Total Greenhorn from Chicago, IL

[Aaron Mikottis]

Hey guys! 

I'm a recent graduate from the Chicago area with a bachelor's degree in architecture. I'm not sold on the idea of trading my time for money until the day I die, so I'm pursuing buy and hold rentals as a means of achieving financial independence. Right now the plan is to accumulate enough passive income from rentals to live life on my own terms - I imagine that this means 25-30 properties. This feels like a ways off, but what is life without goals?

Due to some decisions I didn't fully understand at the time, I'm bleeding out from student loans, around 80k. Most of these have an interest rate greater than 8% which is obviously quite frustrating. Right now I save ~75% of my income and throw it at my loans, so if I stay the course I should be free from these shackles by 2018. 

Any advice for someone in my position? Am I just stuck until I pay off my student loans, or are there wise ways to get cash flow started in the meantime? 

[Todd Heitner]

Ouch, 80K in student loans!  It's great that you're able to put so much of your income toward the debt.

I'm not in that position, but I think if I were I'd postpone the buy-and-hold rental approach till you get the loans paid off.  I'm not saying not to invest in real estate, I'm saying take a different approach.  I'm curious how you'd be able to buy the properties.  In my opinion, you're not at a point where you should be looking at those kind of investments.  Don't get me wrong, they're great if you have the cash sitting around, but it doesn't sound like you do.  It takes quite a while for a buy-and-hold property to be profitable.

To me, it sounds like a better approach would be first to focus on some investing that takes little out-of-pocket cash but has a big payday so you can get those loans paid off faster.  For example, wholesaling, lease options, subject to, etc. can be done with very little out of your own pocket and can give you some nice paydays that can cut down those loans much faster.

Once you have the loans paid off, I'd say still to stay the same course until you have a good amount saved up.  Even then, you might be better off focusing on these same type of techniques where you're investing with other people's money, essentially, which leaves your own money available to work for you in other ways.  

Once you get to a certain level, where you've got more than enough to buy a property outright and still have plenty left over to run your business, I'd say then to start buying a property or two as rentals.  Get some practice renting and keep the cash flow steady.  Then repeat the process, always re-investing profits, and your portfolio will grow, slow and steady.

Todd