"Trina, a 38-year-old Florida resident, was drowning in $44,000 of debt on a $60,000 annual income. Her financial obligations spanned car loans, credit cards, and her son's private school tuition-a complex web of commitments that became more concerning when she revealed filing Chapter 7 bankruptcy just two years earlier. This recent bankruptcy suggested her struggles weren't isolated incidents but part of a recurring pattern of financial instability."
"Ramsey's skepticism is mathematically sound for people already in debt. When you're paying 20% interest on credit cards, no legitimate real estate flip can reliably generate returns that justify additional risk. Creative financing compounds this problem by typically carrying interest rates between 12% and 18%-substantially higher than conventional mortgages. These elevated rates, combined with origination fees and points, quickly erode profit margins on property flips."
A 38-year-old Florida resident carried $44,000 of debt on a $60,000 annual income, including car loans, credit cards, and private school tuition for her son. She filed Chapter 7 bankruptcy two years earlier, indicating recurring financial instability. Creative financing in real estate includes seller financing, land contracts, hard-money loans, and 'subject-to' arrangements that allow purchases with little or no down payment. Those approaches often carry 12–18% interest plus origination fees and points, which erode profit margins on property flips. When borrowers already pay about 20% on credit cards, flip returns rarely justify the additional risk and cost of creative financing.
Read at 24/7 Wall St.
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