Personal Finance

Can Real Estate Investing Help Me Pay Off $180,000 of Dangerous Debt?

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Real Estate Investing Basics, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP
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I think we can all agree that too much debt is dangerous, especially when that debt is from student loans.

That’s why today I wanted to share the email exchange between a BiggerPockets member named Ford (with his permission) and myself. Ford and his wife are struggling to get started with real estate investing and facing an uphill battle due to their student loan debt.

Below I’ve posted Ford’s question, as well as my answer.

I know that Ford is not the only one in this position, so it is my hope this post can help more than just Ford. Perhaps you don't have $180,000 in student loan debt, but perhaps you are struggling with debt, with trying to buy a house, or trying to invest in real estate with bad credit. Whatever is stopping you from achieving the success you want, let’s see if we can help you out.

Webinar JpegFinally, before I get to the email, I wanted to invite you to this week’s webinar here on BiggerPockets! It’s happening this Wednesday and we’ll be talking about The Top 10 Mistakes Real Estate Investor’s Make (and How to Avoid Them). To register, click here!

With that, let’s first hear from Ford:

Ford’s Email to Me:

My wife and I have dreamed of owning a home to call our own and starting a family. Like most people, we also dream of owning rentals properties, having financial freedom, and enjoying the finer things in life. Our current situation is very discouraging and at times seems hopeless. We’ve tried several different things but have only gotten older and have yet to get ahead. I’m 30, and she is 29.

Related: Can You Invest in Real Estate With Bad Credit? (Maybe… Here Are 5 Ways to Do It)

Combined, my wife and I have over $180,000 of college loan debt. Mostly private. Several have adjustable interests rates maxed at 12%. Combined, we pay over $2,000 a month in college loans alone (not including the one car we share, rent, and food). We do not have any credit card debt. We've missed a couple payments in the past from being in between jobs, and as a result, her credit is around 580 and mine is around 640. We do not come from a wealthy family, and every member of our family is trying to survive in their respective manner. They are unable to help.

We have been unable to refi to lower rates due to credit and lack of a co-signer. I've spent hours researching all the ways to solve our college-loan problem with little success. Most of the advice is the same. Much of it is from lenders trying to refi to terms that do not favor us but get them paid a few points for restructuring our debt.

We are not doctors, lawyers, or any other professional that justifies this debt. She works in HR, and I’ve worked in various sales roles as 1099. I understand RE Wholesaling and have taken the actions to start. However, after our monthly expenses, we do not have a budget (Mailers/Adwords) to be competitive with the thousands of other people trying to do it in almost every market.

Because she is the only W2 employee (with bad credit), and I do not have two years of consistent income as an independent contractor, it makes it very hard to get approved for anything. We live paycheck to paycheck and rarely have anything left over for savings. This makes it very hard to invest or start a business. We see opportunities every day that seem out of reach because of our situation. Real estate is one of the things we truly wish we could do.


My Answer to Ford:

Hey Ford,

Thanks for the message and sorry to hear about your situation. Sounds not fun at all. So, I have a few thoughts for you, and keep in mind this is just off the cuff stuff–take it for what it is. 🙂
First, you might be surprised to hear me say this, but I don’t think I would worry about buying a house. I think I would focus on getting the debt gone first. I don’t really buy the argument people say about “throwing away money on rent” ’cause when you get a mortgage, 90% of the mortgage payment is “thrown away” on interest anyway. Yes, long term it can be good, but it’s not really that important IMO.
So the real problem I see is the debt. As far as $180,000 in student loans, I’d expect that for a lawyer or doctor, but you said you don’t have those degrees. You were young and dumb, and I get that, and you get that, so let’s move on from there.
So, to begin, that $2,000 a month in student loan payments is going to KILL you for the next decade or longer and make everything in your life more difficult. That, in my opinion, is your “One Thing” you need to get rid of. I think you know that. That sounds overwhelming, but it CAN be done. There are, of course, two ways to make this happen, and you’ll need both:
  1. The first part of this is going to be cutting spending down to next to nothing. Like, really, really low. No more eating out, movies, etc. Live on under $2,000 per month in non-student loan income. Get on a REALLY strict budget and abide by it. Have a friend hold you accountable. Budget $50 a month for "fun money," and everything else has to go to a bill or into paying off that debt.
  2. Next, you’ve got to increase your income–a lot. Like, I would make it a goal to be earning, combined, $150,000 per year within 12 months from now. You can live on $50k, pay taxes on $50k, and have $50k left to pay off debt. If you have no opportunity at your jobs to make additional income, it’s gonna have to come from another source. Now, we’re getting to the real estate investing stuff. I’d like you to set a goal of making $100,000 per year in real estate (assuming $50k from your jobs for the total of $150,000).

So, how can you make $100,000 per year in extra income, above your job, from real estate investing? There are a couple ways:

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  1. House Flipping
  2. Wholesaling

(Of course, there are more ways than that; those are just the major two.)

I’d probably recommend doing both, because you can flip the deals that are the best and wholesale the rest. I’d start with reading my book The Book on Investing in Real Estate with No (and Low) Money Down. I’ve attached it here to this email so you can read it. [Sorry, BiggerPockets readers! You’ve got to buy it. ;)] You won’t necessarily do each strategy, but it’ll be good to know the stuff.

Related: How to Get Out of Debt: 5 Steps Toward Healthier Money Habits

Next, read J Scott’s books The Book on Flipping Houses and The Book on Estimating Rehab Costs. In fact, read all those books twice. You have 30 days to complete that. 🙂
Now, to make $100,000 per year from this means you are gonna have to do a lot of volume. Maybe four flips per year, or perhaps two flips and 10 wholesale deals, or whatever combination. You already said you can’t really afford mailings yet, so you will need to HUSTLE to get those initial few deals until you have the cash to pay for mailings.
I’d recommend Driving for Dollars to begin with.
Obviously, both working full-time jobs, this will be tough, but you have to sacrifice to make it happen. When you start earning double what you make at your job, perhaps you can quit.
So that’s how I’d do it. I’d start throwing $50,000 per year toward that student loan debt. In four years (or less), it’ll be gone and you’ll be at a REALLY good spot with your income. Just be careful, and don’t go into further debt unless it’s mortgage-related and on a REALLY good deal.
Then after all the debt is gone, I’d start worrying about buying the rental properties. At least, that’s my opinion!
I know this was long and not very cohesive, but those are my thoughts! Take ’em for what they’re worth. 🙂
Let me know how this goes,
READER: Do YOU have anything you would add? Anything you’d change from what I’ve said?
Share your comments below!

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, with nearly 100 rental units and dozens of rehabs under his belt, he continues to invest in real estate while also showing others the power, and impact, of financial freedom. His writings have been featured on,,, Money Magazine, and numerous other publications across the web and in print media. He is the author of The Book on Investing in Real Estate with No (and Low) Money Down, The Book on Rental Property Investing, and co-author of The Book on Managing Rental Properties, which he wrote alongside his wife, Heather, and How to Invest in Real Estate, which he wrote alongside Joshua Dorkin. A life-long adventurer, Brandon (along with Heather and daughter Rosie) splits his time between his home in Washington State and various destinations around the globe.

    Logan Allec Accountant from Los Angeles, CA
    Replied about 4 years ago
    Could you elaborate on “flip the deals that are the best and wholesale the rest”?
    Brian Stephens Logistics Manager from Ohio
    Replied about 4 years ago
    You hit it on the head, Brandon. It’s time to live like a college student with no beer money and focus on higher income. I would focus on the debt for a year (at least), driving down that $2000 payment. Then maybe look for a multi-family house, where they can live there rent/mortgage free. Maybe that could work with a partner or some creative investing. That would have to be the right deal, though, but it could help accelerate debt pay down.
    Adam K. Investor from Brooklyn, New York
    Replied about 4 years ago
    The advice on cutting expenses is good, but if it was that easy to just add 100K a year in income everyone would do it. I think that part of the advice is counterproductive and unrealistic. He has no safety net to fall back on if his first flip is a failure. The first step is repairing those credit scores. There are businesses like Sofi that will refi your loans to about 4-5% but only with a good credit score. There are plenty of resources online about how to improve your credit score. If he can refi those loans it will lower the monthly burden. And a better credit score will make it much more likely to get a mortgage when you get to that point. If they can save $100/week, after two years or so they will have enough for an FHA down payment on a ~200-250K house. He needs to get a W2 job. Easier said than done but he needs to have an income that banks can look at. If they can cut the debt payment to say, 1500-1800 a month (by refi…which also will allow them to save) and get their combined W2 income to say 7000/month (no idea what they make now), they should be able to get a 200K mortgage and fit under D/E ratios. Don’t know what that will get them where they live, but just a general idea. Slow and steady. He’s got to be patient.
    Tammy Richards from Yarmouth, Maine
    Replied about 4 years ago
    GET RID OF IT ONCE AND FOR ALL. Read “The Tightwad Gazette” and get into the game of living on as little as possible – buy nothing new, sell everything you can. Move in with roommates/family members. Learn to cook crockpot cheap. You are both young, and you don’t have kids – so maximize the assets you have (energy and time) and get yourselves part-time jobs – weekends are a luxury you can’t afford right now. Work at the local home depot/lowes/hardware store, use that part-time job to make connections/build skills. You say you want to finance your dreams – prove it! PAY IT OFF.
    Tim Hoffman Investor from Rockford, Illinois
    Replied about 4 years ago
    Ford said he has a car payment on a car they share. WHY ON GOD’S GREEN EARTH DO THEY HAVE A CAR PAYMENT? Sell it now, no, Yesterday and buy a beater with or without a heater. A $2,000 car can last several years and that car payment can go to debt paydown or a combination of debt paydown, savings/emergency fund. I like the idea of sharing living space with family or friends (move into a family members basement and pay them a little something). They won’t be there much because I agree with @Tammy Richards, weekends are a luxury they can not afford so they will be working 2nd and 3rd jobs for the next couple years. House-hack, if they are able to get a duplex or quad, (even in a lower income neighborhood than they like) they can live for free and have their current rent / mtg go to debt paydown. Finally, when they have overcome their debt gained some freedom they need to give back. Tell others with college age kids about their struggles, tell their nieces and nephews to avoid the mistakes they made, raise their children (if they want or ever have any) to avoid that kind of debt and be an example for others. Then they can share their story on BP for the next one coming down the line with a similar story. Good Luck Ford. It will be hard but the rewards will be worth every drop of sweat.
    Greg W. Buy and Hold Investor from Alexandria, Virginia
    Replied about 4 years ago
    Get a loan on Lending Club or Prosper for a lower interest rate than what you are paying on the private loans to pay them off more quickly.
    Kyle Penland Investor from Dyersburg, Tennessee
    Replied about 4 years ago
    Prosper or LC won’t lend anywhere near what they need, and it will only add to their monthly burden…You can add 100k to your income…Not everyone is willing to do what it takes to get properties and FLIP them for profits. Not all are massive but if you buy them right very helpful!
    Bryan O. Specialist from Littleton, CO
    Replied about 4 years ago
    The biggest thing I would recommend if they are not doing it is to move into something super small and cheap. Moving to England taught me how little space is necessary to live very comfortably. The other comment that was made was to get rid of that car! Buy something you don’t need to make payments on. The cost of occasional repairs is less than your continued monthly payment. Depending on where you live you just saved over $10k/year! Cutting out your occasional Starbucks is nothing. Make the BIG changes that require rethinking things.
    Curt Smith Rental Property Investor from Clarkston, GA
    Replied about 4 years ago
    I was curious what real estate advice a professional RE advice giver (BP leadership) would give… Sadly it was the same cookie cutter bad advice. I’m in a leadership / trainer role in my local REIA. I face new folks asking this question every day and it’s gut wrenching! “Wholesaling” is THE hardest job in real estate, especially today in hot markets, where every seller knows zestimate. This is the worst advice to give a ground zero new person. Maybe along the way of lead generation and calling they might accidentally wholesale a deal every few years. Very few folks have the tremendous people and sales skills necessary to sit on a sellers couch and get them to sign away most of their equity. “Flipping” is the most dangerous financially deal type I know of. Today with every seller knowing zestimate professional flippers with their own in-house crews are barely making decent returns on 80% of ARV offers. A new person would surely make too many mistakes and end up upside down. I’ve seen this!! Now they have an over fixed up rental with hardmoney and begging to REFI out into conventional. Come on folks lets give better advice??? The lowest risk deal type I know of is: marketing for low equity deals that you’d do sandwich lease options for 3 paydays. Low equity sellers are happy to have someone get them out of their house, as opposed to arm twisting high equity sellers for 50% of ARV for a wholesale purchase. A beginner can start out lead generation for free in craigslist: search in sale by owner: “must sell”, “motivated”, “fixer”, call all those folks for sellers willing to lease for a few years with an option to buy. Some will. In general, door knocking, even bandit signs, and marketing to expired listings, calling FSBOs, for low to no equity sellers is by far easier than finding desperate high equity sellers for a wholesale!! Ok, who can offer up better, easier, lower risk get started real estate ideas? The key criteria for actionable advice to a new person is: the deal type must not require deep knowledge (subject-to), or extreme negotiation skills (wholesaling) or lots of cash (yellow letters to 1000 sellers a month).
    William Moore Rental Property Investor from Madison, GA
    Replied about 4 years ago
    Great response/advice Brandon! My wife and I are in the trenches of paying off over $200K in school debt by decreasing expenses to bare minimum (ie.. no cable, drive older fuel efficient toyotas!!, read for more tips). We are now to low $40K in school debt by using our business line of credit when funds are available. Since you are an independent contractor, you may be able to get a business line of credit (mine is at 4% APR). My school debt is at 6.875% interest so we pay the minimum on the 6.875% note plus 10K at a time from the line of credit and hurry pay off the line of credit, then repeat. It really helps because with the line of credit you only pay 4% of the amount that you have borrowed. It really helps and I hope it helps you. Once the debt is gone you can start towards having those paid off rentals (our goal!). You will do it!!
    Chris Gibbs Investor from Portland, Oregon
    Replied almost 3 years ago
    I may be wrong but I think you are doing that backwards to be the most efficient at paying off your loans. If your line of credit has a 4% interest rate and your student loan has 6.875% then you would be better off paying big chunks to the student loan and maxing out the line of credit and paying minimum on that. You will pay less interest that way. Unless the payment on the line of credit is to big for you to do that.
    Kurt F. Investor from Rocktown, Illinois
    Replied about 4 years ago
    Curt Smith — how do you really feel? 😉 Actually, the BP leadership already asked in the original posting: “READER: Do YOU have anything you would add? Anything you’d change from what I’ve said?” So, your ideas have already been solicited, and with implied deference to all good ones. I took the entire posting as an attempt to rally some support and ideas for a couple in a very tough spot. It’s clear that you like your ideas, and there is nothing wrong with that. I think your ideas probably have merit. But no one is sitting on THE answer. Like any brainstorming session, initially all possibilities get run up the flagpole.
    Curt Smith Rental Property Investor from Clarkston, GA
    Replied about 4 years ago
    Hi Kurt, I respect your comments! I do go off now and then, especially when I see real estate thought leaders giving bad advice that is completely cookie cutter. He-said-she-said making it fact. Experienced folks need to come to grips with new folks being sent into wholesaling seminars where very very few actually collect an assignment fee. I see at most 5% ever making an assignment fee in a few years of them struggling at it. So how does 5% success rate make good advice? This is the entirety of my point and challenge to leaders and advice givers. I think the advice we give has to actually have a decent success rate or else we shouldn’t give it. We need to blog and post more about what are the easiest deal types to make money at. Then collect statistics from BP members so we have honest data to back up our advice. There’s plenty of forum posts about how hard it is to direct market today, get sellers to agree to low offers, to find cheap properties to fix and flip. Why send a new person into what is extremely difficult? The bit of advice I give new folks is: doubt every thing you hear, it may have worked once and may have worked for the giver, it may not work for you. You need to test it first and adapt to your specifics and todays market place. The second thing I say: do what the room full of experts are NOT doing. If everyone says they are buying 3/2’s $100k to $150k in some area, then you need to do 3/1’s $65k-95k in some OTHER area. Avoid competition, avoid doing what everyone else is doing and ADAPT every 12 months or faster because todays market is constantly changing. At this point every new person (including most experienced) heads are spinning. Adapting, changing is hard work! Good advice is not constant, because the market is changing. If everyone is looking for high equity sellers (wholesalers, flippers per the advice given above and every where else) then look for low to no equity sellers, or look for “ugly” or the “runt” and make it beautiful. Best I can offer.
    Shaun Reilly Landlord and Rehabber from Newton, Massachusetts
    Replied about 4 years ago
    I am in the “not that great advice” camp. As others have said Wholesaling is one of the most difficult ways to get into real estate. Concept is simple, and if you have a deal it isn’t hard to complete it, but it is very hard to find deals, especially these days. Also try rehabbing with no money… good luck with that. Maybe if they had some private funding outlets but since one of the few details we got is that nobody in either persons family is any better situation to help out. Obviously you can find other private lenders, but that it not a fast or easy process. I’m not saying to stop learning, I’m not saying to not network, I’m not saying don’t try to find deals and work solid leads you come across. What I AM saying is that don’t set yourself up for failure by thinking you will just expecting you will fall into $100K within the next year by putting in a little effort on the side. Unfortunately there was not all that much information to give practical advice. Much of the advice given in the comments is useful, given the assumptions made. Housing: You say you pay rent. Fine you have to live someplace. Do you have a 3/2 townhouse with an onsite fitness center and tennis courts or are you sharing a 350sqft studio? If you are closer to the first consider the 2nd. If living with family for a time is an option really consider that. Car: Good to hear you only have one and can get by sharing it. Puts you ahead of a lot of people… However you have a payment. How much do you owe and what is the payment? Can you sell it for what you owe or more? If so consider selling and getting a cheap crapbox with cash. If you can’t afford to sell it then focus on paying that off. ASSUMING that this is MUCH smaller than the student loan, even if the rate is less, you can pay it off and free up that cash flow to put towards paying off the other debt or putting away in savings for something else. Fun/Food/Other: You mentioned food, but not how much or how it is distributed. No mention of any other expenses at all. MAYBE you already are living super lean and have next to no other expenses. I will assume that is not the case. No cable or TV packages, you don’t have the time or money to make any of these worth it. Eating out should be cut out or maybe one modest “date” a month which will be the majority of your entertainment budget. Paying for “fun” again should be minimized, like I said in eating out have 1 modest date a month and then find things you both enjoy doing at home cheap/free on a more regular basis. Sell your toys… Fancy electronics are superfluous, as are many other things but those you might be able to get real money for and are also time sucks that are worth just getting rid of. BTW iPhones (Or your Galaxy for Droid users) are toys with really expensive monthly rate plans. Buy a cheap smartphone and signup for a monthly pay as you go plan from a discount carrier. Depending on your area there should be thing available with unlimited data and text and a few hours of talk (or some other combination) for $25-50/month. Big one is revenue though. The wife can look into a night/weekend job since it sounds like she has a set 9-5 type job. He is doing contract work so the obvious first thing is see if you can get more work in your field. Next would be looking at a 2nd job or other contract work. If you really want to get into real estate right away get a license. You will learn a lot and frankly you are WAY more likely to fall into a commission working this on the side than you are to fall into a 65% ARV deal you can wholesale for a decent profit. Finally if you want to buy a place I’d only look into that at this point if you can house hack. Try to save up an FHA level downpayment for an owner occupied 2-4 unit place and rent out the other unit(s). Only worth doing if it at least brings your housing costs under cheap rent. Hopefully you are in an area where you might actually net something out of it, but it at least needs to be a savings over the cheap rental option (i.e. the small studio apartment mentioned before). Also don’t do this if you don’t think you can sock away at least a few grand more for reserves for WHEN something happens that needs to get fixed. Best things to do are: 1) Get more revenue, but be realistic in how much and how to do it. 2) Tighten your belts as much as possible to minimize out flows and to get your income higher than expenses. 3) Build your credit back. Pay your bills, pay them on time, pay down your debt. This takes time and isn’t sexy but will do more for you than any BS “program” will. Good luck!!!!
    David White from Edgewood, Maryland
    Replied about 4 years ago
    I’m in the same situation. Only my debt comes from mainly credit cards and loans. I appreciate everyone’s input. Me personally I’m looking for either a part time job or possibly another full time job. I have to get more revenue. I know how much I owe on my car. But I never got a quote on how much I can get for it. When my cell phone contract is up I plan on going month to month on a cheaper plan. My work has a gym onsite. So I’m considering canceling my gym membership. I take food to work so I don’t have to order food or go out for lunch. I thought about wholesaling. But it costs money to market. I will order the 3 books from Amazon that Brandon recommended reading.
    Brett S. Investor from Plainwell, Michigan
    Replied about 4 years ago
    Normally I like your posts Brandon, but that isn’t the best advice in this situation. High debt low assets with private loans and bad credit scores is the absolute *ideal* situation for bankruptcy. either chapter 7 or 11 will set them up Very good for the future and after 2-3 years they’ll be at least as credit worthy as they already are from a lenders perspective. If they start making more income before the bankruptcy it actually makes their situation worse. My advice: get a lawyer and file your case tomorrow. Be out of debt the next morning (sort of) then increase your income next week and build your cushion – then use your $180k that you were going to pay loans with to buy a house and an investment property in cash.
    Mark B.
    Replied almost 4 years ago
    I have to agree 100% with Brett S. Personal bankruptcy on private student loans is the best alternative. Private student loans can sometimes be discharged, unlike federal student loans. The biggest problem however with private student loans is that they were normally co-signed by a parent or relative. If the child files for bankruptcy, the parents will still be on the hook for the entire loan amount.
    Michael Wagner Specialist from Victor, NY
    Replied almost 4 years ago
    Bankruptcy is, in my humble opinion, not the way to go. It is NEVER the way to go unless there is no alternative. In this case, there is an alternative. As others have said, SELL YOUR CAR. buy a beater that will no longer require comprehensive and collision. You save the car payment and the insurance costs. Seek out a NOT FOR PROFIT DEBT CONSOLIDATION company. Given what you’ve told us, you should be able to consolidate those loans to a VERY low rate (may require freezing your credit but that might be a good thing too). IT needs to be a NFP though and should cost you NOTHING. And yes, you may need to get a JOB to supplement your modest 1099 income. I am a strong believer that managing your personal finances is a PREREQUISITE to being a successful real estate investor in any capacity. That’s not to say that you have to wait until your debt free to invest….but it does mean that you have to get on (and a ways down) the right path regarding your personal financial situation. PS—YOU ARENT OLD and you are not helpless. You can solve this problem and turn it into a distant memory in a few short years…..Please keep us posted and feel free to reach out with other questions! All the Best, Mike