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Call Us Today: 615-930-0931

Minute with Melissa: Real Estate Investing with Student Loans

Many young professionals, including myself, have student loans that we’re paying and will probably be paying for quite some time. We all know Real Estate is an accessible and approachable way to build wealth. Unfortunately, for those of us who are already swimming in debt, it seems impossible and all too risky.

As I’ve mentioned in my other videos, the are several different types of real estate investments and I’ve given an overview of getting started but for those of us with student loans, this may look a little different. So here are two questions that are probably running through your head and how to address them:

1. Is it smart to spend money that I could put toward my student loans?

This is a very obvious concern. If you’re having to bring upwards of $10,000 to the closing table, that’s a lot of money you could be putting towards your student loans. Not to mention the money you’ll need for potential repairs. This is why it’s so important to take the time to run the numbers. How much are you going to be paying in interest on your student loans? Are you going to be making more money on your investment than you are paying in interest?

2. How will I be able to get a loan with all of this debt?

If you go the traditional way of obtaining a loan through a bank, one of the key things they review is your debt-to-income ratio. This is your total monthly debt payment divided by gross monthly income. The more you owe in student loans, the higher your monthly debt payments are, and the higher your debt-to-income ratio is. Every bank is different, but make sure you understand how this debt impacts your application. However, there are solutions if your debt-to-income ratio is too high:

  • Alternative forms of lending, as long as you understand the financing and terms you are agreeing to.
  • Income-driven repayment program for your student loans.
  • Taking 6 months – 1 year to pay off a big chunk of your student loans.

I’m by no means saying that you need to invest in real estate if you have student loans. Everyone’s situation is different and there are a lot of risks to consider. However, if you’ve done your research and this is right for you, don’t let your student loans hold you back. 

Helpful Tip: Learn the difference between good debt and bad debt.
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