In America today, the average college graduate often begins his career already burdened with a five-digit student loan debt. Instead of just aiming their focus at establishing their careers, these graduates begin their journey with a financial handicap. Usual student loan amortizations require large monthly payments which linger for many years to come, hindering them from making financial investments such as real estate.
Good Debt vs. Bad Debt
If you are contemplating about real estate investment in South Florida, you should know the difference between “good debt” and “bad debt.” Bad debts are those that incur high-interest rate charges as well as very short payment terms. Examples of bad debts include car loans and credit card debts.
On the other hand, good debts commonly have low-interest rates, long payment terms, and are tax deductible. Investing in real estate may involve debt, but it is “good debt.” This is because you get to deduct your mortgage investment interest from your total tax bill. In addition, you can also gain from the capital growth of the real estate property you purchase, which typically appreciates in value over time.
Robert Kiyosaki once said, “Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.” This said, even if you currently have a debt, you can still invest in real estate. Below are three ways you can do so.
Look out for income-driven repayment schemes.
Existing loans are like red flags that mark your financial resume. The common practice of lenders is they compute your debt-to-income ratio before they lend you any money. Once they see your existing loan, this may automatically disqualify you from a loan, even if it is for the purpose of investing in real estate.
There is such a thing as an income-driven repayment plan where, for a period of time, your monthly payments can be set to $0 per month. During this period of time, you can qualify for a mortgage, despite your existing loan. However, you must ensure that you qualify for this program.
Consider alternative forms of lending.
There are a number of alternative forms of lending you can explore which don’t take your existing loans into account. Some examples are home equity loans, crowdfunding, and private money lenders.
Strategize better ways to deal with your existing debt.
The best way may well be to devise a strategy to proactively pay off your existing loan. Note that if you are only making the minimum monthly payments, it will take you ages before you can make a dent on that loan. Take control of your income and expenses.
Consider being more aggressive in attacking your debt. Work harder, engage in side gigs where you can make an extra buck, and seriously set aside an extra amount of money regularly for the purpose of paying out your loan. The time to save money is NOW.
Remember, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” Robert Kiyosaki couldn’t have said it any better. Real estate investment can be one of the best ways to preserve and grow your hard-earned income for generations to come.