My Real Estate Investment Is Backfiring

Brought to you by the EveryDollar app. Start budgeting for free today. I am 38 years old. I am a single mom and I work in law enforcement. About seven months ago, I transferred to the Bay Area to give my son better opportunities and a better future compared to where I was stationed last. And in the process of doing that, I spent tens of thousands of dollars in attorney fees over several years to make this move happen. I do not receive child support. I kept my first house as a rental now because of the terms. It's a 2.99% mortgage on a 15-year loan. I think there's about 11.5 years left. But between the legal fees, relocating and rebuilding my life, I've accumulated a large amount of credit card debt and I have a second mortgage already. So my monthly take home is about $5,900 after everything. But my required debt payments alone are at least $6,900 a month. And so before I even buy groceries or gas. So that's why I keep ending up back on credit cards every single month. So my question to you is because I plan on keeping the 2.99% first mortgage, but I need to at some point replace my current second mortgage with a larger home equity loan to pay off that mortgage and then all of my high interest credit card debt. And I'm in the process of that research right now. But the second part to that question is because I'm trying to build a retirement plan for myself as well. I feel like I've been doing everything for everybody else, but not really focusing on me, my mental health, my long-term plans and everything. So I don't want to spend the next 20 to 30 years just trying to survive. And I'm trying to build enough real estate income that I can retire early possibly to enjoy my life. So after I restructure... Let me jump in here. Let me jump in here. How... Do I have your permission? I'm asking you this as an officer of the law. Do I have your permission to be super blunt with you? Is that cool? Yeah. Yeah, of course. Okay. Here's what you're describing to me and Rachel. You have a giant, and when I say giant, I mean a humongous hole in the middle of your front yard. And your plan for getting rid of this hole in your front yard is going about 30 yards past that hole and digging another hole that's even deeper and using that dirt to fill in this hole. Don't wait for the interest rate to be perfect before buying or refinancing a home. Talk to Churchill Mortgage. Smart buyers buy the home they can afford now and then refinance later if rates improve. Churchill helps you make decisions with confidence instead of guessing. And Churchill Mortgage has a webpage with special offers just for our audience. Go to churchillmortgage.com slash Ramsey offer. This is a You have to acknowledge the plan you have in front of you is wholly unsustainable. And you've got to deal with the giant hole first with new dirt. You can't just dig another hole in your front yard and try to refill it. And the plan you have down the road is I want to have this income or whatever. That's all well and good, but your life financially is on fire right in front of So let's deal with the fire first. You know what I'm saying? It has been for a long time. It's caused a lot of stress and you're trying to do 18 things at once as well. Pay off the debt, try to get this second mortgage paid off, then fund retirement. There's so many directions that you're looking which is understandable because of the situation you're in. And so I think one goal hopefully in this call we can help direct that is to focus on one thing. And we call that focus intensity here at Ramsey. I'm going to be focused on one step at a time. And what that looks like is first getting $1,000. It's our baby steps. Do you have any cash available in savings? I have my short-term rental savings at this point and that's about it. How much is in there? It's about $12,000. Is that just retained earnings for fixing the air conditioner and sealing fans and stuff? It is, yeah. So that's just basically the income I've made the last six months on the rental so far. And the rental is not near you, right? Because you moved. No, no, I moved. You need to sell that house, Mary. Yeah, sell the house. You need to sell the house. I know you got a good interest rate. It doesn't matter. It doesn't matter. You're drowning underwater and you're holding onto this thing called the interest rate and you're like, look how good I'm doing, but you're underwater. And the interest rate is still, because you're holding onto that, you're losing sleep in all these other areas of your money. And so we never recommend being a landlord long distance. So whenever you move, you or anybody else that calls, we would always recommend selling your home when you move cities. So for the sake of time, if you sold that home today, Mary, what kind of equities in that home? I have probably about 275,000 in equity. Okay. So if you sell that house, it completely clears you. Is there a second mortgage on that home or your primary home? There's a second mortgage on that home, yeah. So after all is cleared out, everything, you would be left with 275 of equity? Around there, yeah. I mean, how much credit card debt is there? About 40,000. 40,000. Okay. Is most of that attorney fees and then trying to keep your life afloat with bills? Yeah. Okay. About 30 was attorney fees in the last few years in moving and relocation. Okay. Gorgeous. Gorgeous. I like this plan, Mary. We're making traction here. I don't know if you're going to follow it, but this is what I would do. What other debt do you have? That's just it. That's it. It's just the second, the first, and then the credit card debt. Okay. Okay. Great. The problem is my mindset has always been trying to provide for my son and leaving something for him, which was the house. Yeah, I know. But here's the thing. What I want you to provide him right now is stability and a mom who feels safe in her own skin. He does not have that. You're spread so thin right now, Mary, and you have something right in front of you. That can solve all of that. That can solve it and move you forward. I mean, you could invest $100,000 of this as well. And leave him half a million dollars in cash down the road. Oh my gosh, easily. What you can do for this money working for you versus working for everyone else and getting a HELOC and then getting this and getting... I mean, you are working hard for everybody else and not you. And so really focusing in again and knowing that, yeah, this is a little bit of your get out of free jail card to start over, which is a beautiful thing. Where are you guys living now? Are you renting or do you own a home now? We're renting, but it's through my job. So it's really low rent. Okay. I was going to say you're an officer, which has somewhat of a capped salary, but you're in a really expensive place to live. Yeah, we are. Yeah. So part of that too, Mary, is you have to be thinking long-term that if you're not in that job long-term and you look up and you don't have any money to put down as a down payment on a home, eventually that's a goal. So that would be a goal for me is to clear out this debt, set aside six months of an emergency fund. I would normally say three probably in your situation, but I think all the stress you've been in, I think six gives you ultimate peace. Open up a high yield savings account with Fairwinds Credit Union and park some cash there, six months emergency fund. And then I would look ahead and say, okay, I need to put some of this in retirement. I'm going to put some of this away in maybe a separate savings, high yield savings account for possibly a down payment maybe in the next 10 years. But I'm going to be thinking about my housing because eventually that the rubber is going to meet the road with that. But there's all these, do you see what I'm saying? Like you take your money and you let it work for you and it's growing and you're making interest when you invest, your money's making money for you, not for all these other people living in the cycle of debt. And so you really could go from sleepless nights, stressed, feeling like I can't even, I have to have credit cards to finish out the bills every single month to having no payments, having an emergency fund, having a plan for your house, for your retirement and your son's college, like all of that can be completed. And a big jumpstart on that is selling this home. Yeah. The cost here for you is grieving the loss of this picture you had where I'm going to hand my son this old house. I'm going to be sad about that. I'm going to be heartbroken about it. And then I'm going to be about changing my life. And for you, like most of the calls on the show, man, it's a three, five year, seven year slog for you. It's literally 30 days and everything can be different for you. Create your free every dollar budget today. The simplest way to budget for your life.