Fix credit/pay off debs or invest in Real Estate first?

Question

I have been following the Dave Ramsey method and holding off on looking for my first Brrrr or flip house until I’m debt free and have a nice savings.  I assumed I needed a better credit score and a down payment to start off but I just started making 75k a yr and I’m hungry to start investing. What are your thoughts about this. Thanks in advance.

Chris Allen · Answer

@Jennie Solis I was in the exact same position. My church did Dave Ramsey FPU my last semester of Nursing School, so when I graduated, I had every intention to just pay down my debt as fast as I could. But then I found out about Real Estate and I have completely changed my mindset.

I agree with @Dion McNeeley; build up your credit, house hack, then do whatever else you plan to do. I bought a Duplex right at a year ago for 3.5% down, and since I have been living there, I have only had to pay $200 to cover the mortgage, and if I got a roommate I would be living for free. This has allowed me to increase my savings rate. I would rather make a 15%-20% ROI on my properties than focus more on paying down the 4% student loans.

Jennie Solis · Answer

@Dion McNeeley Hi and thank you for your advise and quick response.

I do intend on continuing to work while investing, I’m a nurse and I love it! So my personal bills are covered and any extra money has been going towards paying down my debt. I believe I need a 640 credit score and at least 3% down to buy my first home even for investment? My 5 year goals are to start with a couple single family homes with a minimal of $300 in cash flow coming in from renting and I’ll keep brrrring into the next one. If I cannot get what I need in rent, I Intend to flip. My longer 10 year goals will be to scale up to multi family homes. I guess I’ve answered my own question and that’s to become qualified for a loan, whatever that takes. 😊

Alyssa Dyer · Answer

@Jennie Solis work on your credit long enough to get fair terms on your financing. I'd look into house hacking once you're in a good spot to buy. It's a less jarring transition into investing (emotionally and financially, haha).

Chris Allen · Answer

@Jennie Solis The way I see it, is we have a very rewarding job, but it can be difficult at times, and burnout is a big problem. I never want to be that crabby old nurse that hates their job and take it out on their patients and coworkers because they HAVE to go to work to pay the bills. I want to work as a nurse because I WANT to, not because I need a paycheck. And I believe that REI will allow me that freedom.

Jennie Solis · Answer

@Chris Allen That’s great we’re on the same path. 😊 I will always be a nurse but I want to have passive income in case I need some time off :) Also, If I can bypass my student loans and buy investment properties I’ll be very happy. Thank you for the encouragement. It’s hard to make your first jump in but I’m passionate about it no matter what.

Dion McNeeley · Answer

Sounds like a solid plan. Have you considered a small multifamily? Loans basically work the same as a single family house. You can live in one side, rent out the other. Rinse repeat every couple of years and the cash flow will start to add up. Then in the future you can get a sfh and your other rentals can pay for it.

Some markets do not have a lot of small multifamily. So a house with an ADU ( some call this a mother in law house) works the same way.

Dion McNeeley · Answer

Hello, here are my thoughts. but each situation is totally different.

I would work on getting credit score up. There are several ways to do this. I would try to pay down any debts over 5%. debts under that I would keep paying but save for the first property purchase.

Is house hacking an option for you? This is usually the fastest way to increase saving rate or to have money to pay down debt.

I did a blend. pay down bad debt and increase good debt. My goal was to cover living expenses with rental profit. This makes work optional. Do you know what your goals are? It is a lot easier to seek advice, find a mentor and target your sources of information if you know the outcome you want to work towards.

Fix credit/pay off debs or invest in Real Estate first?

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