How to start with high debt

8 Replies

Hi BP community,

So I have a strong interest in rental properties and most likely am looking into purchasing out-of-state because LA and orange county are difficult to cash flow. I've only begun saving up for a down payment, but I wanted to know if there was any way I could be financed for a rental property with high debt?

In my case, I, unfortunately, have $150,000 in student loan debt due to bad financial advice until it was too late and would like to start investing in rental properties to cash flow and help pay off my student loans!

I have a great credit score but only make $45,000 currently. Are there ways for me to qualify for loans for investment? 

Any advice is welcome!

With mortgages pre-approval is gonna be pretty heavily based on debt to income ratio. You should try to either raise your income level or lower your debt level in order to get a bigger mortgage. I'm not a mortgage guy so I'm not 100% sure but maybe if someone was co-signing it would help. Other than that you can try owner finance.

Originally posted by @George W.:

With mortgages pre-approval is gonna be pretty heavily based on debt to income ratio. You should try to either raise your income level or lower your debt level in order to get a bigger mortgage. I'm not a mortgage guy so I'm not 100% sure but maybe if someone was co-signing it would help. Other than that you can try owner finance.

Agree completely, but just wanted to add that there are some asset-based lenders who may be willing to fund your deal. You may need to save a bit more--some want to see 6 months of debt service saved up, in addition to down and closing. The interest rates will be higher than what you can get through conventional/agency loans. However, this may be an avenue, if traditional banks are turned off by your large debt. Good luck!

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@Ranier Olegario-Nebel. There are many threads like this on BP, if you find them, you may seem my comments on them. I was on a similar thread just the other day about this exact topic. I’ll ask you the same questions:

What did you do to get so much debt? What did you study?

Unfortunately, at this time you're not in a place to invest in REI. Anyone who tells you differently is giving you bad advice

Well, where there's a will there's a way. But I think you'd have to get pretty creative to be successful with your current resources and DTI. I would tend to agree with @Caleb Heimsoth  that you may not be in the right financial situation currently to invest in real estate. I would focus on paying down the student loans. If you had a rate of say 6.5% that will be a guaranteed return of that same amount by paying them down. Could you do better in real estate? Maybe, but there is a risk versus reward trade off and you’d be taking on the unknown risk when the alternative is a guaranteed reward.  Best of luck whatever you decide to do.

@Caleb Heimsoth

I'll take a look around more on the BP threads for this topic. 

I got my MBA in marketing and it was all student loans. I wanted to invest in cash-flowing properties to help pay the loans. I would only go for rentals that have an ROI (adjusted for risk) greater than the interest rates on my loans if I thought a deal was good. Of course, I'd have to start saving for a downpayment in a high-interest yield account rather than paying down loans so that comes with those incurring costs.


Concerning DTI, from calculations I can find online, my DTI is 26.7%. My loans were stretched 30 years (to attack the higher interest rates), but my monthly is payment is $1000 and my monthly gross is $3750. I do not have other forms of debt. Is there another calculation used besides just monthly payment?

@Jonathan Liu

I'll look into asset-based lenders and see if that might give me a better ROI. Issues would be the savings mean the money doesn't go into the loan and that'll cost adding up. I can help combat it a little with a high-interest yield savings account, but that's maybe still a -4.5% rate while saving.

Originally posted by @Ranier Olegario-Nebel:

@Caleb Heimsoth

I'll take a look around more on the BP threads for this topic. 

I got my MBA in marketing and it was all student loans. I wanted to invest in cash-flowing properties to help pay the loans. I would only go for rentals that have an ROI (adjusted for risk) greater than the interest rates on my loans if I thought a deal was good. Of course, I'd have to start saving for a downpayment in a high-interest yield account rather than paying down loans so that comes with those incurring costs.


Concerning DTI, from calculations I can find online, my DTI is 26.7%. My loans were stretched 30 years (to attack the higher interest rates), but my monthly is payment is $1000 and my monthly gross is $3750. I do not have other forms of debt. Is there another calculation used besides just monthly payment?

No that seems correct, as far as DTI calculation. This is a side note but it seems you got screwed if you're only making 45k a year and you got a mba and 100k plus in debt.

You don’t want more debt, that’s the problem.  You will likely get in over your head very quickly