Should I get a rental while in debt

Question

Hey Guys

I was wondering if you’d be willing to answer a couple questions me and my wife have, about our finances and if we’re in a position to get into real estate.

We feel like we are, but we’ve been doing the Dave Ramsey method for a   almost a year now, we’re scheduled to have no credit card debt by end of February 2019.

Our plan was then to move onto my school debt, which is $170 a month, with a balance of approximately $9,000 remaining. Then onto my wife’s care which is $207 a month and a balance of about $4,500. If we stuck with this plan we should have no debt by June 2019, maybe May.

after this we were planing on saving for a down payment and purchasing our first multi family property

We both work full time now and make about $106k before taxes.

But we’re really considering saving this money and using it for a down payment.

Just curious what your opinion on getting into rentals while still having debt would be.

Thanks

Bob B. · Answer

@Brendon Seiffert Congratulations on having a get out of debt plan. IMHO I'd keep hammering win the debt before buying an investment.

Chris Szepessy · Answer

Since it's not a whole lot of debt and it can be paid off in 6 months or less, I would just pay it off before investing. 6 months isn't going to set you back that far in your RE journey. It's possible that a great deal comes your way in that time frame that you'd have to pass on, but I think you guys would feel much better being debt free before investing.

Brendon Seiffert · Answer

@Ed Emmons

Thanks! Yep, that debt is accurate, we add it up all the time, we got “get out of debt” charts on our wall that we update pretty regularly. We’ve been really bad with money until this last year or so we’ve gotten it together and have paid off over $30k or so this last year or so

Dennis M. · Answer

Getting into debt is how you build up a portfolio in real estate . If your afraid of debt you won’t have much of future in this business unless you have a few million sitting under your mattress . You need to understand there’s good debt and bad debt . To get started you need a reserve of cash regardless

Matthew McNeil · Answer

Whether you're looking at personal debt on educational loans, car loans, house loan, credit cards, rental property, etc. its not so much about how much debt is owed (within reason), but how its managed.  Based on your post, it sounds like you're managing your personal debt very well and I think you're ready to move into REI.  Good luck!

Mary M. · Answer

I would think it depends. It depends on the interest rate you are paying and how much you can save etc.

You both make good incomes. You should be able to really get rocking on all this quickly

The big thing is if you are going to buy multi family (5+ units) you will need 20% down.

If this were me i would start doing some net present value analysis etc.

Good luck!

Ed Emmons · Answer

Curious, you make good money for most parts of the country, do you have an accurate account of your expenses? It would seem that the amount of your debt payment is insignificant in comparison to your income. If your interest on your debt is reasonable then why pay it off sooner than necessary? There are many ways to buy without requiring your money for the down payment. A single multi family can provide much more residual than your debt payment. Why wait, start looking.

Should I get a rental while in debt

Most Popular Reply