Recomendations about Investing with Student Debt

[Brady Boyer]

My name is Brady and I just graduated from Penn State this May. I will be moving to NYC in August, and I am eager to start investing in real estate as soon as possible. I have been reading books about real estate since high school and took numerous real estate classes in college. I want to use a buy and hold strategy once I start investing.

My issue, and what I want to get your opinion on, is that I have about $60,000 in student debt. My plan is to try and pay this down aggressively until I get the balance down to around $20,000 (which I anticipate taking 4-5 years) and then try to start buying investment properties. While paying down the debt, I have also budgeted to save 15% of my income, so that when I get my debt down to around $20,000 I will have built up enough money for a down payment on an investment property. My reasoning for this plan is that I don’t want to take on too much risk with that much debt, and I am skeptical if I would even qualify for a loan with that much debt as a new investor. What are your opinions about this plan? Do you have any suggestions? Has anyone else experienced a similar situation?

In the meantime I would like to start getting familiar with the NYC market and surrounding boroughs. Does anyone have any suggestions on which markets outside of NYC work best for a buy and hold strategy?

[Joanna Gossett]

You're smart to put together a plan and to put thought into the execution! I am no expert, and can really only speak to your question/comment about loan qualifications based on my own experiences. Typically the biggest factors that a lender looks for in a conventional first (owner occupied) mortgage is your debt to income ratio and credit score. Even with 60k in school loans, you could still qualify if your debt to income is below 36%. Most lenders for non owner occupied properties will also heavily weigh your debt to income ratio but will likely use a different % of income. If student loans is your only debt, your monthly payment is reasonable, you have a good credit score and your income is strong I wouldn't think you'd have a problem qualifying for a loan. Although you mention wanting to build your cash for a down payment.... For investor loans you will need a minimum of 20% down payment but if you owner occupy your first home you may be able to put less money down depending on what type of mortgage you go after.