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If you don't have any money. Cash in hand, stuff that belongs to you. Money that you can take to the casino, spend on options in the stock market, bet on the horses, then do not do it.

You said you would buy the house and maybe it would go up in value.

That set off all the bells and whistles in my mind. What you are doing is


Now, don't get me wrong, I speculate all the time. I hold a small Canadian Energy Company and have a bid out on a faltering European telecom. But I understand, it is a speculation.

Way back in the 1960's the states of Louisiana and Texas got together and decided to build Toledo Bend, my father, an electrician for the local power company a 100 miles south of the lake, decided to buy some land and build a marina. Now, you have to understand, he was a wage earner with 4 children. Few assets from a low income background. No college and no business training.

He bought 15 acres where the lake would be when the dam was completed. The only problem was, he borrowed money, paid a premium and the surveyor was off of his mark by six feet. The land eventually was worth what he paid for it, but he used leverage to speculate. A lot of work and a lot of years was spent trying to make it work.

We, and I do mean all of us, tend to think that just because something is tangible, and it is respectable to own, like a house, that buying one to make a profit is less of a speculation and risk than buying equities that are little more then bits in the cloud.

However, when you are leveraged, you own nothing but right to future profits.

In today's world, the beauty of real estate is not the real estate. It is the leverage. With interest rates low, real estate lets you speculate on rising interest rates by selling long bonds, (A long bond and a long mortgage tend to behave the same way, so while YOU cannot sell a long bond, when you create a mortgage, someone else sells a long bond.)

In your case you are asking your father to buy a long bond. If everything works out, the best thing that can happen is your father gets creamed on the falling price of the long bond.

It would be far better to look for Fannie May repos and let them provide the long bond. If you cannot afford the down payment. Consider not entering in. You cannot afford it.

You would be way better to enter into a limited partnership with people you trust.

Leverage is a lousy way to learn. The game is too short and the recovery is too long.

Personally, I have one rental property, it is paid for cash, after expenses it pays the taxes on my home, that is it. Dave cringes when he sees that the 70 grand is yielding about 5 percent or so.

But I see it as a learning situation.

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