Pay off student loans or buy rentals?

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Pay off student loans or buy rentals?

Coby Federowski
Member since 2020 · 14 posts · 7 votes

I have just under $20,000 in student loans. I just started my first job in Ohio with an annual salary of around $35,000. I really want to start realstate investing but I feel like the student loan debt is hanging over my head. Should I pay that off before I start investing?

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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
5y
Originally posted by @Coby Federowski:

I have just under $20,000 in student loans. I just started my first job in Ohio with an annual salary of around $35,000. I really want to start realstate investing but I feel like the student loan debt is hanging over my head. Should I pay that off before I start investing?

 The first thing you should do is chat with a lender here in Ohio. @Chris Wharton is one of the better lenders in Ohio. They will be about to tell you what your purchasing power is. You would be surprised on what you can afford. I know a group of truck drivers for Amazon that have just been purchasing $100,000 single-family homes in Columbus, Ohio and house hacking them. They now have more equity than most people in the state and do not have a high paying job. They are all still in their 20s and will be about to retire pretty soon.

[email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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  • Bill P.
    Investor | Syndicator | Instructor · Cincinnati, OH · Member since 2008 · 435 posts · 198 votes
    5y

    @Coby Federowski do rentals as that can help you pay your student loans that may remain after Biden cancels whatever he decides to do.

    0Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Coby Federowski:

    I have just under $20,000 in student loans. I just started my first job in Ohio with an annual salary of around $35,000. I really want to start realstate investing but I feel like the student loan debt is hanging over my head. Should I pay that off before I start investing?

     The first thing you should do is chat with a lender here in Ohio. @Chris Wharton is one of the better lenders in Ohio. They will be about to tell you what your purchasing power is. You would be surprised on what you can afford. I know a group of truck drivers for Amazon that have just been purchasing $100,000 single-family homes in Columbus, Ohio and house hacking them. They now have more equity than most people in the state and do not have a high paying job. They are all still in their 20s and will be about to retire pretty soon.

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    4Reply
  • Chris WhartonBusiness Member
    Lender · Columbus, OH · Member since 2020 · 85 posts · 73 votes
    5y

    @Coby Federowski we should take a look at the repayment structure of your student loans. I've assisted many clients with much higher student loan debt and similar income to purchase their first home.

    [email protected]614-638-9531
    3Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Remington Lyman I appreciate the advice. I have been studying a lot but haven't felt confident enough to inquire from somebody. I want to be respectful of peoples time but im not sure I have a clear enough understanding of my options to justify sitting down with someone. Im not sure where to start or what information I should have before starting.

    1Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    5y
    Originally posted by @Coby Federowski:

    @Remington Lyman I appreciate the advice. I have been studying a lot but haven't felt confident enough to inquire from somebody. I want to be respectful of peoples time but im not sure I have a clear enough understanding of my options to justify sitting down with someone. Im not sure where to start or what information I should have before starting.

    If you go about it the right way, there are a lot of people on BiggerPockets willing to help out. If you're just a tire kicker, then that's a different story but if you are sincere and serious about investing, you're not wasting people's time.  

    4Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Zeke Liston that is really encouraging to hear. I definitely am sincere. I think I just need help understanding my options as well as guidance on how to navigate the world right now.

    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Coby Federowski:

    I have just under $20,000 in student loans. I just started my first job in Ohio with an annual salary of around $35,000. I really want to start realstate investing but I feel like the student loan debt is hanging over my head. Should I pay that off before I start investing?

     I paid of my student loans awhile ago, you know what happened....my credit dropped because the student loan line was now inactive. However I learned my lesson, my wife has only $10k in student loans left, we are making the minimum payment and will hopefully never pay it off, it has boosted her credit score and virtually does not affect her dti.

    On the flip side we have been able to buy multiple rentals in Columbus Oh that are creating a huge return.

    2Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Steven Wilson so essentially you and your wife purposely not paying off her student loans so that your credit score continues to rise?

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Coby Federowski:

    @Steven Wilson so essentially you and your wife purposely not paying off her student loans so that your credit score continues to rise?

     yes, and the monthly payment is $65.....so its essentially nothing, were pretty much paying $65/month to increase her credit score, not to mention there are some tax benefits.

    But if we paid it off, we save $65/month, but her credit score drops and our tax benefits go away...doesnt seem like a good trade off.

    3Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Steven Wilson haha its awesome to hear someone confidently speak about the benefits of not paying off student loans. I appreciate your input!

    So then if I choose to hold on to my monthly student loan payments (in favor of increasing my credit score), how can I afford to get into a rental property with an even smaller monthly paycheck?

    0Reply
  • Brandon GoldsmithBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    I am in the same boat. I chose to pursue buying property that will ultimately pay off the student loans eventually. @Coby Federowski

    [email protected]614-963-3340
    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Coby Federowski:

    @Steven Wilson haha its awesome to hear someone confidently speak about the benefits of not paying off student loans. I appreciate your input!

    So then if I choose to hold on to my monthly student loan payments (in favor of increasing my credit score), how can I afford to get into a rental property with an even smaller monthly paycheck?

    When you apply for a loan, DTI is a major factor, however they look at monthly obligations, not necessarily overall debt. So I suggest making your student loan payment as little as possible to help it not effect your DTI as much.

    Though I am all for student loan payments, I am not for car payments or any other liability of the sort, I believe in good debt, not stupid debt.

    2Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Brandon Goldsmith what type of property or conditions were you looking for that allowed you to be confident enough to plan for your future, pay your debt, and get into active real estate investing?

    0Reply
  • Brandon GoldsmithBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    It will be a turnkey or cosmetic multifamily property between 2-4 units. I plan on house hacking and renting out the other unit(s). 

    [email protected]614-963-3340
    1Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Steven Wilson honestly man, this is gold. I really appreciate your suggestions. So then my next question is what type of strategy is appropriate for this type of situation? Find a move in ready home and rent it as soon as I can? Should I stay away from flipping since I dont have enough capital on hand to pay for the remodeling?

    0Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Brandon Goldsmith when you say cosmetic multifamily does that refer to only cosmetic updating for the property? Paint, appliance upgrades?

    So you're looking for a duplex of some kind or fourplex and plan to live in one of the units and have the other renters cover your mortgage payments?

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Coby Federowski:

    @Steven Wilson honestly man, this is gold. I really appreciate your suggestions. So then my next question is what type of strategy is appropriate for this type of situation? Find a move in ready home and rent it as soon as I can? Should I stay away from flipping since I dont have enough capital on hand to pay for the remodeling?

    I started investing in Columbus OH while I was a sophomore at SU. I bought a duplex on campus with an FHA loan. I rented it to my buddies while I fixed it up. I fixed it up, rent it for top dollar and refinanced to complete a BRRRR. The duplex now provides more then $1,500/month in net passive income, and the refi gave me a $100k check which I used to buy my second place.

    2Reply
  • Brandon GoldsmithBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    Yes, I am planning on living in one of the units and getting a property with some updates ideally (paint, flooring etc..) When you live in the property as well you qualify for lower down payment options and will give you more options to spread out your money a little better in the future. @Coby Federowski

    [email protected]614-963-3340
    2Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Steven Wilson thats amazing! That is how I am picturing myself going about this. I know its a common strategy and I want to know how I can start doing it.

    When you refinanced it was that basically the bank paying you the equity built into the property? I haven't learned as much as I want when it comes to the refinancing process.

    1Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Brandon Goldsmith thats awesome! I had never heard that living in it qualifies you for a lower down payment.

    Do you have a recommendation on percentage down on a property? Whats an appropriate down-payment amount?

    1Reply
  • Julie DeWolfe Arroyo
    Realtor · southern Idaho · Member since 2020 · 81 posts · 50 votes
    5y

    @Coby Federowski it's an investment to help you pay off debt...so no guilt there. Be wise, invest well, pay debt. Just my opinion.

    2Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Julie DeWolfe Arroyo I appreciate the encouragement! Thank you!

    1Reply
  • Reece Iovine
    Realtor · Columbus, OH · Member since 2016 · 170 posts · 227 votes
    5y

    usually id say start investing! however with your income and debt your dti might be too high...talk with a lender and see what you can qualify for :)

    1Reply
  • Coby Federowski
    OP
    Member since 2020 · 14 posts · 7 votes
    5y

    @Reece Iovine thats a great realistic tip. I appreciate that.

    0Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Coby Federowski:

    @Steven Wilson thats amazing! That is how I am picturing myself going about this. I know its a common strategy and I want to know how I can start doing it.

    When you refinanced it was that basically the bank paying you the equity built into the property? I haven't learned as much as I want when it comes to the refinancing process.

    So real basic math. I bought it for $305k, put $15k down. Added about $50k and all the sudden it was worth $450k so the bank said they'd give me a new loan with LTV at 85% or $382,000, paying off my other mortgage that left me with a check for about $100k.

    My monthly payment did increase, but my rents were so high that I am still able to cash flow more than $1,500/month. 

    0Reply
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