Investing With Student Debt: Should I Use an LLC?

Question

If I have student debt and poor credit, should I focuse on repairinng my credit before investing in rental properties or can I use an LLC to build a separate line of credit? Or any advice on getting started with debt. Thank you for your time.

Mike Parkins · Answer

Thank you everyone for the great feedback. I agree that I must get my finances in order. I see real estate as an opportunity to supplement my income and be more self sustainable. Anyway, thanks again.

John Weber · Answer

Good question, Mike. I was able to hold off on paying my student loans and still obtain a mortgage. My credit was in good shape and my salary was pretty good so I was able to  get the debt to income ratio needed to secure bank financing. The way I figure it was that the interest rate on my student loan was lower than the going interest rate on a mortgage so I didn't want to pay it off. It worked out for me.I would agree with Greg above though that if you are not yet financially responsible or have very bad credit, start with getting that in order .  I would first take steps to realize your spending habits and see how much you can consistantly save every month.

Thomas S. · Answer

Pay off all your debts and clean up your credit. If you can not accomplish those two goals you do not have the mind set or the personal financial skills to invest.

Individuals with debt and poor credit looking to invest to get ahead are never going to succeed because they lack discipline.

James Masotti · Answer

Student loans wont really matter but poor credit will hurt you. Even if you form an LLC and start trying to get commercial lending, you're more than likely going to start of with a full recourse loan which means your personal credit will still be tied to the loan even though it's in the name of the LLC. Only once you are much bigger and your LLC has collateral or a track record that you can document to the bank will you be likely to get a non-recourse loan.

My recommendation for folks trying to start out with poor credit is to a live in flip or a live in BRRRR where you can get great low money down financing and or zero out your monthly living expense and then keep moving your way up while building your credit back up.

Rob Gillespie · Answer

Mike,

I would not worry about  credit.

Just work on understanding the business. You can do subject to, wholesale, bird dog, etc...

Just work on finding deals, the rest is easy!

good luck!!

Scott Vance · Answer

@Mike

@Mike Parkins  Make sure you speak with a financial advisor who has a true understanding of student loans.  Depending on the type, amount and some other factors how you choose to pay them down could cost you alot of money.  For instance I recently had a client who refinanced her loans, because she refinanced the wrong way she lost eligibilty to have a large amount of her student loans forgiven.

Investing With Student Debt: Should I Use an LLC?

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