Austin, TX · Member since 2017 · 6 posts · 3 votes
Hello,
Been reading a lot of RE books, listening to more BP podcasts (on show 101 currently) and looking at what my next steps should be. I wanted to pay down my student loan, and that was my primary goal. When I graduated, I had 180k in student loan. Luckily, it was for a degree in which I make about 150k currently and have my balance down to about 65k. I had not been financially driven until recently, just being happy with making decent money and living with the Jones's (living in luxury apartment, buying a nice car, eating out a lot, partying every weekend). I recently read "Set For Life" and started to make my budget and with moving into a friends apartment, downgrading my car, making my own food for the week and taking steps to cut down on my "party" bills, I will be able to save an additional $1500 per month. I'm curious as to what others think is the better play: Pay down my loans with the additional cash or forgo that to start saving for a down payment on purchasing a primary residence (which I plan to house hack with either roommates in a SFR or similar with a duplex). I refinanced my student loan down to a fixed 4.3% and my cheaper rent with roommates will be $600 + split utilities (down from $1200!). Before researching in Bigger Pockets and reading my sole goal was to pay down my student loans, but now I'm starting to think that it would make much better sense to just use the money I would have paid down on my loan (20-30k/year) and use that to get into the house hack. My logic now is that if I can get the house hack going with a property in which I would pay less than my current rent, then that makes the most sense. But on the other hand, getting equity in the property I purchase makes more sense either way. Is there anything I'm not thinking about or how should I go about analyzing properties?
Atlanta, GA · Member since 2016 · 81 posts · 45 votes
9y
House hacking is the way to go @Randy Stout. Like @Elbert D. said above me, student loan rates are typically low, especially if you consolidate. If you are going to be paying rent anyway, you might as well be 'paying yourself' and get that equity buy-down at the same time. Depending on the size of the MFH you buy (depending on your area, probably 3 unit+) , you could potentially live for ZERO dollars per month, maybe even get some cash flow out of it... all while paying down your mortgage. You can use the extra savings to pay your student loans. Also since you're house hacking, you can qualify for the FHA loan and put down only 3.5%...again using the excess money towards student loans. Best of luck!
Real Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
9y
Randy Stout - 4.3% is a great rate. Do you think you can earn a return higher than 4.3% in real estate? If so, you should pursue the house hacking/real estate investing route.
Make sure you do the numbers and you'll
be amazed as to what you can find.
House Hack is my vote- I agree with @Elbert D... the rates are very low and it is beneficial to get into a property (at the right price) if you are able to
Rental Property Investor · Scottsdale, AZ · Member since 2017 · 115 posts · 136 votes
9y
@Randy Stout, agree with my fellow BP members that house-hacking is the way to go. You mention that until recently you were happy with making decent money and keeping up with the Jones's. Just curious, what changed for you?
Investor · Memphis, TN · Member since 2016 · 25 posts · 11 votes
9y
We have 2 young adults and while they don't have official student loans because they borrowed from family who offered to loan to them at 0% interest, regardless they're paying rather large monthly payments, at their choice....
but my question is more about house hacking & the financial side of that, for them, as they are looking at purchasing their first property together (brother & sister - not sure how that'll go down with banks for young first time buyers who do have steady jobs been working since they were 15yrs of age, excellent credit built up, both credit scores almost 800, but still, They Are Young ) and as they are planning and dreaming and talking of all this .....
I notice how they actually [seem to me] to be concerned that their friends/potential room mates will know that they would [kinda sortta] be living totally rent free... and their friends paying Their way for them....
Now, as their parents (in REI a couple years), we do know that home ownership has lots of other responsibilities + they help us with our REI business and the rehabbing, so they also know this, re: financial responsibility, but they still wonder about how to best handle house hacking with friends.
As mama, I can imagine how I'd handle it, but then again, I've never House-hacked. So, how do y'all handle these sorts of house-hacking situations while having close friends/family/relationships renting from y'all ? Our kiddos are just not the types to likely let someone live with them that they don't know & trust pretty well, beforehand.... I kinda doubt house-hacking is anything that they're gonna want to do for very long, but they think it will help them get their start in REI more quickly.
BTW, the properties they're looking at will need a significant amount of work, which will also extra time & effort & financial responsibility on them, as owners. (we have tools, equipment & experience + a back-up crew of help, if repairs end up being something like major electrical/plumbing issues.)
BUT, even understanding all of this, as best they can at this point, they still seem to be oddly/overly concerned about "what friends will think" and how to handle the leases and paperwork "without roommates finding out". If it were me, I'd feel more comfortable about just telling my friends, BUT of course, I can see how that might not be the best ting to do, at all. (Having experience w/bad tenants, who seemed amazing in the beginning).
I don't know how to encourage them through these sorts of concerns that they keep speaking of .... I really can't even quite wrap my brain around it, or why our children would even have this concern about what their friends think, or why their friends might not understand (surely they would?), or why friends would expect to know so much about the details of our our family business, alas, they do have these concerns and I do believe there's more to it, than what just seems like it's only about "what if friends find out we're the owners" .... it's probably more about their concern of possibly seeming deceptive to their friends (who would also not only be their tenants, but living WITH them/in the same household) if they aren't open about it from the beginning and how that could affect things .... which is why I'm here asking for advice.
FWIW, duplexes/triplexes or those types of MF properties are not very "popular" in our area of the country and there are very few in good/safe areas of Memphis. (I'll avoid discussing Memphis crime here, for now.) There are townhouses & condos, but they're sold as SF-attached (usually individually sold) and even those are not as popular as in many cities, and usually kinda small and not conducive for several room mates to share altogether. We're looking for at least 4BR, 2BA SFR with space for son to have a decent tool shed/workshop & a decent sized yard for being outdoors + 2 dogs. Also, in Memphis (with terrible public transit) most folks have & drive their own vehicles ... that can mean needing parking for each college age student living with them. (i.e. needing space & to lay out rules re: city ordinances about parking, as well... our kiddos have already learned some things from us being in REI even about how these sorts of things can become issues w/tenants # of vehicles and dealing with city sending letters about complaints)
I realize that my questions might be far off from the original topic of this thread, but I hope somewhat related as they are college-age-related REI and re: house-hacking.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
9y
Hey @Randy Stout if you are making 150k per year and rent is only $600, you should be able to pay off your student loan within a year. Focus on getting that paid off AND focus on finding a great deal. It will take you some time to find a great deal, so in the mean time you can get the student loan paid off at the rate of about 7k per month. You have the income to qualify for the loan, but the student loan will hurt your Debt-to-Income Ratio (dti). Hit the student loan hard and your FHA loan will be no problem in Jan or Feb of next year. By the way, Jan and Feb are the best months to buy a home.
Without reading any comments after your post, it looks like you need about two years to pay-off your student loan, plus another year to save for downpayment and perhaps some extras for reserves.
If you recently refinance at 4.5% interest rate on student loans, you will pay a lot of interest on the front. Sadly, it may not equal a 12% on return on your investment, due to high interest rates paid on the front on your loan.
I have students loans and while investing, that cash flow is moving towards the student loans, but I have not refinance any of them, and I'm on the last 3 years on each loan (10 year loans), so its mostly principal now. We both work, properties are positive in cash flowing, so more income, and focusing on student loan right now...
On other words, If I were you, I will keep househacking your current property, until you can re-invest and do the same again, and pay your loans and save for downpayment.
Been reading a lot of RE books, listening to more BP podcasts (on show 101 currently) and looking at what my next steps should be. I wanted to pay down my student loan, and that was my primary goal. When I graduated, I had 180k in student loan. Luckily, it was for a degree in which I make about 150k currently and have my balance down to about 65k. I had not been financially driven until recently, just being happy with making decent money and living with the Jones's (living in luxury apartment, buying a nice car, eating out a lot, partying every weekend). I recently read "Set For Life" and started to make my budget and with moving into a friends apartment, downgrading my car, making my own food for the week and taking steps to cut down on my "party" bills, I will be able to save an additional $1500 per month. I'm curious as to what others think is the better play: Pay down my loans with the additional cash or forgo that to start saving for a down payment on purchasing a primary residence (which I plan to house hack with either roommates in a SFR or similar with a duplex). I refinanced my student loan down to a fixed 4.3% and my cheaper rent with roommates will be $600 + split utilities (down from $1200!). Before researching in Bigger Pockets and reading my sole goal was to pay down my student loans, but now I'm starting to think that it would make much better sense to just use the money I would have paid down on my loan (20-30k/year) and use that to get into the house hack. My logic now is that if I can get the house hack going with a property in which I would pay less than my current rent, then that makes the most sense. But on the other hand, getting equity in the property I purchase makes more sense either way. Is there anything I'm not thinking about or how should I go about analyzing properties?
Good for you for taking that step to save and get your life in the order you feel is best for your personal growth.
I would buy a home and with the monies you're saving you can still pay down your loans and have the best of both worlds.
After you have the experience of the first home (1 - 2 years) your loans will be that much closer to being paid off and you can move forward with a 2nd property. Take your time and learn from other people's mistakes. BP is great for this so you're in the right community. Keep reading and find a deal that works for you. Units would be my choice but to each his or her own.
I hope this helps and have a great holiday weekend.
@Randy Stout, agree with my fellow BP members that house-hacking is the way to go. You mention that until recently you were happy with making decent money and keeping up with the Jones's. Just curious, what changed for you?
I have always been interested in investing but it was more of an idea that I'd do it later "when I had money". But I've started reading a lot more than I used to and I heard about the BP podcasts from a friend and starting listening to them on my rides to work. Eventually, that just lead me to think that I could eventually quit my job and work for myself, which is highly appealing. I like my job, but I see pharmacists that are working in their 60's and 70's, and the thought of that horrifies me. Then, I recently read "Set for Life" and have started heavily budgeting myself with the big money holes in my life (rent, car payment, groceries, alcohol/drinking) and seeing that I will be saving around 1500/month woke me up to the fact that I need to be investing now, not later, so that compound interest will work in my favor. There have been a lot of shifts in my thinking lately and I would like to be able to quit my job if I want to by the time I'm 45. That's my goal, now.
I would look into possible down payment assistance programs in your area that would allow you to put a very low amount of your own money down.
This would allow you to purchase a property while simultaneously allowing you to pay down your student loans.
If this is not an option, I would definitely house hack as everyone else has stated. Hope this helps!
I would assume there are generally limitations to this type of thing dependant on how much money a person makes in their job. Being above $125k, I would assume programs wouldn't help me. I'm still most likely going to go with an FHA loan as a first time home buyer, but are there other programs specifically to look into and how would I find those?
Real Estate Agent · Tampa, FL · Member since 2017 · 191 posts · 98 votes
9y
@Randy Stout You are correct. I honestly do not know what the rules and limitations are in your area but I would suggest contacting or going to the website of the department of housing in your state or county. You could also talk to an experienced mortgage broker and they will know any, if they exist, programs that may work for your situation. It could be something with a possible 1% down loan or things like that. It never hurts to ask.
Investor · Franklinton, LA · Member since 2017 · 43 posts · 35 votes
9y
House hack and at some point, if done properly, you can use the cash flow add to the amount paid towards student loan or use it to continue investing. Would you rather use your cash to increase your wealth and potentially use someone else's cash to help pay off your debt or use your cash to pay off your debt?
Austin, TX · Member since 2017 · 6 posts · 3 votes
9y
I think I knew the answer before posting, but I wanted the reassurance from the members. I'm saving now for a down payment for a house hack. I think, after that, I will be looking for investments in a different market than Austin, TX. I live in Austin, but I work in Killeen, TX. I think there are good investment potentials there. It is a military town that seems to be expanding. After I have a house hack, I should be able to save faster and be able to buy a multi-family in that area. Is there anybody that knows about the market in Killeen/Harker Heights/Fort Hood area?
I own a fourplex myself in Killeen and have worked with quite a few fourplex buyers in the past couple years, plus a few duplex buyers. Our market indeed seems to be seeing an uptick in the past six months. Still behaves like a buyers market, but increasingly competitive.
I think house hacking is a great idea with a multi-family, too. I wish I had done that with my first couple homes instead of buying SFHs.
I have a fourplex in Killeen that has done well for me so far and would be happy to answer questions and share my experiences. I actually organized a small meetup of Austin residents that own Killeen multifamily a few months ago. I'll be setting up another meeting later this month. I'll be sure to include you on the email.