354: Frank Advice on What to Do When a Real Estate Investment Goes Wrong
BiggerPockets Money Podcast
BiggerPockets
4.6 • 2.9K Ratings
🗓️ 18 November 2022
⏱️ 63 minutes
🧾️ Download transcript
Summary
You’re one bad real estate investment away from being cash flow-poor and debt-rich. That’s right, not every investment property works out, and when leveraged the wrong way, a single property could put your financial future on the wrong track. While it’s easy to watch social media real estate investors flaunt their infinite cash flow and no money down tricks, buying profitable real estate is a little harder than it seems. Today’s guest, Shane, finds himself in this position, as an over-leveraged investment is causing him to hemorrhage cash.
Welcome back to another episode of Finance Friday, where hosts Mindy and Scott bring financial suggestions, no matter how extreme, to guests in many different situations. This week, Shane walks through his numbers, and from the start, Scott picks up on a big problem. Shane and his partner bring in a solid amount of income, but it’s slowly slipping out of their accounts every month as an overleveraged short-term rental property and high consumer debt eats away at their respectable income.
This isn’t an easy position to dig yourself out of, and Scott has some serious suggestions for Shane that could flip his financial position 180 degrees. But, doing so will require Shane to make drastic moves that will force him to reevaluate his relationships with spending and debt. While this “rip off the band-aid” type approach can be painful at first, it could save Shane years' worth of time on his path to real estate riches.
In This Episode We Cover
Staying away from consumer debt and how it can destroy your financial position
Real estate leverage and why too much of it can cause you to have negative cash flow
Sacrificing subscriptions, eating out, and other spending categories that may be tanking your budget
Having a money date with your partner or spouse to get on the same financial footing
The biggest moves to make if you’re serious about getting out of debt and on the path to financial freedom
Budget busters and how to build a more sustainable pattern of spending
And So Much More!
Links from the Show
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Subscribe to The “On The Market” YouTube Channel
Listen to The “On The Market” Podcast: Spotify, Apple Podcasts, BiggerPockets
Check Out Mindy’s 2022 Live Spending Tracker and Budget
Designing a Frugal But Luxurious FI Life by Age 32
Food Spending Eating Away at Your FI Plans? Here’s How to Eat for Cheap
The Money Date: What You Should (And Definitely Should Not) Do to Align Your Finances as a Couple
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Transcript
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| 0:00.0 | Welcome to the bigger Pockets Money Podcast finance Friday edition where we interview Shane and talk about |
| 0:07.5 | Cutting expenses. I'm wondering if you're asking from a financial standpoint |
| 0:12.2 | I think I think you're in trouble here frankly |
| 0:15.0 | I think you and I think that's why you probably came on the show you you have a lot of a huge amount of debt here |
| 0:20.5 | You're not generating any cash flow although we will get to the cash flow like it's clear that that's you're not racking up cash |
| 0:26.2 | That you can then use to prepay this debt is that right right and I'm wondering if they're if a big reset |
| 0:33.8 | Might not be the answer here to do this and you just sell both of those properties take that cash and wipe out a |
| 0:41.8 | significant chunks of the chunks of this debt |
| 0:44.3 | Hello, hello. Hello. My name is Mindy Jensen and with me as always is my charming co-host |
| 0:49.7 | Scott Trent and with me as always is my throat tickling co-host Mindy Jensen |
| 0:54.0 | Scott and I are here to make financial independence less scary |
| 0:59.0 | Less just for somebody else to introduce you to every money story because we truly believe |
| 1:04.3 | Financial freedom is attainable for everyone no matter when or where you're starting |
| 1:09.8 | That's right whether you want to retire early and travel the world going to make big-time investments in assets like real estate start your own business |
| 1:15.2 | Or completely reset your financial position will help you reach your financial goals and get money out of the way |
| 1:20.4 | So you can launch yourself towards those dreams |
| 1:22.4 | Scott I am very excited to talk to Shane today because he doesn't have a perfect situation |
| 1:29.6 | But he does have some easy wins and some hard decisions to make |
| 1:35.4 | I think that having a discussion with his wife is going to be the number one |
| 1:42.3 | recommendation for him and I think that there's a lot of things to think about I |
| 1:46.8 | I do want to reiterate that when we make suggestions. These are just suggestions and our suggestions should not be |
| 1:55.1 | Jumped into with both feet. I think you should take these into consideration and really weigh the pros and cons |
... |
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