Lancaster, PA · Member since 2019 · 15 posts · 3 votes
Hello everyone,
I am a newbie here and am really excited to start diving into real estate investing! I am looking to start using the BRRRR method. I already have capital available for when i am ready to make my first deal. I wanted to know if my student loans will have a big impact on my ability to get the cash out refinances for my rental properties. I currently have $100,000 in student loan debt and my credit is good.
I still have a lot of research to do and have a lot to learn. Any input would be greatly appreciated!
@Chandler Colyer weigh your risk appetite, focus on your goals (set them ASAP if you don't have them), and figure out what's the best way to get there. If your DTI is at 25%, financing won't be a problem. So the decision comes down to getting out of debt vs getting invested in RE. Can you get a return on your property greater than the interest on your debt? If so, it may be worth it (with risk due to significant debt). If not, absolutely pay down your debt instead.
The good news is, you can do both. While nothing happens without action, action is better taken if well informed. Maybe the best choice is to spend the next year or 2 working, saving all you can, learning, and developing a network. This slow path may not get you what you want right now, but may be like a snowball and accelerate your growth in the future.
As they say, opinions are like ***holes. Plenty of people will tell you to invest now, an equal amount will tell you pay off debt now. Each person has their own bias based on their experience and risk appetite. Weigh all the options and figure out which one works best for you, but to do that there’s nothing more important than working towards a goal.
@Amy Beth I will not need to take out another loan for school this coming year which is nice, but yes I will be trying to focus on handling these loans as quickly as possible.
@Chandler Colyer not having a 9-5 in 10-20 years is a good thing to strive for. It’s also a goal with massive variability in both time and value, which makes it difficult to reach practically. How much do you expect it will take to get you out of a 9-5? Are you ok with just making enough to make ends meet, or do you want to live comfortably when you quit your job? That may be a difference between $3k-10k/month in passive income, which is enormous. That difference changes your strategy and your ultimate goal significantly.
A 10 year window of time does too. If you’ve never heard of Parkinson’s Law, it’s the idea that the amount of time it takes you to complete a task expands to meet the amount of time available. What that means to you is that if you set a goal of 10-20 years, you’ll HOPEFULLY hit it in 20.
I encourage you to get specific and set a target that may make you uncomfortable to plan for. Figure out how much you need to make to quit your 9-5, and set a goal to have that specific amount of passive income by a very specific date. This will drive every action you take.
As an example, on my birthday last year I said that I will have $10k in monthly cash flow in 10 years, November 2028. Now every decision i make, every purchase I make, is geared towards that goal. It isn’t a nebulous range of $$ and dates, it’s a set goal BG a set time that informs my activities. Hope that helps!
Welcome @Chandler Colyer! Short answer is no if you vote for Bernie. Longer, more responsible answer seems to be well covered in this thread.
I paid off my student loans within 18 months of graduating while working three part-time jobs. What I learned during that short time has set me up for the next 18 years. While your friends are traveling the world and eating out, you'll be growing up and building the foundation for the rest of your life.
So for $100,000 student loan debt, what income do you have as a result of the fact? I hope it’s pretty high for that amount of debt.T he reason I ask is if your debt to income ratio is decent and they know that you’re paying back your loans, you should be able to qualify for mortgages in cash out refinance. Do you have credit card debt for car payments?
@Dave Skow I am a current college student who is in a similar predicament when I graduate. If you could send me the student loan scenarios I would really appreciate it!
Same question, but a bit different situation - already graduated, paying off my loan now and have a 9-5 job. My debt also equals out to about $100k but half of it is a Parent loan, but I'm the one paying it off. Just got a job with a higher pay so just about to start saving up capital but its going to take awhile. Anyone have any ideas how to make 10k out of 1k? :D :D
Don't let student loan discourage you. Go to local meetups and meet other investors in the area. Maybe do a partnership, where you find the deals and handle the operation, and let your partner be the loan guarantor and provide equity.
@Chandler Colyer one of my clients had a strategy to purchase a 4plex. Like I mentioned in the previous post, if you owner occupy this home you can use a FHA loan for the financing. He lived in one unit, remodeled it over three months, then moved into the next unit repeating the process until he had all four units remodeled and rented out.
He purchase another home and now had cash flow from the 4plex. About a 1.5 years later the real estate market in Utah jumped up high. He sold the 4plex, took the $150,000 of income made, paid the short term capital gains, and paid his wife's student loans off.
This was a great strategy because the cash flow on the 4plex was less than what he was paying out in the student loans. When he sold the property and then paid the student loans off his cash flow went up giving him opportunity to look for other investments. The added benefit is his net worth increased as well because he didn't have the student loans weighing down his ability to buy in the future.
Like was brought up before, set your goals, focus on a strategy, and take action.