Hi BP ! My husband and I are selling our primary residence to pay off all our bad debt and get started in realestate investing. We plan to rent for a year until we save up for a downpayment or buy cash. Should we get started with house hacking or buy a buy a rental and keep renting? Rent in our area is very high
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Hi Yandry,
Love the idea of selling and paying off your debt and freeing things up. I know lots of people that have done that. They are all much happier. Less debt more monthly cash flow and enjoying life. Restart and now work from a new position.
If the sale would cover all of your debt and you can then save $1500 a month (after rent is paid), how much would you have left after the sale of your house and all the fees associated with selling and moving (twice)? Renting for a year would allow you to save $18K, add that to the proceeds left over from your house...does that give you enough for a down payment of your next house?
Investor · Cedar Hills, UT · Member since 2017 · 6 posts · 0 votes
7y
@Yandry Mastromihalis. It really depends on what you want to accomplish, and how quickly you want results... and your market of course.
If you have enough cash after paying off your debt or saving for the down, One option would be to buy a small multi family property. 2 to 4 units and live in one unit while building up your real estate portfolio. This is a good way to live rent free to assist in the acceleration of your investing.
Developer · Philadelphia, PA · Member since 2018 · 21 posts · 7 votes
7y
@Yandry Mastromihalis congrats on taking massive action to build wealth! I love how you are motivated to get into real estate but have realistic expectations. Also, great idea to use the current market in your favor. I would absolutely house hack! Because this way you can buy a smaller multi family with very little down, take advantage of today’s low interest rates and you can live for free. When you decide to move out of your unit in your house hack, it will create an additional rental. PM me if I can help in any other way.
Rental Property Investor · Sedan, KS · Member since 2016 · 125 posts · 92 votes
7y
@Yandry Mastromihalis I had a credit score in the 400s when i finally stopped figging the hole i was in. Gotta love medical debt.
The advice i got was to get a handful of credit cards. I had to pay for 3 secured cards. Use one for normal day to day stuff like gas or groceries. When the first bill comes, pay the minimum and swap out cards. When the second bill comes pay it off. It's a little bit of hassle but it works VERY well. Sign up for Credit Karma and follow their advice. Keep the cards under 30% of the maximum the card allows also.
Take from that what you will. A guy worth well into the 7 figures told me he doesn't even look at his credit score but he uses a card and pays it off monthly. His credit score is in the 800s. The person that taught me about swapping out cars made over 7 million that year.
I won't pretend to be an expert but it didn't take long to repair my credit. I'm sitting just shy of 750 on Equifax and Transunion. The only thing I need for 850 is time now.
General Contractor · Palm Desert, CA · Member since 2016 · 193 posts · 79 votes
7y
My first thought is something I've heard on the BP podcasts over and over, NEVER SELL ANY REAL ESTATE. You're giving up any future appreciation, tax write off and potential positive cash flow.
I was going through the same dilemma a few months ago. I finally decided to build a guest house (I'm a contractor), live in it and rent the main house to cover the mortgage / PITI.
Realtor · WV · Member since 2018 · 454 posts · 310 votes
7y
@John Warren I agree with house hacking. Find a two to four unit and take advantage of the great financing options along with beginning of your real estate investing.
Also not sure that renting will help build your credit. If your bad debt is delinquent and on your credit then paying it off could actually make your credit worse. Renting can only help if the landlord actually reports the payments to the credit bureaus. Speak to an accountant and credit specialist before doing anything. Good Luck! Aaron