I need guidance. What do I do next?

[clumlee]

I'm at a crossroad. I see a lot of people doing well in real estate and I see some of those people "borrowing themselves rich". I generally cringe at the idea of debt so as you'll see below you can imagine I'm a tense mess. While I try to be financially conservative I'm a bit insecure so I'm getting the itch and want to jump into something (with adequate due diligence, of course).

I start getting into real estate...erm, actually, I only have one property now. I bought a property in Detroit, MI for $41K. It's not a bad property and the neighborhood is okay. I'm just not making much money (if anything) off of it due to delay in getting tenants and then I had to do some upgrades and repairs. To spread out the risks, I want to take a HELOC on what I can of that property and use it for a down payment on a home in another jurisdiction. To be conservative, let's say the jurisdictions I've looked at would run me about $130K.

Here's some background to analyze the situation:

Take home pay (monthly) is approximately $3,930
Monthly bills (non-debt) is $903
Car payment is $336 monthly (balance is $9,416)
Credit card balance is $828
Secured loan I took to get the Detroit place is $125 monthly (balance is $10,353)

The credit card will be paid off this month and about $500 will be taken off the car payment and about another $150 on the secured loan.

My assets are as follows:
Emergency savings: $12,041
Savings for house: $7,060
Bond funds: $1,600 (est)
Brokerage account: $19,300 (est)
Peer-to-peer account: $8,285
IRA: $29,000 (est)
Deferred Comp: $1,000 (est)
Currency stash: $300 (est)
Silver bars: $1,600 (est source: Kitco)
Car: $10,000 (conservative est)
Detroit home: $31,697 (source: Zillow)


The question is, what should I do? Should I move forward and continue to add leverage? Or should I reign in this debt first? Thanks!

[Trifle]

Also -- there is a Real Estate and Landlording section on this forum, if you haven't checked it out yet.  Very informative. 

[privatevoid]

Take home pay (monthly) is approximately $3,930
Monthly bills (non-debt) is $903
Car payment is $336 monthly (balance is $9,416)
Credit card balance is $828
Secured loan I took to get the Detroit place is $125 monthly (balance is $10,353)

Pointing out these two debts against your assets:

Credit card: Pay that down immediately! Out of your emergency savings. That's why it's there. Don't carry a balance on your CC with those other debts.
Car: You may have enough assets to comfortably pay this off too, but I would need to know what car you're paying $336/mo for.
Real estate: I would listen to the other posters here, and seek advice from others who do this. I know nothing about it, but imagine you can lose money here if you don't do it right.

[PapaBear]

Also -- there is a Real Estate and Landlording section on this forum, if you haven't checked it out yet.  Very informative.

+1 on the Real Estate subforum. When you post your information for your current rental in the Real estate case study format, some people might be able to help you to determine if that rental is worth keeping or not. Here is the template: https://forum.mrmoneymustache.com/real-estate-and-landlording/how-to-real-estate-case-study-sell-or-rent/

Additionally, I would recommend looking at the investment order: In case you have not maxed out your pre-tax contributions, do so prior to investing in real estate. Due to the tax benefits, these have most likely a way higher expected return than your current or potential rentals. https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

The third point I would consider is the stability of your financial situation. The more leverage you pile up, the more fragile your financial house of cards will be. So when thinking about leveraging real estate, it is quite important to eliminate a lot of other sources of financial risk first, especially the ones that can become threatening to your personal liquidity: e.g., What happens when your units are both vacant at the same time. What happens when you have to replace a roof or furnace or any other costly item in both rentals at the same time? These things require a larger cushion of liquid savings (either cash or assets you can sell quickly).

My fourth point is not related to real estate, but a general observation: You have quite a list of diverse assets there and a lot of them are <2.000 USD.
I'm sure that you had motives to buy each of these assets, but I'm wondering how that fits to the overall picture of your investments? Therefore, in case you have not done it yet, maybe it is time to reflect and think about an investment policy statement: https://www.bogleheads.org/wiki/Investment_policy_statement
Does not have to be anything fancy, but should clearly state your financial objectives, your desired asset allocation, risk tolerance etc. 1-2 pages are sufficient.
This helps a lot to structure your investments going forward and to stick to a planned asset allocation.

[PapaBear]

Also -- there is a Real Estate and Landlording section on this forum, if you haven't checked it out yet.  Very informative.

+1 on the Real Estate subforum. When you post your information for your current rental in the Real estate case study format, some people might be able to help you to determine if that rental is worth keeping or not. Here is the template: https://forum.mrmoneymustache.com/real-estate-and-landlording/how-to-real-estate-case-study-sell-or-rent/

Additionally, I would recommend looking at the investment order: In case you have not maxed out your pre-tax contributions, do so prior to investing in real estate. Due to the tax benefits, these have most likely a way higher expected return than your current or potential rentals. https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

The third point I would consider is the stability of your financial situation. The more leverage you pile up, the more fragile your financial house of cards will be. So when thinking about leveraging real estate, it is quite important to eliminate a lot of other sources of financial risk first, especially the ones that can become threatening to your personal liquidity: e.g., What happens when you are laid off? What happens when your units are both vacant at the same time? What happens when you have to replace a roof or furnace or any other costly item in both rentals at the same time? These things require a larger cushion of liquid savings (either cash or assets you can sell quickly).

My fourth point is not related to real estate, but a general observation: You have quite a list of diverse assets there and a lot of them are <2.000 USD.
I'm sure that you had motives to buy each of these assets, but I'm wondering how that fits to the overall picture of your investments? Therefore, in case you have not done it yet, maybe it is time to reflect and think about an investment policy statement: https://www.bogleheads.org/wiki/Investment_policy_statement
Does not have to be anything fancy, but should clearly state your financial objectives, your desired asset allocation, risk tolerance etc. 1-2 pages are sufficient.
This helps a lot to structure your investments going forward and to stick to a planned asset allocation.

[chasesfish]

I would liquidate/wind down the Peer to Peer account and payoff your debt.

Does your employer allow you to get a side-gig?  I might suggest getting into property management, get paid to manage other people's rentals and learn through experience while you save up enough money of your own.  You might also be able to get pieces of deals for sweat equity.  Go find Coach Carson online, he built a nice business this way. 

I agree with the others, I don't think your in the financial position to go buy another house, work on the debt.

[HPstache]

You have 12k in an emergency fund, but You Are running a credit card balance?  There you have what to do next...