Financing the property
I was able to find a lender who would allow me to purchase the property with a 10% down payment. I had some money in savings but I got this brilliant idea to finance the property 100% with no cash coming out of my pocket.

Put equity to work – what some experts say to do
What I did was simply take out a home equity line of credit (heloc) and borrowed against my primary residence. I thought that this was a great idea. The equity that I have in my home is just sitting there – not providing any income at all. Why not use the equity as a down payment for something that can provide income. Made sense at the time.

Somethings are just better on TV infomercials
Buying a house with no money down puts you as the borrower at greater risk unless you are able to buy the house that is priced far under appraisal value. So, in effect what 100% financing has done is made my margins so tight that there isn’t much cash flow at the end of the month – even with a duplex. So, when the inevitable hot water heater goes out I may be forced to tap into my own savings to cover the cost.

Now, I know that this is not really a no money down situation but it was to me because I didn’t have to come up with the cash in order close on the property. Typically, when you hear no money down you’ll hear fancy finance terms like seller carry back or wrap around financing (more on these in later posts).

Lessons learned

Amount financed is key
I love real estate but I won’t buy another property until the entry point (price) is advantageous as compared to the rental market in the neighborhood. In other words, the property will easily cash flow each month. Which requires better negotiation tactics, market research, tenant selection and of course a much larger down payment. Because you are locked in for a period of time – 15 or 30 years, the financial terms of the loan are absolutely critical. All of these things were admittedly glossed over on my part this go around.

I am no expert
It showed that I was an amateur investor. It tested my ability to truly assess the property’s value as well as the ability to rent it out in order for it to cash flow each month. A bad idea for a first time rental property investor.

Borrowing against your house is crazy
What I know now is that using my primary residence as collateral substantially increases risk and expenses – and added to my debt load. I can only charge so much rent and still keep the rental occupied but due to the fact that I have pretty much financed the selling price.

Using my home’s equity was a mistake but…
I don’t regret buying the property. There is definitely something rewarding about having another property that provides income and the experience was priceless. I’m learning how to think in terms of a business owner by calculating monthly income statements and balance sheets. However, if I had to do it over again I would make sure that I had more down payment in order to reduce my expenses each month and not add additional risk by borrowing against my house.

Here are some things to avoid when looking for the best debt consolidation loan.

• HELOC (Home Equity Line Of Credit) Loans are loans that utilize the equity of the borrower’s home as collateral. Your home is your most prized asset and should not be put at risk for bailing out credit card debt or any other type of unsecured debt. If you default on the repayment of the loan you could easily lose your home, which is a terrible consequence.
• Stay away from any type of consolidation loan that is secured by a fully owned asset of the borrower. If you are already in trouble with debt, involving something that you own free and clear as collateral to secure a consolidation loan is asking for trouble. If you have trouble managing your finances and you put up an asset to secure a loan it is quite likely that this gamble will pay off, but not for you. Be ready to kiss your asset goodbye.
• Another danger zone for a debt consolidation loan source is anyone who advertises an ‘easy-to-get’ debt consolidation loan. There are no good consolidation programs that are easy to acquire.
• Beware of debt consolidation programs that stretch out the repayment plan for a much longer than ordinary time period. The interest rate may seem to be quite attractive to you and lower than what you are currently paying, but if you will do the math, you may find out that if you would follow this kind of plan you would have paid out a great deal more in interest payments than if you did not use the plan at all.

Really the best thing to consider about any consolidation loan is to try not to get one. If you can afford it, the best way to reduce outstanding debt is to pay a little more on the principal of as many of your bills as possible each month.

If you still think you need help to eradicate your debt load, locate a reliable debt management service company in your city. Make an appointment to talk to one of their counselors who will help you analyze your specific situation and work with you to arrange a resolution with your creditors. If the counselor thinks that a debt consolidation loan is a good fix for you, then abide by the recommendations and discipline yourself to follow their directions. This by far is the best debt consolidation loan.