By Donna Robinson, TREA Director

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, you should only do this 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 quickly so that they can pay off existing personal debts.

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. 
 
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" with "connections in the business".

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".

He 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 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 it left him with virtually no recourse at all. If only Tom had gotten
some professional advice first. This never would have happened.
Real Estate Arena members enjoy access to professional investors and licensed agents and brokers who can provide common sense advice based on real world experience. If only Tom had the chance to run this by a professional before he had gotten involved.

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 independent advice from someone with experience who was not directly involved in the deal.

Turns out, his friend 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 Tom holding the payment book on properties worth about $200,000 with loans outstanding of about $300,000.

Now Tom 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 give you the benefit of an expert opinion, and that opinion is not influenced by involvement in the deal.  

Real Estate Arena members have the opportunity every week to discuss their deals and investment opportunities with real investors who have real experience.
Our weekly coaching and mentoring calls allow members to ask their questions and get independent advice BEFORE they make a big mistake.

Don't let the temptation to make a quick buck draw you into a deal that you don't
understand. 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. 
But for the average person who's in debt seriously and needs to get out, you
really should take this one step at a time.

You can make $10,000 in a short period of time. I see it done every day.
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.

It is a fact that over the long term, investing in real estate, is a great way to pay
down debts, build income and secure your future, but only if done correctly.
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