I'm a newbie when it comes to real estate investing. I'd like to purchase my first investment property in the next year or so and am currently trying to do as much research as I can to get prepared.
I'm conflicted in whether I should use my savings to pay off my credit card debt or just keep the savings for a down payment. My debt to income ratio is pretty high right now. I also have a school loan, but I'm just making my regular payments on that. I figure that if I can pay off my credit debt, that will definitely help my debt to income ratio. However, to do that I'll have to use most of my savings and be at square one again when it comes to a down payment. So confused as to what to do!
What are your thoughts? Thanks in advance!
You should try to pay them off. You don't have to do it overnight. Maybe over 6 months. This way, you'll have some cash remaining, but you will also be in the process of paying down your credit cards.
If you need to buy a property using traditional financing, it will be easier with good credit. Also, you'll have the credit card balances available for emergencies.
First set up a monthly budget and stick to it. If you want to be serious about investing having debt and living beyond your means is going to slow you down. I would pay off the debt as quickly as possible and save up for your down payment before investing. It will take longer but you will be more successful.
Pay off credit card and student loans before investing. You do not want the added burden of bad debt when your investing takes a down turn. Investing is high risk and bumps will be disastrous with other debt responsibilities .
Pay off debt for student loans and definitely credit cards first
Thank you all, appreciate it!
I agree with everyone so far: pay off your debt before you think about investing.
Remember to make those necessary sacrifices and save a few more dollars today, in order to afford what you need tomorrow. One example: choosing to buy a box of instant coffee which has 50 servings for around $10 versus going to Starbucks or Dunkin’ and buying 3-5 servings for around $10.
Set up a schedule and stick to it. I recommend you make a list of your debts in order from highest interest rate to lowest interest rate and payoff as much as you can afford. Paying off your high interest loans first is the key to success.
Once your loans are paid off, you should be able to save money at a much higher and quicker rate than you are saving now. If this is your first time buying a home, look into opportunities like a 203K loan. They require low down payment and could even provide more money than asking price if the property you want to purchase needs work. These loans tend to hold low interest rates as well, usually. Make sure you talk to small local banks as well as big banks in order to see where you can get the lowest interest rates.
The more you know the better off you are. Looking into BP for some type of guidance is great, but it’s not your only option. The internet is a gateway to an enormous amount of information. It’s up to you to mine through it and learn what you need to know in order to succeed.
I hope this helps!
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