Starting out in REI with LOW money and student loans. How?

Question

I'm 28. I'm not broke, but I definitely don't have a huge savings. I work an 8-5 and love my dogs. My DTI ratio is about 40%, I have lots of student loan debt, and I cannot currently save but maybe $100/month.

After listening to tons of BP podcasts, it seems like most of similar people in my situation had no idea what they were doing going into their first deals...besides knowledge of terminology and what not. I'm currently reading Brandon's book on investing with low and no $, but wanted to throw some feelers out and get some opinions/advice.

Thanks for everything!- Shawn, Baltimore, MD

Eugene M. · Answer

@Shawn Smyth You're definitely going to have to get creative. As Brandon will tell you in that book, no/low money down is very feasible but you have to know the downsides and potential risks. We hear stories on the podcasts all the time about successful people who hustled their way in with no money, became successful, and then lost it all (which can happen to anyone!). It might be worth it to keep saving (especially having a decent amount of reserves / emergency fund) because while anyone can bounce back from losing money, that doesn't lessen the huge impacts to your life as a result of a loss - especially if you have a family, debt, or dogs!

The creative strategies you use have to be tailored to reach your goals while minimizing those downsides and risks. A few explicit recommendations from personal experience: 1) Continue along the personal finance & savings path - Can you cut any expenses? Budget tighter? Negotiate a raise/promotion? 2) Go to local meet-ups or make one, even if you don't think you have anything to offer. 3) Find something you can offer. Are you a hard-worker, willing to learn, and willing to work extra hours because you really want this? 4) Partnerships! Find someone with money in exchange for that skill you can add. 5) Those partnerships also apply to general networking. Call bankers and brokers. Make good relationships and be a good dude. You might be pleasantly surprised at what a creative underwriter at a local credit union can offer you.

And lastly, I'm sure you're aware of the low/no money down programs out there - FHA, USDA, Conventional 97, homeowner assistance programs, 203K...If you don't have a property yet, get out there and get one that can make you money! Combining these with creative strategies (house hacking, live-in flip) will only compound your growth!

Caleb Heimsoth · Answer

@Shawn Smyth you’ll have that same problem trying to finance rentals. I recommend you pay that off or down before you do anything in real estate

Solomon Morris · Answer

@Shawn Smyth I had an opportunity to go seller financing awhile back on a town home in baltimore but the seller and myself could not agree on a price.  I understand how powerful HELOCs can be and cant wait to build more equity in my primary residence so I can use that to fund another deal.  It's one of the cheapest options for funding an investment

Shawn Smyth · Answer

@Caleb Heimsoth I personally have about 69k in student loans, some personal and some federal.

45k personal at 6.74%

24k fed at 5.375%

I've tried several times to refinance but my DTI is always too high.

Shawn Smyth · Answer

@Solomon Morris is like to go an unconventional route for sure. Seller financed, lease options...something like those. I keep a close eye on bills to make sure I'm paying the correct amounts and frequently contact our bill companies asking for any specials or what have you...

Are you familiar with using either option mentioned above? Or HELOC?

Shawn Smyth · Answer

@Eugene M. Great advice! I'm halfway through his book. I've been in contact with several people regarding my situation and my interests, so I hope it pans out. I currently own a home and have ~60k of equity as it stands.

The student loans are what's killing my savings potential, but I still save what I can. My wife has far less debt having gone to CC for a few years so she's able to save more. I'll need to reconfigure a few things for sure.

Shawn Smyth · Answer

@Matt M. Definitely! I'm in the process of setting up meeting with real estate agents I know and people who are currently investing.

Caleb Heimsoth · Answer

@Shawn Smyth how much student debt and at what interest rate?

You’re not ready for REI yet sorry.  Pay off debt or increase income.  Don’t buy anything.  It’ll Likely end poorly

Solomon Morris · Answer

@Shawn Smyth I recently got rid of my motorcycle (I loved the bike too) to help fund my second deal I'm currently in the hunt for.  Not only did I get its market value but I no longer have a monthly insurance requirement to feed.  Look at all your expenses and scrutinize everything.  How bad do you really want this?  100 dollars per month of savings will be a slow route towards buy RE the conventional way if that is the route you plan on utilizing. I'm sure there is some fat you can trim from your monthly expenses to fund your goal

JD Martin · Answer

You need more income. That's really the sum of it. Either a better paying day job or a side job that can bring in more income. Becoming an investor presupposes that you have something to invest. $100/month won't even get you a reasonable safety net for your personal finances, much less anything to invest in real estate.

Starting out in REI with LOW money and student loans. How?

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