Author Topic: Getting started in Real Estate while still paying student loans?  (Read 3345 times)

cashstasherat23

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Since starting to read MMM, I have gotten more and more interested in real estate as a viable way to generate income, but always thought that it would be something years in the future for me. However, I recently started browsing foreclosures in the area while at work, and have found several great deals, ranging from $30K-$100K for homes of various sizes, from a 1BD apartment to a Multi-family house. With a mortgage, and based on what I have gathered so far, the highest monthly mortgage payments would come in around $850, just the same as my current rent payment on my 1BD, and if I was able to get a deal like the $39K apartment, it would be closer to $300 a month.

With prices like these, I am thinking that is it really worth taking a look at. I have two different scenarios that could work for me.

1: I get a 1BD and live there on my own. Not income generating, but would significantly reduce my housing expenses, and if/when I decide to move, I can use this apartment as a rental apartment.

2: I get a single family house. I use one room and rent out the others to roommates. This would help bring in income, but part of the reason I am in a one bedroom now is because I like my privacy.

3: Get a multi-family house. This would probably be most profitable, but at the same time, I would be taking on a lot. I have never been a landlord before, and I am not handy at all, though I hope to learn. The costs seem to be much higher for this, and the stakes much greater. For my first foray into real estate, I am not sure if I'd want to take on this much responsibility.

As of now, I am leaning towards the 1st option, the 1BD apartment. However, the other part of my question is, does it make sense to take on a mortgage while I am also paying student loans? I cannot see a downside here, as I would be saving myself a great deal of money on rent, while aquiring equity. Can anyone tell me if I am missing something glaringly obvious? Any insight is appreciated for a first time real estate buyer!


ETA:

Another part of my question is, what sort of expenses can I expect while fixing up a foreclosure. This one seems to be in pretty good shape, and my father and uncle are both very handy and can be paid in beer and pizza, so I can save on labor. Obviously I will get a home inspection, but are there any large expenses I should anticipate?

The 1BD in question I am looking at looks to be in pretty great shape actually; beautiful hardwood floors and the basic structure seems ok. The bathroom has a large hole in the wall by the tub, and the tile could probably use redoing, the paint in the rooms is atrocious but I love painting. Barring any huge plumbing or electrical issues, I can't think of anything else that I would need to do. Any insight on this? Can post pictures of the apartment if that's helpful!

« Last Edit: April 03, 2015, 01:11:31 PM by cashstasherat23 »

arebelspy

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Re: Getting started in Real Estate while still paying student loans?
« Reply #1 on: April 03, 2015, 01:10:45 PM »
I owned maybe 9? rentals before my student loans paid off.  I was paying the minimum though, as my rates were quite low.

It very much depends on the interest rates on your student loans.

As far as the options, assuming multiplexes are viable in your area (depends on your local real estate market), I'd do #3.  Barring that, #2 if the numbers make sense on SFRs.  Obviously if the numbers don't make sense for your area, don't buy there at all.  #1 doesn't seem very useful to me, personally, based on my investing philosophies and goals.  But it might be right for you.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

cashstasherat23

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Re: Getting started in Real Estate while still paying student loans?
« Reply #2 on: April 03, 2015, 01:22:33 PM »
I owned maybe 9? rentals before my student loans paid off.  I was paying the minimum though, as my rates were quite low.

It very much depends on the interest rates on your student loans.

As far as the options, assuming multiplexes are viable in your area (depends on your local real estate market), I'd do #3.  Barring that, #2 if the numbers make sense on SFRs.  Obviously if the numbers don't make sense for your area, don't buy there at all.  #1 doesn't seem very useful to me, personally, based on my investing philosophies and goals.  But it might be right for you.

Thanks for the quick reply!

To answer your questions:

My student loans are currently split: I have $11,000 at 6.55%, and another $9,800 at 3.15%. Once I get the 6.55% loans paid off, I think I will slow up a bit, because the 3.15% rate isn't that bad.

As for my area, it is the NJ suburbs of NYC, right by the GW bridge. Apartments rent very quickly here and can command a pretty good price. Owning a multi-family and being a landlord is very intimidating to me (maybe because I am a young woman and worried people won't take me seriously), but it is certainly the most profitable. I guess another question I have is, what was your experience as a first time landlord? Is there any reading material you would recommend   to learn more about what to expect? (besides this forum of course!)

arebelspy

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Re: Getting started in Real Estate while still paying student loans?
« Reply #3 on: April 03, 2015, 01:28:15 PM »
My student loans are currently split: I have $11,000 at 6.55%, and another $9,800 at 3.15%. Once I get the 6.55% loans paid off, I think I will slow up a bit, because the 3.15% rate isn't that bad.

I'd definitely pay off that 6.55% one ASAP, and pay the minimum on the 3.15% for as long as possible, until it eventually pays off and you're sad.  ;)


As for my area, it is the NJ suburbs of NYC, right by the GW bridge. Apartments rent very quickly here and can command a pretty good price.

That doesn't mean they're a good investment.  It depends on what the purchase prices are.  If they rented for 5,000/month, for example, that sounds like a lot.  But if they cost 2 million apiece, that's not a good investment.  (Made up numbers to illustrate the point.)  It might -- or might not -- make sense to invest there, you'll have to break down the numbers once you learn how to evaluate real estate investments.

Owning a multi-family and being a landlord is very intimidating to me (maybe because I am a young woman and worried people won't take me seriously), but it is certainly the most profitable. I guess another question I have is, what was your experience as a first time landlord? Is there any reading material you would recommend   to learn more about what to expect? (besides this forum of course!)

Knowledge overcomes fear.  Start learning everything you can about investing in real estate.  Here's the book recommendation thread, a good place to start: http://forum.mrmoneymustache.com/real-estate-and-landlording/real-estate-book-recommendations/
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

math-ya

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Re: Getting started in Real Estate while still paying student loans?
« Reply #4 on: April 03, 2015, 01:52:01 PM »
i def vote for #3 as well. with those cheap prices, you could almost buy a place for cash and save yourself a lot of legwork. if you have the ability to get some cash.  as for your loans, i would pay interest only. save your money for real estate. the way i see it, even your worst loan is only 6.55% and a rental property that you manage should easily make 10-15%. so your money would be working better for you in real estate than your loan is hurting you. and thats not even considering re apperciation.. etc.
the price to fix these smaller places can be really reduced if you have cheap labor.  so unless the house has some serious issues like roof, foundation, i wouldnt be too worried.

cashstasherat23

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Re: Getting started in Real Estate while still paying student loans?
« Reply #5 on: April 03, 2015, 02:28:22 PM »
i def vote for #3 as well. with those cheap prices, you could almost buy a place for cash and save yourself a lot of legwork. if you have the ability to get some cash.  as for your loans, i would pay interest only. save your money for real estate. the way i see it, even your worst loan is only 6.55% and a rental property that you manage should easily make 10-15%. so your money would be working better for you in real estate than your loan is hurting you. and thats not even considering re apperciation.. etc.
the price to fix these smaller places can be really reduced if you have cheap labor.  so unless the house has some serious issues like roof, foundation, i wouldnt be too worried.

Where would one get cash from? The only thing I can think of besides a mortgage is borrowing from family, but my family is in no place to lend me a large amount of money to cover the entire price of a house. As for my own investments, I have only about $5K in my 401K (not going to take that out) $2K E-fund, and another $5K in TDAmeritrade. Any additional income right now is going towards paying down those student loans quickly, but if I needed to accumulate some cash quickly to put down a down payment, I could probably come up with $15K or so from saving my paychecks for a month or so and borrowing a smaller sum from my parents. 


math-ya

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Re: Getting started in Real Estate while still paying student loans?
« Reply #6 on: April 03, 2015, 02:55:16 PM »
i thought these places only cost 30-100k?  thats pretty dang cheap for multifamily. and you have skilled labor for basically free? i would work, and save, and borrow from friends and family to get the first place as fast as i could, and youll be rolling from there.  if you can get a loan, thats great, but its going to cost money and its gonna eat up some of your time.
as far as managing, its not hard at all. youll be fine. tell your tenants your just the employee and its not your place. people wont give you their sob stories as much, and you cant be put on the spot by anyone. once you get your first place youll realize how easy it is and youll be signing up to get more. the learing curve is very steep in the beginning but if you can tough that out, youll kill it.

cashstasherat23

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Re: Getting started in Real Estate while still paying student loans?
« Reply #7 on: April 03, 2015, 03:00:34 PM »
My student loans are currently split: I have $11,000 at 6.55%, and another $9,800 at 3.15%. Once I get the 6.55% loans paid off, I think I will slow up a bit, because the 3.15% rate isn't that bad.

I'd definitely pay off that 6.55% one ASAP, and pay the minimum on the 3.15% for as long as possible, until it eventually pays off and you're sad.  ;)

I assure you, I am working on it! :)

As for my area, it is the NJ suburbs of NYC, right by the GW bridge. Apartments rent very quickly here and can command a pretty good price.


That doesn't mean they're a good investment.  It depends on what the purchase prices are.  If they rented for 5,000/month, for example, that sounds like a lot.  But if they cost 2 million apiece, that's not a good investment.  (Made up numbers to illustrate the point.)  It might -- or might not -- make sense to invest there, you'll have to break down the numbers once you learn how to evaluate real estate investments.

The purchase prices for the houses I am looking for are about $150-200K for the multi-families. Of course they are foreclosures, so may require some additional work as well, but for a house in the NYC suburbs, the price is pretty good.

Owning a multi-family and being a landlord is very intimidating to me (maybe because I am a young woman and worried people won't take me seriously), but it is certainly the most profitable. I guess another question I have is, what was your experience as a first time landlord? Is there any reading material you would recommend   to learn more about what to expect? (besides this forum of course!)

Knowledge overcomes fear.  Start learning everything you can about investing in real estate.  Here's the book recommendation thread, a good place to start: http://forum.mrmoneymustache.com/real-estate-and-landlording/real-estate-book-recommendations/

That's what I am hoping! I think I got excited about finding a good deal, but I intend to read up a good deal more before I jump in.

cashstasherat23

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Re: Getting started in Real Estate while still paying student loans?
« Reply #8 on: April 03, 2015, 03:03:04 PM »
i thought these places only cost 30-100k?  thats pretty dang cheap for multifamily. and you have skilled labor for basically free? i would work, and save, and borrow from friends and family to get the first place as fast as i could, and youll be rolling from there.  if you can get a loan, thats great, but its going to cost money and its gonna eat up some of your time.
as far as managing, its not hard at all. youll be fine. tell your tenants your just the employee and its not your place. people wont give you their sob stories as much, and you cant be put on the spot by anyone. once you get your first place youll realize how easy it is and youll be signing up to get more. the learing curve is very steep in the beginning but if you can tough that out, youll kill it.

Well the 1BD costs around $30K...the multifamilies are closer to $100-125K. I can certainly switch gears towards saving to get real estate, but can't materialize $100K that quickly. As for my family, they could pitch in some, but probably $10K at most...and I don't know if they'd be willing to. My father would be the one holding the money, and I have a feeling he would tell me it is a stupid idea and I have no idea what I am doing/have no reason to do this. This may be something I need to do on my own.

arebelspy

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Re: Getting started in Real Estate while still paying student loans?
« Reply #9 on: April 03, 2015, 03:56:21 PM »
Get a mortgage. Rates are silly cheap right now. But you aren't in a position financially to do so right now. Start saving your money, reading and learning, and familiarizing yourself with your local market.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.