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Gerri Willis Commentary:
Top Tips by Gerri Willis Column archive

Investing in foreclosures 101

Plus, Gerri Willis answers your questions on long-term health insurance and paying off your credit card debt.

By Gerri Willis, CNN

NEW YORK (CNNMoney.com) -- Question 1: I am interested in purchasing foreclosed properties on the market. Do you have any advice how to get started? - Skiff, California

Well, first off, buying a foreclosed property isn't very easy. Keep in mind there are some serious drawbacks to investing in this type of property. For example, the tenant may still be in property or you may not be able to see the condition of the property. And there may be other liens against the house that you may inherit as the new owner.

So, first brush up on the laws in your state by going to the county clerk's office. To find out what properties are available, you can check the listings in your local newspaper.

Or, you can do your research online. Yahoo! has just launched a site for foreclosed property. There are also places online that list foreclosed properties, like foreclosure.net and realtytrak.com.

Question 2: Can you suggest sources for information on long term health insurance?- Helene

The reason you buy long term care insurance is to protect your assets in case you need to pay for assisted living, home care or a nursing home stay. Right now there are about 5 or 6 big insurance players in the market. To learn more about long term health insurance, go to Federal Citizen Information Center at www.pueblo.gsa.gov.

If you're found a company you're comfortable with, make sure you find out just how strong the company is financially at Moodys.com, standardandpoors.com, or at fitchratings.com. Remember, you want a company that's going to be around for a while.

Question 3: I'm 38 with 35K in my 401(k); I want to pay off 25K in credit card debt. Should I cash out my 401(k) or live paycheck to paycheck until retirement or buy a winning lottery ticket? Help! - John

We say winning lottery ticket! But seriously, cashing out of your 401(k) is a bad idea. You'll pay income tax and penalties for taking out that money before you're 55-1/2 years old. Plus you'll be robbing yourself down the road, says Doug Flynn of Flynn Zito Capital Management.

Think about how what would happen if you left that money alone. That $38,000, earning the average annual S&P 500 return of 8 percent, would grow to well over $200,000 by the time you reach 60. Would you wipe out $25,000 worth of credit card debt now, to rob yourself of $200,000 later?

If you own a home, think about taking out a home equity line of credit. Not only will you be able to pay off that high interest debt, but come tax time, you'll be able to take a deduction on that credit line.  Top of page

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Gerri's Mailbox: Got questions about your money? We want to hear them! Send e-mails to toptips@cnn.com or click here - each week, we'll answer questions on CNN, Headline News and CNNMoney.com.