Tyrone Springs has youth and ambition in his favor. At 23, he's managed to buy seven properties, four in Philadelphia and three in Tulsa, Oklahoma, valued at $733,000. Springs understands investing in real estate is crucial to wealth building. He attends seminars, reads up on the topic, and regularly visits the sheriff's department to check out home auctions. For Springs, buying real estate started out as a safety net. He felt more comfortable buying houses than buying stocks. The young investor doesn't make a princely sum at his job as a commercial document specialist with the Bank of Oklahoma; he earns about $34,000 a year and nets another $17,340 annually from rental income. Springs, a native of Orange, New Jersey, bought his first house in Philadelphia in December 2002 for $65,000. At the time, he was a senior at Howard University. He bought two more Philadelphia row houses for less than $50,000 each in 2003 and another house for less than $50,000 in 2004. When he relocated to Tulsa, he began to eye the area for potential real estate deals. He started out by purchasing a primary residence for $42,000 in 2004. A year later, he bought two more properties for $68,500 and $132,000 each. Springs' seven properties have a total of eight units; one is a duplex. The interest rates on the mortgages range from 6.38% to 8%. Right now he clears a little more than $1,400 monthly in rents. "I want to have enough properties where I'm getting at least $5,000," he says. Though he has extensive spreadsheets to help him manage his property-related bills, it's tough dealing with different mortgage companies and property-management firms, which charge him between 8% and 10% of the monthly rental income. Moreover, "insurance costs and property taxes have increased," he adds. Those extra expenses have helped create some $13,000 in credit card debt. Add to that mortgages, a car loan, and student, and personal loans, and Springs' total debt soars to more than $500,000. It's not surprising that he hasn't managed to save much. His 401(k) is down to $5,000 from $8,000, due to a loan he recently took out for real estate expenses. He has $2,500 in an IRA, $3,000 in savings bonds, $500 in a former employer's stock, and a little more than $13,000 in checking and savings accounts. In spite of his heavy debt, Springs isn't ready to unload his properties. Ideally, he would like to keep them for five to 10 years and evaluate the internal rate of return at that time to determine if it's practical to stay invested. THE ADVICE BLACK ENTERPRISE turned to Kathy Williams of the Williams Financial Group in Oklahoma City to put the budding real estate maven's financial situation in perspective. "Tyrone is only 23 years young. When a young person begins a strategy of any kind, it is to be applauded," says Williams. However, he has an overinvestment in real estate, which is more than 90% of his entire assets, she explains. "Diversification is needed in different asset classes to reduce risk." Williams is also concerned about Springs' cash flow. "He is forced to use money from small cash reserves in his checking account when rent payments don't come in a timely fashion," she says. According to Williams, Springs moved a little too fast without the proper amount of liquid assets and used credit cards too much along the way. He will need to meet with a certified public accountant to determine which of his properties would be the best to sell over the next five to 10 years. Williams suggests that Springs follow these recommendations: Take action. Springs either has to raise rents or decrease operating expenses. His management fees are costly. He should consider working with management companies that offer the lowest rates. Raising rents 2% to 2.5% per year would help increase net operating income and cash flow over time. Furthermore, Springs could sell his Philadelphia properties, invest some of the equity, and pay off debts, says Williams. Explore interest-only mortgages. Springs should consider changing to interest-only mortgages, allowing him to pay only the interest on a mortgage for a fixed period of time, usually five to seven years. At that point, he could sell his properties. Williams says interest-only loans work for people in a cash flow crunch whose income is likely to increase in the near future. Should he decide to refinance his mortgages to go after lower rates, Springs should look to pull out equity to eliminate his high-interest credit card debt, thereby increasing cash flow and net worth. Hold off on buying more property. Before he buys another piece of property, Springs needs to save four to six months of mortgage payments ($14,000 to $16,000) as an emergency cushion. That money should be put in a high-interest money market fund. Adopt new strategies. Since cash flow is an issue, Springs should purchase $500,000 of term life insurance to replace his current $150,000 fixed universal life policy, which he can get for about half the cost. At his age, he can afford to temporarily cut back on contributing to his 401(k). He could go as low as 3% until his debt is reduced and emergency funds are established. After those goals are reached, he should begin contributing at least 10% to his 401(k). Start paying off debt. Springs has a $3,480 loan against a 401(k) he established with a previous employer. He needs to pay it off before attempting to roll it over. To help battle his debts, Springs should take the $2,000 contest winnings and use it to nearly halve the $4,800 balance he has on a credit card with 22.5% interest rate. It will be a good first step. Financial Snapshot: Tyrone Springs HOUSEHOLD INCOME Gross Income $51,340 ASSETS Checking $12,000 Savings 1,000 Savings bonds 3,000 Merchants Bank stock 500 401 (k) 5,000 IRA 2,500 VALIGN="MIDDLE">Value of car* 14,500 Value of primary residence 68,000 Value of other 95,000 Tulsa properties 150,000 Value of Philadelphia 110,000 properties 100,000   110,000   100,000 Total $771,500 LIABILITIES Credit card debt $13,000 Student loans 80,000 Car loan 7,000 401 (k) loan 3,480 Mortgage on primary residence 59,000 Mortgage on other 65,000 Tulsa properties 119,000 Mortgage on Philadelphia 59,000 properties 29,000   31,000   40,000 Total $505,480 NET WORTH  $266,020 *ACCORDING TO KELLEY BLUE BOOK.