What do you suggest I do?

Buying & Selling Real Estate
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What do you suggest I do?

Gervon Thompson
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes

Here's my story, so I happen to be on of those naive millennials who continuously took out student loans without even considering the burden it would cost to repay them upon graduation. I've amassed about $91k in student loans and I've managed to land a job that pays around $95k gross (about $60k net). Like most college students that enter the working world, I've now realized that I do not want to continue in my current job for the next 5-10 years and beyond. I'm not too fund of W-2 jobs and want start investing, do you suggest I get second job to pay off my loans or, look into BRRRR investing or short term rentals as a source of side hustle for additional income that could subsequently lead to amassing good source of passive income and wealth (after garnering relevant knowledge on how to do this of course). I welcome any constructive criticism, and yes I'm an idiot for taking out so much student loans. Thank you!

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Erik W.
Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
6y

@Gervon Thompson, hi and welcome to BP!

You've accomplished step 1, realizing there's a huge problem and that it's your responsibility to fix it vs. waiting for a benevolent Govt to fix it for you.  Bravo!

I think the idea to work is excellent! Here's the thing: BRRRR involves a lot of work too, but unlike a W-2 job there is no guarantee of making money. Many first time BRRRRs end up COSTING you money vs. making it. Just like your college degree / education cost you money, the "education" of doing your first BRRRR could come from overpaying, underestimating rehab costs, overestimating ARV, delays from weather, unforeseen problems, etc.

To put it another way: it's not guaranteed income, especially as prices are rising and it's getting harder to find BRRRRs that actually make numbers work.

Btw, another commonly misunderstood fact about BRRRR: most investors aren't using that to generate cash flow or profit today. They're using it to expand their portfolio that they plan to hold into for 5+ years. It's a long term play. The one's who are creating cash income today are flippers. Different strategy. The point of BRRRR is to keep putting money to work over and over. You don't use it to live on or pay off debts.

The bad news is you have a lot of debt.  The good news is you have a good income and potential to boost it.  Are you single?  If yes, I recommend cutting your lifestyle to the bare bones.  Live off $30K and throw $30K per year at your debt.  It will be gone in 3 years, and you will be primed to begin investing!  If you want to go faster, double down and work 12-16 hours per day.  If you go crazy, you could be done with that debt in 12-18 months.  If you're married, of course your spouse will have to be on board with this "scorched earth / work like crazy" lifestyle.  But anything is tolerable for a short season.  If you're on the same page, you can do it!  

I hope this helps.

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  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    6y

    Hi Gervon,

    Work a second job, making as much money as possible. BANK 100% of it in an FDIC Insured account until you accumulate enough to start investing with. While at the same time learning how to invest in the way you think will be best for you.

    Good Luck!

    2Reply
  • Erik W.
    Real Estate Investor · Springfield, MO · Member since 2017 · 1k+ posts · 2k+ votes
    6y

    @Gervon Thompson, hi and welcome to BP!

    You've accomplished step 1, realizing there's a huge problem and that it's your responsibility to fix it vs. waiting for a benevolent Govt to fix it for you.  Bravo!

    I think the idea to work is excellent! Here's the thing: BRRRR involves a lot of work too, but unlike a W-2 job there is no guarantee of making money. Many first time BRRRRs end up COSTING you money vs. making it. Just like your college degree / education cost you money, the "education" of doing your first BRRRR could come from overpaying, underestimating rehab costs, overestimating ARV, delays from weather, unforeseen problems, etc.

    To put it another way: it's not guaranteed income, especially as prices are rising and it's getting harder to find BRRRRs that actually make numbers work.

    Btw, another commonly misunderstood fact about BRRRR: most investors aren't using that to generate cash flow or profit today. They're using it to expand their portfolio that they plan to hold into for 5+ years. It's a long term play. The one's who are creating cash income today are flippers. Different strategy. The point of BRRRR is to keep putting money to work over and over. You don't use it to live on or pay off debts.

    The bad news is you have a lot of debt.  The good news is you have a good income and potential to boost it.  Are you single?  If yes, I recommend cutting your lifestyle to the bare bones.  Live off $30K and throw $30K per year at your debt.  It will be gone in 3 years, and you will be primed to begin investing!  If you want to go faster, double down and work 12-16 hours per day.  If you go crazy, you could be done with that debt in 12-18 months.  If you're married, of course your spouse will have to be on board with this "scorched earth / work like crazy" lifestyle.  But anything is tolerable for a short season.  If you're on the same page, you can do it!  

    I hope this helps.

    6Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    6y

    @Gervon Thompson  Congrats on finishing college/university and getting a good paying job.  That job is the key to your success in real estate.  Start saving as much as you can-keep living like a poor student.  Do not buy a fancy new car, and all the other things people often do once they start working.  You can use that money to get started.  Assuming you don't own a home, save so that you have enough to buy a house with a lower down payment (5% vs 20%).  Use it to buy a duplex where you can live in one half and rent the other half out.  After a couple of years, rent the half you live in out and buy another place...repeating the process.  You can pay down your student loans, but if they are a low interest rate just pay off the regular amount until it gets to the point that it affects your ability to borrow more money.

    4Reply
  • Justin V.
    Rental Property Investor · Minneapolis, MN · Member since 2016 · 214 posts · 132 votes
    6y

    @Theresa Harris @Gervon Thompson

    Listen to Theresa.

    High w2 income is the key to lots of nice low interest 30 year fixed loans.

    If the interest rates are lower than mortgage rates, let them ride until your debt to income ratio catches up with you.

    House hack a 2-4 unit with lots of bedrooms and rent out the other three sides plus charge roommates to live with you. Get as low of a % down loan as you can find to get started right away. PMI is minimal compared to the rents it allows you to make.

    1Reply
  • Michael Tucker
    Member since 2019 · 9 posts · 3 votes
    6y

    Just got through paying off quite a bit of debt myself. Dave Ramsey is great for this sort of thing so if you haven't checked him out, I would strongly recommend you look him up on YouTube or his website. Some people are probably going to disagree with that comment, but when it comes to debt reduction his stuff works. You don't have to agree with his thoughts on leverage, etc. to know that he's good at getting people out of debt. I wouldn't be in the position I am today without his advice this time last year. I went from having a car payment and student loan to being able to put $2000 per month toward gaining enough capital to use to purchase my first investment property. I just made my first offer today! 

    I would not add more debt to the situation. The only real estate move I would consider making until the debt was considerably lower would be house hacking with an FHA loan or something with very little down. If that's not an option, can you get a roommate? Even a roommate would probably allow you to cut your housing expense in half. That would allow you to throw as much money as possible at your debt and I bet you could pay it off in two years or so if you were really serious about it and got a side hustle/2nd job.

    1Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Scott Mac

    Thank you so much for responding ! What other benefits does an FDIC insured bank have other than peace of mind that your money is protected?

    0Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Erik Whiting Thank you so much for responding to my post Erik, I like the idea of grossly limiting my expenses and throwing as much money at my loans as possible (even though I might not like the process of doing so). I’m actually in the market for a second job as we speak, I was also entertaining the idea of starting online business of some sort, or a business that requires low capital to start but would yield good cash flow. If I get a part time job I know that would be guaranteed income, can’t say the same for a business.

    1Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Theresa Harris Hi Theresa! Thank you so much for responding, I actually love this response as my girlfriend and I were thinking about doing this (house-hacking). I’m actually in the market for a second job so that I can bring in some extra cash to throw at my student loan debt. This would make my debt to income ratio a little more palatable for mortgage companies, I live in the NYC area (Brooklyn to be exact) so house house-hacking might be a little farfetched with the price of these properties, hopefully I can locate a good deal when the time comes. Thanks again !

    0Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Justin Voegele

    Hi Justin! Thank you so much for responding, I’m also in agreement with what Theresa suggested and you’re right I’m currently working to make my debt to income ratio a little better. The problem is that I live in the NYC area coming up with the down payment for a decent house hack seems a little out of reach even if I didn’t have this massive student loan debt to deal with. Thanks again!

    0Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Michael Tucker

    Hey Michael thanks for your response! Hope you’re doing “better than you deserve” (lol). I’ve recently started to listen to Dave Ramsey, and it’s good to hear from someone that has been through a similar process. I’m currently in the market for a second job, I’m also thinking about starting a low capital high yield business (whatever that may be) to bring in some extra cash so that I could make my debt to income ratio a little better. My girlfriend and I have also given house- hacking some thought, it’s just that we love in a crazy expensive NYC market that’s causing some hindrance. Thanks again man!

    0Reply
  • Christopher B.
    Rental Property Investor · Knoxville, TN · Member since 2011 · 701 posts · 531 votes
    6y

    Buy the book: Set For Life, written by BP's own CEO. It is literally written for this exact scenario, for you, the young professional that doesn't like their J.O.B. 

    Saving is good as it leads to investment but Dave Ramsey isn't a model you follow to acheive financial freedom or wealth. Some debt isn't worth paying off, not if you can achieve higher returns elsewhere.

    Good luck.


    1Reply
  • Scott Mac
    Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
    6y
    Originally posted by @Gervon Thompson:

    @Scott Mac

    Thank you so much for responding ! What other benefits does an FDIC insured bank have other than peace of mind that your money is protected?



    You can do whatever you're comfortable with, but with FDIC you won't lose any of it (other than tiny fees).

    Just my 2 cents.

    1Reply
  • Account Closed
    Investor · United States · Member since 2018 · 565 posts · 356 votes
    6y
    Originally posted by @Gervon Thompson:

    Here's my story, so I happen to be on of those naive millennials who continuously took out student loans without even considering the burden it would cost to repay them upon graduation. I've amassed about $91k in student loans and I've managed to land a job that pays around $95k gross (about $60k net). Like most college students that enter the working world, I've now realized that I do not want to continue in my current job for the next 5-10 years and beyond. I'm not too fund of W-2 jobs and want start investing, do you suggest I get second job to pay off my loans or, look into BRRRR investing or short term rentals as a source of side hustle for additional income that could subsequently lead to amassing good source of passive income and wealth (after garnering relevant knowledge on how to do this of course). I welcome any constructive criticism, and yes I'm an idiot for taking out so much student loans. Thank you!

     Step 1: move out of the north east if possible.

    2. call up your student loan creditors and tell them you want to lower your payments considerably or you wont pay them.

    3. do the same with all other forms of consumer debt

    4. get a side hustle preferably online and put all of your money into the debt.

    5. learn your lesson and don't do it again.

    (p.s. not professional financial advice, just my opinion.)

    2Reply
  • EMarie Windham
    Investor · High Point, NC · Member since 2015 · 38 posts · 25 votes
    6y

    @Gervon Thompson. Hello.. big congrats on your forward movement in education and landing on BiggerPockets for insight! I agree with some of the others regarding House hacking, especially since I know as a former Bklyn resident rents are very high there. This would give you the opportunity to save the rental outlay each month.

    Although it's the responsible thing to do to work..I do NOT recommend getting a 2nd job. Start right where u r today and get in the real estate investment business. Join a local REI group so that you can get knowledge under your belt.. and partner with someone who has had success wholesaling or flipping. This is what I think ur free time should be spent on .. not another W2 job. In my opinion that extra cash is of lesser value than the knowledge and experience u will gain. Stay on BP, pick up J Scott's books on analyzing properties. Review podcasts on wholesaling. If u can manage to shadow a successful investor on a deal offering ur leg work as sweat equity... imagine how much information and confidence You will gain. Use your free time to do this... and go get a slice of NY's best pizza for me from Scarrs Pizza😋

    2Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Christopher B. Thanks Christopher I’ll def check that book out!

    0Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @Jason Allen Hi jason! Thanks for the advice! In my line of work, if I should I’d be taking a drastic pay cut, unless I’m moving to California metro area which is also expensive. The 2nd idea about about threatening my debtors with non-payment is a bit ballsie lol, but I worry that they might see my income and call my bluff. I actually like the idea of setting up an online side hustle just trying to figure out what’s the best niche for me. Thanks again!

    0Reply
  • Gervon Thompson
    OP
    Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
    6y

    @EMarie Windham Hi Emarie! Good to see a fellow brooklynite on this forum. I resonate with your advice the most ! As I actually was on the route to doing this but got discouraged after a not so fruitful stynt in wholesaling. I then considered becoming a real estate agent, bought a book and a course to go with it, the information in both book and online course seem so daunting that I keep putting it off. I’d very much like to house-hack, but as you may no NYC, particularly bk is very expensive! Which leads me to the question- Do you think it’s possible to house hack in NYC ? Or even be successful in RE in NYC. Maybe I should be moving out of the northeast as one commenter previously said? Anyone I’ll check those books out, thanks for the reading recommendations and your advice! Hope all is well !

    0Reply
  • EMarie Windham
    Investor · High Point, NC · Member since 2015 · 38 posts · 25 votes
    6y

    @Gervon Thompson. Hello again... why did wholesaling not work for you? Whatever those reasons were.. dig deep in them and learn from them. Some deals will not go as planned (in the beginning) but ask the investors you presented deals to why they didn't go for ur deal. Often wholesalers underestimate rehab costs or ARV. Really dissect the bad deals.. those experiences will be very Valuable to you.. because you lived through them and felt the sting of disappointment. Each wrong move will be a red flag for u in evaluating the next 100 properties.

    Don’t give up if wholesaling is ur area of choice. Evaluate hundreds of properties and continue to make offers.. ask as many questions as you can about deals that are rejected.

    As far as house hacking In NY... yes it's more difficult than other States but I believe anything is possible. It will take longer to find that multi family deal that will produce the income you need to house hack. But so what if it takes longer.. go on a mission to do it...there will be a deal that will rise up.... people are still foreclosing or in pre-foreclosure who need help out of their situation. If ur on the hunt .. you will find one. You start by believing it's possible. Some of the people on BP never thought they could stop waiting tables and earn 6 figure incomes from REI.. but they do. My point is focus on what u want even if it's house hacking in NYC.. put blinders on and don't stop until you find it... It IS POSSIBLE! And it's Possible for YOU!

    As I mentioned before join a local REI and surround yourself with likeminded people in the biz. Hearing the experiences of other will connect with the books/vids/pods u r educating yourself with.

    U got this!

    2Reply
  • Dylan VargasPro Member
    Rental Property Investor · Chico, CA · Member since 2016 · 633 posts · 336 votes
    6y

    @Gervon Thompson Welcome!I agree with @EMarie Windham and don't get a second job just yet. Here is a thought. Can you commute from a cheaper location via train? Outside the city it appears much cheaper. Live on rice and beans and pay the debt down in a few years. Will suck living this way but is done by many people. Get rid of all payments except rent and student loan. Also, outside the city you can actually house hack and live free. This gives you more money to spend on debt. Now, if you are freaking out about living out of the city and refuse to commute via public transportation consider a 4 plex in a cheaper, small town. This profit monthly will make your student debt payment but will take forever to pay off. I would think with 95k income you can get a ton done in a short time. Live cheap and I mean cheap. No new clothes, lattes, shoes, going out etc. Not that you dont sacrifice and do these things already but I am amazed at how I see people "Not spend" while talking on an iPhone, drinking a Starbucks and driving a new car. Good luck and keep us posted.

    0Reply
  • Randall Weatherall
    Real Estate Agent · Memphis, TN · Member since 2019 · 261 posts · 253 votes
    6y

    I wouldn't be in a huge hurry to pay off the student loans yet, but this is coming from someone who only racked up around a third of what you have so the potential impact on how you invest is likely very different.  Learn which loans have higher interest rate and snipe those first (overpay monthly and have the extra go to those loans, specifically) if you really want to pay them off.  Or, bite the bullet, pay the lowest amount you can while you build up your reserves, then start taking them out one by one while investing at the same time.  Househack, pay little down and cashflow on that or live for free depending on the market and the units, and then worry about the loans later IF your chosen investment strategy allows for having large debt hang over your head.  

    0Reply
  • Joel W.
    Investor · Atlanta, GA · Member since 2020 · 3 posts · 0 votes
    6y

    Gevonta, As someone who was born and raised in NYC (Queens to be exact), the only thing I regret after I graduated St. Johns with student loan debt myself was not moving from NYC sooner. It will be very difficult to house hack in NYC but if you are open minded, you should be looking at Newark. Its a designated opportunity zone and there are multi-families there to pick from. As a new investor, you should be thinking about a FHA loan, low down-payment and house-hack at least for a year. You could BRRRR your way out of the multi-family within a year, use the capital appreciation to buy something else (maybe back in the city if you're tied to it, I wouldnt do it though) and have the rentals pay for itself and maybe even the student loan debt. I dont know about taking another job up. Use that time to sharpen your sword on REI as you know another W2 job wont make you happy. Just my quick thoughts!

    0Reply
  • Charles Xia
    Investor · New York, NY · Member since 2019 · 44 posts · 30 votes
    6y

    Hi,

    I would say pay off your debt first. You are in better condition than most people landing an above salary job. If you dont pay off your debt it will limit you in terms of the financing you can get. I would suggest learn for a year and start shopping while paying off your debt. It will take you time to find a place you really want anyways.

    Best,

    Charles

    0Reply
  • Abel CurielBusiness Member
    Real Estate Agent · Queens, NY · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    @Gervon Thompson

    Welcome to BP! Great intro by the way... You may have dug yourself in a bit with your student debt but if we didn't have obstacles, we wouldn't strive for anything great! I like your attitude towards tackling your student debt.

    Assuming you're fresh out of college and don't have a wife/kids at the moment, I think a 2nd job could be a good idea - depending on your desired lifestyle. What this will allow you to do is save up some more, maybe tackle a bit more of those loan payments, but more importantly get you closer to investing in property.

    I highly recommend looking into house hacking.

    Here are the reasons why folks use the house-hack strategy when building/growing their NYC portfolio:

    - They can get in with a low down payment - You can get into a multifamily property property in Queens, Brooklyn, the Bronx, and Long Island with less than $35K!

    - They can significantly lower their current living expenses - People currently paying ~$2K/month in rent can pay as little as half of that for their portion of the mortgage (after collecting rental income).

    - They gain acquisition, project management AND property management experience - all which will help tremendously when its time to scale and grow the portfolio.

    -When they move out (to the next house hack OR forever home), the income of their currently occupied unit will oftentimes allow them to cash flow.

    - NYC properties appreciate higher than most parts of the country - of course, this should not be relied upon. Rather, it should be looked at as a bonus!

    Best of luck to you on your journey!

    Abel

    REbuild Team - eXp Realty5234 Reviews
    WebsiteView Page
    1Reply
  • Ahmed Saad
    Rental Property Investor · Brooklyn, NY · Member since 2008 · 92 posts · 59 votes
    6y

    @Gervon Thompson do not beat yourself for the student debt and do not let ANYONE else beat you up for it. Consider it the investment cost to get you to where you are today. Holder of a degree. EMPLOYED with a solid job. 

    The piece of advice I have for you that differs from what I glanced at above (if someone else said it forgive me) is get your side hustle in some kind of real estate repair service: specifically plumbing or electric. Those trades are vital to any real estate professional starting out. Find a licensed plumber or electricians office and VOLUNTEER to work weekends or evenings. Do you have a valid NYS driver's license? So many worker's don't have a license or at least one in good standing. Offer to drive the worker to sites in exchange for education. I cannot stress the value of this type of education enough! Daily rates for one-off plumbers/electricians can go around $400. 

    Good luck!

    1Reply
  • Nicole (Dunlap) Pendergrass
    Rental Property Investor · Bronx, NY · Member since 2011 · 193 posts · 322 votes
    6y

    @Gervon Thompson

    I house hacked in NYC (the Bronx). I have a 3 unit where the other 2 apts covered all the expenses and I lived for free. I sacrificed a "good" neighborhood for the opportunity and never planned to live there long term (I figured 3 years, I actually moved in 4). You can do Brooklyn if you move a little further out, or maybe switch boroughs to get something in your price range. If you and your girlfriend are willing to make some short term sacrifices, you can def make it work and tackle those student loans. But like others have said, I never stressed about paying my student loans off faster since the interest is so low. I have about $60k in student loans but would rather use $60k to invest and build my portfolio/cash flow (I'll pay off student loans down the line when I have more than enough equity to cover it without affecting my cash flow/lifestyle).

    1Reply
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