Dear Experts. Please read. Please help?

Question

Dear Experts. Please read. Please help.

My wife and I need sincere, honest, hard-truth advice from a real RE expert. Someone that can truly point us in the right direction without anything to gain.

Any advice or feedback would be much appreciated. Thank you for your time.

Our Situation:

My wife and I have dreamed of owning a home to call our own and start a family. Like most people, we also dream of owning rentals properties, having financial freedom, and enjoying the finer things in life. Our current situation is very discouraging and at times seems hopeless. We’ve tried several different things but have only gotten older and have yet to get ahead. I’m 30 and she is 29.

Combined, my wife and I have over $180,000 of college loan debt. Mostly private. Several have adjustable interests rates maxed at 12%. Combined we pay over $2000 a month in college loans alone (not including the one car we share, rent, and food). We do not have any credit card debt. We’ve missed a couple payments in the past from being in-between jobs and, as a result, her credit is around 580 and mine is around 640. We do not come from a wealthy family and every member of our family is trying to survive in their respective manner. They are unable to help.

We have been unable to refi to lower rates due to credit and lack of a co-signer. I’ve spent hours researching all the ways to solve our college-loan problem with little success. Most of the advice is the same. Much of it is from lenders trying to refi to terms that do not favor us but get them paid a few points for restructuring our debt.

We are not doctors, lawyers, or any other professional that justifies this debt. She works in HR and I’ve worked in various sales roles as 1099. I understand RE Wholesaling and have taken the actions to start. However, after our monthly expenses, we do not have a budget (Mailers/ Adwords) to be competitive with the 1,000s of other people trying to do it in almost every market.

Because she is the only W2 employee, with bad credit, and I do not have 2 years of consistent income as an independent contractor, it makes it very hard to get approved for anything. We live paycheck to paycheck and rarely have anything left over for savings. This makes it very hard to invest or start a business. We see opportunities every day that seem out of reach because of our situation. Real Estate is one of the things we truly wish we could do.

I have a bookshelf full of the best books on success, mindset, wealth, and real estate. I have read most. At times, I get super excited and try things but then reality sets in, or a financial hurdle hits us, and we are back to where we started.

Here are our main questions:

• How can we buy a house and start building equity instead of paying rent?
• How can we start owning rental properties and accomplish our dreams?
• How can we get rid of our debt, responsibly?

Any advice is greatly appreciated.

Thank you. Thank you. Thank you.

Justin R. · Answer

What opportunities are you referring to?

Shootin' you straight here ... In the world or REI at this point in the market, the people who have the power are the people who have the deals.  If you brought a solid "opportunity" to me (or any of the other hoards of San Diego investors on BP), you'll get what you need to make it happen.  Sure, maybe I'd only be willing to cash you out for $5k or $10k, or maybe you bring enough value to the table to partner with.  I don't know.  But, in this game you have to figure out what value you bring.  Contacts?  Money?  Time?  Experience?  Deep neighborhood knowledge?  Street cred?  Painting skills?  Then match that value with someone who doesn't have it.

That does require putting yourself out there and networking (which is what you're doing on BP - that's a perfect start!).  Let us know what value you bring to the table.

As another example of where that line of thinking leads (this is off the top of my head now), I have a 5 unit building I'm about to start rehabbing.  I need help to do all the work.  One of the units (a 1bd/1ba in a duplex) will be mostly untouched.  I could leave it empty during rehab or I could put it out there that I'm looking for someone who wants to live there for free during the rehab.  In exchange, maybe that person can re-build the dilapidated fence ... or help with demo ... or install a patio ... or do some painting.  It's a matter of matching up what I have-and-need with what someone else needs-and-has.

Maybe that's a $5000 benefit for the person who takes me up on that in free rent.  Find a series of "opportunities" like this and you'll find yourself with an extra $10k or $20k that I'm sure would make a big difference in your situation.  This is what a hustler does.

It starts with putting yourself out there and describing what value you can bring to people who don't know you.

As for your other desires (owning your own home, etc), I don't have much to advise.  What I do know is frugal living takes you a long way ... but higher income -- structurally -- is the ultimate answer.

Jon Holdman · Answer

@Ford Smith I moved your post over to the personal finance forum.

If you have $180K of college debt, did you at least get some useful degrees out of that?  Will those degrees get you a good paying job?  Because a good paying job is the number one thing you can do to dig out of this very deep hole.

A couple of missed car payments will not result in scores of 580 and 640.  There's more going on here than just that.

Sound like the $2000 a month for student loans is a significant chunk of your monthly income.  If that's the case, you're going to have a hard time buying a house.  Let alone having money to invest.   You may have to put your focus on paying down that debt before doing anything else.  You're not alone in that situation.

When you buy a house, lenders are going to want to see a ratio of the PITI payment on the house to your monthly gross income under about 28%.  And they want to see that PITI payment plus all other debt under about 38-40%.  If that $2000 is, say, 20% of your monthly gross, then your house payment will be limited to 20% because of your heavy debt load.  If its 40%, you're not going to be able to get a mortgage until you've reduced that ratio.  Maybe by getting more income, maybe by restructuring those loans, maybe something else.  You may have to make these payments for 10 years or more, but you will eventually knock them out.

I, too, am a big believer in Dave Ramsey.  Read "Total Money Makeover".   He recommends:

1) get a "baby emergency fund" of $1000.  To be used ONLY for a true emergency, like your one car breaking down.

2) pay off your debts.  Including a residence.

3) then start investing.

I think that's a pretty good plan.  I do think that if your debt load is managable vs. your income that investing even if you do have debt is OK.

Parker Cox · Answer

@Ford Smith

There is a ton of positive and highly helpful information in the thread above, and you should implement as much of it as possible.  But, you said in your post that you get positive and willing to try things "until reality sets in or a new financial hurdle presents itself."

That happens, it happens to all of us, usually quite frequently, but success is not the ability to be positive when it all looks great, its stable positivity during the good and the bad.

If I was you, I would try and add one of these things per week.  Start with a budget TODAY. If you can save just 50$ a month, you're gonna be miles ahead of where you are now.

Next, week, find a job that has flexible hours and does not require extensive training you don't have (I am thinking tutoring with that expensive degree for whatever you majored in in college, you can get 12-18 dollars per hour no sweat working in your leisure).

Then, make a plan for how you will add value to another investor's business and start getting your beak wet at meetings, on here, offer anything you can, the more creative you are and the more willing to hustle you are, the farther you will go.

Then finally, GET YOUR CREDIT UP.  "The man" has you by the you know whats until you guys can improve your income and your credit.  But there are quite a few easy ways to really improve your score quite quickly.  It only takes commitment and consistency.

Ultimately, good for you for talking to the people on here, the community is willing to inspire you.  But, after you read this, you can't just have 10 minutes of empowerment.  You need to make a lasting decision for yourself today, that will still be there when things get worse and will still be there as things get better.  Don't ask for permission, just do it.

Finally, here is what my economics professor in college told me when I was frustrated and disappointed that I went into debt to get a degree in history.  He said "you American's.  So weak." in a strong Turkish Accent "in Turkey, we say 'debt is a whip on the brave man's back, and shackles on the weak man's ankles."

Time to decide Ford: are you the brave man or the weak man?

Good luck

Joshua McGinnis · Answer

@Ford Smith

Many of us were in your shoes once.  A little over 12 years ago, I was near homeless with a 500 credit score, medical bills out the wazoo, and working a $10/hr tech support job!

I can now say that I'm doing quite well for myself and am in the process of writing a book about my experiences to give people like yourself some insight into how to make it happen.

That said, there's hope. My advice would be that you should not focus yet on buying a home and instead focus on two "big picture" things:

- Increasing your income

- Decreasing your expenses

Sounds really simple - but people lose site of these two important concepts. If you aren't laser focused on these two, your other goals just won't be possible.

I tell people all the time: I can tell you how to get a six pack, but you have to do the work.

First of all, is it at all possible for you to get out of this sales role that has you're financial life in a roller coaster? Certainly you've got some skills that could help you land something with a consistent and strong base pay?

How long as your wife been in this HR position? Is it time to ask for a raise or look for another job where she can take on more responsibility and get paid more?

Have you run your credit report for both you and your wife to see what creditors you have that are driving your credit so far down (especially your wife?). Look at: https://www.creditkarma.com/

How much do you spend on housing currently? Is moving to a cheaper state an option? Remember that sometimes big results require big moves.

When I first started building credit, I had 3 - 4 medical bills in collections and they ranged from $50 to $250.

The first thing I did was dispute every. single. one. If a creditor cannot prove the debt, the collection will be removed from your credit report.

The second thing I did was call all of the collections agencies and I asked them to renegotiate my debt (NOT settle it as this will further adversely affect your credit). Make sure you say that you do not want to settle, but you want to know if you promised to pay $5 or $10 a month, would they be willing to forgive some portion of the debt?

Have you tried looking at sofi.com, prosper.com, lendingclub.com or other alternative financiers to see if there's an option for refinancing that student loan debt?

$180K is a lot of debt. I would consider speaking to a bankruptcy attorney to see what your options are there. They may be able to help you file bankruptcy or force the creditors to renegotiate the terms of the debt so that you have a better chance of paying it back.

Unfortunately, I don't think student loans can be written off in a bankruptcy at the moment - but it's worth looking into.

Have you setup a budget? Try mint.com and https://www.youneedabudget.com/. You need to be tracking and budgeting every single penny you two earn.

Once you have a handle on your budget and you have committed to the discipline of only spending what you earn, you can sign up for 1-2 secured credit cards and start using those for purchases you were already going to make in your budget.

Lastly, I also recommend joining the community and making a post over at: https://creditboards.com/forums/

There's a lot of smart people there that know tons of tricks to helping you build credit fast.

I hope this helps. YOU CAN DO IT.

Cal C. · Answer

This is not a flippant answer, but I suggest googling Dave Ramsey.  He is going to suggest a lot of hard work and sacrifice, but otherwise in ten years you'll be in the exact same place you are now.

Micah Redden · Answer

Hello @Ford Smith

Welcome to BP.  Glad to hear of your interest in real estate investing.

You provided quite a bit of detail about your current situation which tells me you have really been looking into your situation.  Let me preface what I am about to say as solely my opinion, someone else might not agree or it may not be what you want to do, but since you put it on the forums I figured I would answer.

First, keep living frugally.  Create a budget, stick to it.

Second, honor your debts.  No one made you take out that much in student loans, you two chose to do so and vouched for the repayment.  Your word/reputation is everything in business.  Do what you said you would when your received the money, it will also increase your confidence in your abilities.

Third, make more money.  Concentrate on your 1099 position, find ways to increase your yield or you and your wife take other/secondary jobs.  The ability to increase your sales or income will be skills you need in REI.

Fourth, keep studying RE.  Don't give up because it is not right here right now.  Some people take a longer path to get started but at that point you should have incredible momentum to take you as far as you are able.

Good luck and enjoy the beautiful San Diego area.

Brian Gibbons · Answer

@Ford Smith

you're in California, I'm in Los Angeles for the most expensive places to live in the United States

You can either cut expenses or make more money or both

There are places to live in United States were housing is a lot cheaper than here, I'm thinking like Oklahoma City Oklahoma

Think about moving and living cheaper and making the same money

Think about getting your real estate license and knowing everything there is to know about real estate sales and real estate property management

Frank Jiang · Answer

For brutal honesty: Have you considered leaving San Diego?  For an ambitious young couple, there are better places in the US both for finding higher paying regular jobs and for better real estate opportunities.

I have a lot of friends moving to either the Bay Area, New York, or Texas right now because living in San Diego just didn't make sense for them and they can make more money doing the same thing in one of these other regions.  Texas in particular is very attractive.  When an entry level home goes from being 300k+ to being only ~100k the dream of home ownership becomes orders more feasible.

If you're determined to stay, Justin gives good advice.  You need to network with people who have more money than you and somehow bring value to them.

Ron Drake · Answer

@Ford Smith I agree with @Micah Redden sounds like you need to make more money. Carrying $2,000/ month payments for student loan debt is something that probably seemed like a good idea at the time. It may have allowed you both to go to school without working but is now a burden you are forced to carry.

If you are working in sales and not making a substantial income, figure out how you can. Since you are interested in Real Estate why not go into Residential Real Estate Sales. Get your real estate license and sell houses. If you work really hard you can make a great income. Good luck.

Paul Stout · Answer

I have not read all of the comment previous so forgive me if my opinions are redundant.  I am not a financial advisor but I am a blue collar worker who married young and had a boat load of student debt and wondered if i could afford gas to get to work let alone buy a house.  I may not say the most politically correct things here but I'm guessing thats not what you need now anyway.

The hard and honest truth boils down to this, you need to earn more and spend less.  Easy to say I know but its possible.  If you don't have a budget you should.  This is critical. Name one successful company that operates well without one...... you can't because they don't exist.

There is an evil force out there and I call it the financial black hole.  It sucks up all of your money and gives you nothing in return.  The most sinister part is that you will never know it exists if you do not track every penny you spend.  Once you do that you may find you are not nearly as frugal as you think you are.  Are you honest with yourself in defining wants vs needs?  Is your one car the most efficient you can find?  Is it more expensive than it needs to be?  Is your apartment nicer than it needs to be?  If the questions don't cause a bit of pain then you aren't asking the right ones.

There are many ways to make more money.  Figure out which one works for you and do it.  I had a dream to collect certain valuable and hard to find items.  The want drove me to learn everything I could about the subject.  One day I thought to myself that others would pay me for my knowledge and I could use that money to start my collection.  I did it and it worked.  Im nobody special.  Im a construction worker.  You probably have many more skills and opportunities than I do and you can do this.

Now that the hard part is over, I don't see what your financial issues have to do with wholesaling.  There are many ways to find leads.  There is little to no money required to secure a contact.  If you find a good deal the money will find you.

If you haven't tried maybe you can renegotiate your student loan terms.  If they say no, keep bugging them until they say yes.  Write emails, make calls and write letters.  Don't give up.  Don't limit yourself.  Lots of people have gotten out of worse situations than you.  You can do it too.  Then you can make millions with books on how you did it.

As far as your home goes, maybe try a house hack.  You might have to get creative with the financing but you know how.  You've read a lot about it so use it.  Your on BP.  It's all here.  Man up and make it happen.

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Dear Experts. Please read. Please help?