealEstateInvestorHelp.com

As a general rule, real estate investing is an excellent way to build a solid financial foundation and get out of debt. 
But-- that being said, the strategy works best when used under the right circumstances, and for the right reasons. 
One of the most common scenarios that I see among new, inexperienced investors, who have gotten 
themselves into big trouble with real estate, is jumping into a deal that they don’t understand, in 
hopes of earning a chunk of money so that they can quickly pay off existing personal debt. 

If you are desperate for $20,000 and you’re trying to think of a way to come up with it in the 
next 30 days, you could use real estate as a strategy. But I strongly suggest that you
consult with an independent professional who can give your deal an honest evaluation that is
in your best interest.

Many folks get into deals that they barely understand and wind up in a 
worse financial situation than they had to begin with. I recently counseled with a young man,
(we'll call him Tom), who had excellent credit, documented income and a "friend" 
who is an appraiser. The friend approached Tom and said, " I can set you up with 
some good real estate deals, I’ve got the connections in the business, we can make some big money quickly".  

Being a young, inexperienced investor, Tom jumped in, assuming that his friend had everything under control.
After all his friend "had done this lots of times".
Tom signed loan documents he barely read. He did not understand how the deals were to work, or how 
the profit in the deal would actually be made. He committed his credit as the buyer for the properties, while
his friend, the appraiser, would be responsible for all the confusing details Tom did not know anything about. 

Unfortunately, it was a bad decision. Tom signed paperwork that was so vaguely worded
that I was rather shocked when I read it. If only Tom had gotten some professional advice first. This never
should have happened. Getting an independent third party to evaluate your first deal, or any deal you don't
understand well, is an excellent way to gain experience, while avoiding major beginner mistakes.

There were three critical errors that Tom made. These are very common among the inexperienced:

A: He assumed he did not need to know anything about the deal because he had "a friend in the business".

B: He committed his credit and signed as the buyer for deals that he did not understand. 

C: He failed to get an independent third party to evaluate of the terms of the deal. 

Turns out, his friend the appraiser was engaged in a bit of loan fraud. He inflated the 
appraised value of the properties so that the lender loaned more on them than they were actually
worth, pocketed the extra cash, and left this Tom holding the payment book on properties worth about $200,000 
with loans outstanding of about $300,000. Now He will have to borrow more money to fix the properties and try to get them sold in order recover 
as much cash as he can for the lenders, or face foreclosure and possibly even bankruptcy. 

For the average new investor, who’s never done a deal, who doesn’t understand real estate that well, 
has no experience with writing contracts, you should never, ever, in my opinion, engage in any kind of real estate 
deal, or give cash to anyone, until you have consulted with someone who knows what to do; Someone who can 
at least give you the benefit of an educated opinion. Have someone look at the numbers and evaluate your deal 
appropriately. They can make educated recommendations about what you need to do. 

Ultimately, you make your own decision about whether or not to invest, but you can make that decision with
a much higher comfort level if you have independent analysis that says this deal is a "go". 
Don’t let the temptation to make a quick buck draw you into a deal that you don’t understand. 

If you need consulting, you should seek someone who is capable of giving you an honest assessment of the deal
and give you some degree of assurance that the deal as presented makes sense for you. A real estate attorney, a CPA,
a fellow investor, or qualified family member are some of many people who can give you qualified advice for a relatively small fee,

Real estate investing is, in my humble opinion, the best way on the planet to generate and maintain true wealth. 
You can generate cash flow to build income and build assets through appreciation. Houses are shelter and provide an
essential human need. A house has a value that goes far beyond the price. You can't live in your stocks. You can't raise your
children inside a bank CD. Real estate makes sense for a lot of very fundamental reasons.  

You can use real estate to generate cash to pay down debt but the deal must be a good one. It really is possible
to make $10,000 in a short period of time. I see it done frequently. But the people who are doing it know how the deal
works, and most importantly, they understand where their profit is coming from and how they will generate it. They also
understand what their risks are and what they will do if plan A does not work out and plan B becomes necessary. 

Wise investing requires prudence and experience. You can take action now. But get the help you need before you sign
anything. The best advice in the world can't prevent a mistake that has already been made.