Payoff debt first or Investing ???

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Payoff debt first or Investing ???

Perry Apawu
St. Petersburg, FL · Member since 2011 · 45 posts · 5 votes

Hey everyone, over the last two years or so I have been trying my hand at wholesailing with no real success, now I was at one point in time one of those newbies who was gullible enough to believe that you don't need any money to invest or wholesale or any other thing associated with real estate, which I have learned over the past two years is just not true. With the little money I do have to commit to my small marketing campaigns I have come to a little bit of a fork in the road, I have come to the conclusion that maybe if I first focus on paying off all of my debts that I can actually have more focus in the future on my real estate investing/ wholesailing when I actually have the cashola to spend. Now I know there are a great number of people here with wisdom and knowledge, so I would like to ask would you focus on investing and paying down consumer debt ? or would you just focus on paying off debt first with the thought process of being able to focus more on real estate investing in the future because your cash position will be a whole lot stronger without consumer debt.

The reason for this question is because I feel that the little bit of money I have to commit to my marketing campaign may not be effective enough, and I'm seeing more cash going out than coming in and with this consumer debt on my back I feel it would be more of an advantage to payoff the debt now so I can commit more marketing dollars later. What would you suggest ????

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Beth D.
Grand Rapids, MI · Member since 2013 · 99 posts · 30 votes
13y

Yes, pay off all your debts first - even student loans.

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  • Jimmy Hong
    Flipper · Irvine, CA · Member since 2013 · 349 posts · 45 votes
    13y

    Hey Perry Apawu, how long will it take you to pay off your debt?

    0Reply
  • Greg Potter
    Duplex Investor · Syracuse, NY · Member since 2013 · 75 posts · 19 votes
    13y

    Hello Perry Apawu, without knowing specifics I would suggest a variation of the debt snowball. List your debts from smallest to largest based on their total balances and then pay off the smallest loan. Depending on your situation I wouldn't necessary work to pay off all the debts at this time. Pay off a number of the smaller ones and free up cash flow that way. Once you've cleaned up enough that you are more comfortable with your cash flow situation go ahead and dive into your marketing.

    0Reply
  • Eric Lasley
    Fort Worth, TX · Member since 2013 · 44 posts · 4 votes
    13y

    It all depends on your ROI...if your ROI is more than the interest you are paying on your bills, then keep marketing and investing. Otherwise, I would suggest paying your debt

    0Reply
  • Eric Lasley
    Fort Worth, TX · Member since 2013 · 44 posts · 4 votes
    13y

    Of course, the richest man in Babylon would tell you to use 10% of your income to invest and 20% to pay off your debts

    1Reply
  • Perry Apawu
    OP
    St. Petersburg, FL · Member since 2011 · 45 posts · 5 votes
    13y

    @ Jimmy I expect to payoff all of my debt by next year, I'm taking on extra jobs and side hustles to hurry up and get rid of it, its mostly student loans and two small credit card bills total of around $30,000.

    0Reply
  • Shawn S.
    Rental Property Investor · Kansas City MO · Member since 2013 · 147 posts · 9 votes
    13y

    I'd think student loans would be low enough rates that you could wait on paying them off. But the cc likely needs to be your focus.

    0Reply
  • Timothy W.
    Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
    13y

    Eliminating debt is the surest way to increasing your monthly cashflow (with the exception of acquiring certain cashflowing assets). Why? Because less money goes out. Less money that goes out is less money that has to be earned and taxed.

    0Reply
  • Timothy W.
    Attorney · Raleigh, NC · Member since 2008 · 4k+ posts · 1k+ votes
    13y

    Grrrr....dupe

    0Reply
  • Chris L.
    Investor · Fort Wayne, IN · Member since 2009 · 391 posts · 257 votes
    13y

    Hi Perry,
    Without knowing the specifics of your loans, I have to believe that paying off your credit cards would be your best return on investment.
    You have worked this for two years so it may be time to rethink your strategy.
    Chris

    0Reply
  • Account Closed
    Real Estate Investor · Garland, TX · Member since 2013 · 46 posts · 7 votes
    13y

    I say if you can't afford to do it yourself right now then immerse all of your second jobs into the field you are interested in...

    Become a bird dog for another investor and get paid a small finders fee if he/she ends up closing on the deal. That way you will at least keep your head in the game, note future neighborhoods to invest in (or not invest in) for yourself and possibly learn some good valuable information from the investor you could be bird dogging for.

    Another second job could be assisting at a property manager's office to learn more about real estate and the in's and out's of rentals. You would gain a lot of marketing skills to use for future projects that you will have in your investing career.

    Look into becoming an assistant for a realtor/real estate investor. Get experienced with meeting people face to face to talk about what they want for their property. Go with the realtor on seller listings to gain these skills.

    1Reply
  • Beth D.
    Grand Rapids, MI · Member since 2013 · 99 posts · 30 votes
    13y

    Yes, pay off all your debts first - even student loans.

    2Reply
  • Michael Spindler
    Aspiring MFR Investor - Kansas City, MO · Member since 2013 · 79 posts · 7 votes
    13y

    Perry Apawu

    Finally! A topic I can relate too. : )

    Everyone has made some great points about getting out of debt. Additionally, you need to weigh the stress and psychological impact your debt load has on you. (Bad) Debt is a poison on your mind.

    How badly do you want to change your mindset and quality of life? Your mindset directly impacts your goals... which might be why the 2 years of hitting walls. imho. Don't be hard on yourself, it took me a decade to figure this out.

    Personally, I was like a whole new person when I paid off the last of my consumer debt. It was liberating and a key factor in changing my thinking and actions toward abundance and wealth building.

    What worked for me. Debt snowball (Dave Ramsey) and a spreadsheet so I knew where every dollar was going, every dollar had an objective, to pay off debt. This immediately gave me a feeling of empowerment and I was less consumed by it. Freeing me up to see the big picture.

    Opening the door to new ideas via a ton of books from Amazon. Let the snowball work itself and read as much as you can in the meantime, to prepare your mind for a life of abundance, achievement and success.

    Best wishes.

    0Reply
  • Tom Goans
    Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    Michael Spindler,

    You have a great idea of tracking all the expenses. Have you ever considered using Quicken or Quickbooks to track expenses and print checks. It is all done at once. Each software program has numerous reports and graphs to show where the money is going.

    0Reply
  • Michael Spindler
    Aspiring MFR Investor - Kansas City, MO · Member since 2013 · 79 posts · 7 votes
    13y

    Tom Goans That is a great idea.

    Having a system to pay off debt was like a game. That software would make that game and of building a business more "fun" than a spreadsheet. : )

    0Reply
  • Jeremy VanBussum
    Investor · Louisville, KY · Member since 2013 · 20 posts · 9 votes
    13y

    Perry Apawu - Don't forget that your student loan interest is deductible to AGI...assuming your AGI is not above $75K (single). To get your real interest rates on these loans...assuming the above, take the stated rate, net of your tax benefits. Also, installment loans typically will not negatively impact your credit score, but high balances in revolving accounts will hurt your score. My vote is to pay off the credit cards first, and if your interest rates on the student loans are not exceeding 7%, I would take my time with these. Hope this helps.

    0Reply
  • Nicole Pettis
    Flipper/Rehabber · St. Louis, MO · Member since 2008 · 489 posts · 300 votes
    13y

    Perry Apawu...do what you can to get rid of all of your debt. You can get rid of $30k in a year if you focus and work your butt off. Don't hold onto the students loans if you don't have to. And then invest in your business with that cash flow.

    As Greg Potter said...list them from smallest to largest and do a zero based budget. Which is listing your monthly income then subtracting necessities(food, shelter, clothing) and then going from there. Then take your remaining money left and put it at the debt. It will go quickly. Use cash only when purchasing groceries, gas, spending and such.

    Once you get rid of your debt, you will feel AWESOME and you will be able to focus on your entreprenurial goals.

    2Reply
  • Brendan J.
    Homeowner · Knoxville, TN · Member since 2011 · 207 posts · 73 votes
    13y

    Perry, how high are some of these interest rates? I may come from a more conservative background, but I would think that getting out of "consumer" debt is a very high priority. There is a difference between an installment loan and consumer debt.

    0Reply
  • James H.
    Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
    13y

    I have held on to some student loans in order to get a rental property. The return on the rental property, based on the dollar amount invested, is at least equivalent to the reduction in student loan monthly payments had I used that money to pay off debt.

    I think I could do that again, but I am just tired of having the debt sitting over my head. I would recommend you don't consolidate you SL's if you haven't already. This way you can pay off the individual smaller loans instead of one great balance. This will allow you to

    A) snowball the student loan debt which is psychologically beneficial and

    B) reduce your DTI ratio as you go.

    0Reply
  • Josh Farrer
    Midvale, UT · Member since 2013 · 60 posts · 10 votes
    13y

    Lots of fantastic it advice here. As with most things, it depends.

    I suggest strongly a budget. Unused "YNAB.com" it's a zero based budgeting system with iPhone apps so my wife and I can have instant updates to info.

    If you give every dollar a job, and you know exactly how much you have, it makes it less stressful in my opinion.

    0Reply
  • Perry Apawu
    OP
    St. Petersburg, FL · Member since 2011 · 45 posts · 5 votes
    13y

    I recently just started doing a zero based budget, and now I am working on my debt snowball, I also am looking to take on a second job to get rid of this debt. My student loan debt is under 7%, but the credit card debt interest is what is ridiculous but I truly feel that if all of the debt is off the plate that 20% of my income could go towards my investing. I feel this will take a load off and I will be able to focus solely on investing that is why I have addressed this subject at this current time.

    0Reply
  • Brian P.
    Wholesaler · Salt Lake City, UT · Member since 2009 · 1k+ posts · 401 votes
    13y

    I have had people I know in your same situation, including myself. You wouldn't ever want the debt I had at one point in my life. It was the price I paid for investing in something other then real estate. My investment just missed by inches, I almost joined the jet set. But close don't count.

    Hitting $5,000 or more paydays is not that far out of line while investing. And you can probably do it on $100 a month budget for starters, time will be your biggest problem. So set aside that much out of your extra earnings to use. I say keep working the investing game ,after all. even scoring a $30,000 pay day once in a while isn't beyond your reach and the experience you will gain while doing it is priceless, and I suspect paying off that debt will keep you motivated. And when the debt is paid you won't be starting from point zero, you will have gotten an education, and have a going business.

    1Reply
  • Wayne Woodson
    Investor · Nashville, TN · Member since 2009 · 483 posts · 228 votes
    13y
    Originally posted by Perry Apawu:
    The reason for this question is because I feel that the little bit of money I have to commit to my marketing campaign may not be effective enough, and I'm seeing more cash going out than coming in and with this consumer debt on my back I feel it would be more of an advantage to payoff the debt now so I can commit more marketing dollars later. What would you suggest ????

    My suggestion would be this, as long you can pay your bills and eat go ahead and invest in your business. If at some point you have to choose between the three, eat and pay your bills. If you have have to choose between eating and paying your bills, eat.

    Over the past 4 years in wholesaling I have had to not invest in my business to eat and pay my bills. I didn't wholesaling anything for 3 years until 2011. Once I learned what I did wrong I wanted to smack myself for being so dumb but I didn't quit. I went to my buddy's office here in Brentwood Tennessee and saw how he ran his business and it made me feel stupid for not taking this seriously.

    2Reply
  • Antonio Cordeiro
    Montreal, Montreal · Member since 2013 · 10 posts · 0 votes
    13y

    Paying off debt is admirable, however it may not be the best strategy. This one is working for me.

    I looked at my cc's and paid one off (with the highest interest)and moving forward only use that one for business related purposes. If the income you earn is salary pay off your personal debt with it. When receive business income then use that against your business debt.

    Ask an accountant if this is the best strategy for you.

    0Reply
  • Perry Apawu
    OP
    St. Petersburg, FL · Member since 2011 · 45 posts · 5 votes
    13y

    Since I have posted this, I decided to focus on my cc debt instead of knocking out student loans along the way. Since my cc debt is really not that much I can knock this out hopefully by the end of the year, for now I will do some no cost marketing well not really no cost but low cost driving for dollars in my target areas and write a few letters per week to my absentee owners list until I free up the money I am using to payoff my cc debt, we will see how this works out !!!! In the meantime I am taking on a part time job and some odd jobs plus my 9 to 5 to expedite all of this to bring in some extra cash flow.

    0Reply
  • Graham MinkPro Member
    Rental Property Investor · Stowe, VT · Member since 2013 · 102 posts · 27 votes
    12y

    @Perry Apawu

    I just came across your post after posting one of my own about a similar situation. I am curious as to how things are working out?

    Podcast Guest on Show #119
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