I am from the southern New Hampshire area trying to get my financial freedom started. I love to network and get to know how people think to expand my horizon of knowledge and ideas. I have been saving/investing into my 401k, stocks and bonds. I have roughly 24k saved. My plan is to “house hack” but when I applied for a loan I was denied because my debt to income due to my student loans. I don’t plan on letting this stop me but I am not sure where to go next. I have reached out to a few people to see if they wanted to partner but many are hesitant. Any suggestions or advices?
Keep working at it and learning. Pay down that debt. Anything you can do to raise your income at work will be helpful too, because a higher income will help you qualify for a loan and pay down that debt.
People don't want to partner with new investors because new investors don't have a track record of success. That takes time to build, but keep working at it and you'll get there.
Most banks will only loan you a certain amount based on your debt to income ratio. With $100K in student debt, it will reduce the amount you can borrow. Nicely done saving $24K. Why not look to see if you can buy a home and rent out a room?
Consider a Seller carryback. Sometimes the Seller is willing to take a reasonable down payment, and then serve as the bank by carrying the note. You can have all the payments serviced through a title company to ensure that the taxes and insurance payments are distributed, and your payments are all documented.
Additionally, you could look at options for refinancing your student loan for better terms. The lender is going to look at the monthly payment to count against you. So, if you can get a lower interest rate, or perhaps, even stretch it out over a longer term so that the payment is lower, that may help. I hesitate suggesting to stretch it out as I believe in being aggressive about bad debt like student loans, credit card debt or anything that doesn't MAKE you money. But sometimes the choice in front of you isn't always the most obvious, so at least consider all of your options.
As a last resort, you could go to a hard money lender for acquisition of an investment property as they look at the deal and not you. However, this would be a temporary solution as you would need to refinance it in order to live in it, and you wouldn't want to carry a loan with high interest for too long. So having an exit strategy is always important with HMLs.
@Theresa Harris @Taylor L. @Cara Lonsdale Thank you for taking your time to address my situation I have going on! I appreciate the feedback and advice. So y'all recommend me spending more time to try and lower some of my debt instead of trying to get into investing into real estate? Obviously I don’t have a lot of options.
@Cara Lonsdale I have tried to refinance my student loans but I have been denied by many banks I applied to. I even tried to apply again months after when I receive a “prequalified” rate for some of the lenders but still got denied....
@Matthew Tay You can also work on increasing your income which will also affect the debt to income ration.
@Matthew Tay you can both work on your debt while growing your real estate knowledge. Go to local networking events - many are free or pretty cheap. Listen to podcasts, they're all free. Interact on BiggerPockets - maybe set a goal of asking 3-5 solid questions, or posting 3-5 times a day. Think where you'll be a year, 3 years, 5 years from now. Much further along.
Also, go talk to 2 or 3 more lenders in your area about a loan. You might end up with the same result, but you also might not. One of them might be able to tell you exactly what the numbers need to be for you to get a loan.
Success in real estate takes persistence, or as Trevor McGregor taught me, success in real estate requires a defiant commitment.
Sounds like a plan! All I do is listen to podcast and do research when I’m not sure what the podcast is talking about from time to time. I have zero songs on my phone and never listen to the radio. I’m always listening to podcast when I’m driving which I do frequently because of my commute to work.
I am trying to figure out ways to increase my income for sure. I’ve recently received a promotion in April which was ~20k increase in my annual income.
Sounds like you're being smart... keep doing what you're doing and you will get there
Just like everyone else says, decrease debt, increase income. You might start with a cheap condo for a hack rather than a triplex or something but if the numbers work, who cares? My husband and I are house hacking in southern nh and I'm happy to help anyway I can. Good luck!!
Hi Matthew! I am an new investor in southern NH also. On average, most student loan holders can pay off their debt in 12-24 months when debt pay-down is their sole focus. Once you’re out of debt you’ll be in a way less risky position (debt-wise), and you’ll have a huge chunk of money each month that you can then use to invest into real-estate.
I paid off my student loans before I started saving for my first multifamily. It was a long 20-months, then a bit longer to save up for a down payment & renovation funds, but well worth it not to still be making debt payments.
If you haven’t already, you should check out Dave Ramsey’s podcast/book. You don’t have to agree with him entirely, but he does one thing very well- and that’s helping people get out of student loan/consumer debt so they can build wealth & invest in their future. Best of luck to you!!
@Tracy Uscinski I recently found Dave Ramsey and have been listening to him about get rid of debt first. Now would you recommend taking what I have saved and putting it straight towards my student loans?
@Matthew Tay Well, if your savings is retirement in a 401(k), you may not want to use it to pay off debt because you’ll get hit with a 10% early withdrawal penalty if you’re under 59 1/2, in addition to income taxes based on your tax bracket. That could be a pretty big hit! Other, non-retirement savings you may want to apply toward the principal of your student loan debt, as long as you keep couple thousand in reserve in case of an emergency. Other than non-retirement savings, the extra you pay on your student loan debt should come from your weekly/monthly cashflow. Figure how much you’d have to pay each month to pay them off in 24 months, 12months, 9 months etc., choose a feasible game plan for your pay off date and make it happen. Remember your ‘WHY’, whatever that is for you, that keeps you motivated through the process. Congrats on your bonus by the way! That’s pretty awesome.
I really value the sources from Bigger Pockets. If you have a question, more than likely, someone with years of experience has answered it. Plus, there is so much information to learn from in their blog, too. And all of these are really good advice.
Definitely did not plan on pulling from my 401k. Last question I would have is, should I stop investing the ~20% of my monthly income and focus more on my debt or just decrease that percentage?
@Matthew Tay Great question! Depends how quickly you want to get rid of your debt. 20% into retirement seems above average. Maybe you’d consider reducing your contribution for 12-24 months enough so you still get employer match if available. Dave Ramsey would say to stop contributing altogether until your loans are paid off. You know your numbers, just have to decide what you are comfortable doing. Best!!
Work the snowball Dave style. In the mean time, research deals and run numbers. Talk to banks and figure out the ‘why’.
You’ve got a ‘no’.
When you get a ‘no’ ask why and fix that.
You may be also able to sublet a room or something like that if you’re renting. If you’re currently in a 1bed, you may be able to get into a two bed for another ~$200/month and rent out the extra room for something around $100/week or so.
I’d really like to see you crank that debt down.
That’s ‘bad’ debt.
Good debt makes you money.
If you find a deal that really makes sense, try passing it off onto another investor.
You’ll find another, and that person can either be a proof of work, or tell you why it doesn’t make sense.
You’re on the right path.
Hey Matt! Nice to meet a fellow Matt. I actually graduated myself with $95k in student loans at 23 - I sat down with my now mentor and business partner who I got connected with because I wanted to buy a duplex. He told me to stay at home where I was and pay down my debt so I did that. Overall just wanted to lend my personal experience, I now live in a duplex and dont have the student loan debt anymore. I dont regret paying it off at all but now being 29 I could have maybe had a few more units under my belt. Overall I think keeping it simple and getting multiple perspectives to ultimately help you make your decision is a great idea. Best of luck!
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