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- Both Peter Keane-Rivera and Karina Mejia decided to prioritize buying a home over paying down loans.
- They both “house hacked,” which allows them to live for free and improve cash flow.
- They also both focused on increasing their income in order to save up for a down payment.
Today, nearly five years after graduating, the 29-year-old real estate investor makes more than the minimum payment but still owes close to $40,000 in student loan debt.
“That’s fine,” he told Insider. “Because instead of paying down that debt, I used that money to buy a house, which has appreciated hundreds of thousands of dollars.”
Keane-Rivera, who moved to Seattle for work after graduating from Purdue University, closed on his first property, a $355,000 three-bed, two-bath house, in .
She ran the numbers and decided to prioritize investing in real estate. The interest rate on her loans was around 5%, she told Insider, so she figured that if she could get more than a 5% return elsewhere, she’d be fine delaying her loan payments.
“It was a matter of where my money was better spent,” said Mejia, who closed on her first home paydayloan4less.com/payday-loans-ct in Boston the same year she graduated. She still made the minimum payments on her loans each month, but didn’t feel the need to pay them down completely before buying a property.
Mejia, 25, still hasn’t paid off her debt but plans to wipe it out in 2022, now that she’s earning more than $350,000 from real estate commissions and rental income.
“We’re taught that debt is bad,” suggests Keane-Rivera, particularly when prioritizing financial goals and career during a period of high inflation.
If you graduate with student loans and start attacking it with big monthly payments, in addition to making rent and car payments and other expenses that arise in your 20s, “you have no money to work with after that to put towards a down payment,” he said.
Of course, everyone’s situation is unique and, in many cases, debt can be “bad.” If you have high-interest debt like credit card debt, for example, and only make minimum payments, you’ll rack up a ton of interest, extend the amount of time you’re in the red, and struggle to build long-term wealth.
Keane-Rivera and Mejia, who knew they wanted to use real estate investing as a tool to build wealth, ran the numbers and figured that by taking on more debt with the mortgage, they’d actually be better off in the long term.
Plus, in Keane-Rivera’s situation, buying a home improved his cash flow because he “house hacked,” a strategy that involves renting out a portion of your home to lower (or eliminate) your monthly mortgage payment. He bought a three-bedroom home, moved into one room, rented out the other two, and paid $375 to live in his own house. As a renter, he paid $700 a month. Now that he has two properties and nine tenants, his rental income completely covers both of his mortgages and he lives for free in the second house he bought.
That meant making minimum monthly payments on his loans
Mejia was able to save big by moving back home with her parents after graduating. If you have the ability to live with family at the start of your career, it doesn’t have to be as big of a sacrifice as it may seem, she said. “You don’t have to think that you’re giving up your freedom. It’s just a smart financial thing to do for the first year or a couple of months as you’re getting started and paying down your loans.”
She also focused on earning and worked three jobs while saving for a down payment. In addition to her full-time, salaried job as an analyst at the time, Mejia kept the part-time job she had in college as a banquet server at the Boston Harbor Hotel. Plus, she was collecting commissions as a real estate agent, which started as a side gig and is now her full-time job.
“There would be days when I was working at my corporate job, then I would walk over to my banquet server job at night, and then on my break, I’d be calling trying to negotiate real estate transactions,” she said. “It was definitely a lot at that point.”
Keane-Rivera, who paid $32,000 upfront for his first property, came up with the money partly thanks to an early $300 investment in bitcoin that turned into $20,000, he said. He didn’t want to use all those funds for his down payment, though, and supplemented his bitcoin money by saving diligently for about six months.
Keane-Rivera has always lived below his means, but he was extra frugal during those months. “I literally would not get haircuts. I’d be like, ‘If I wait another 30 days, I can save 50 bucks. I think I’ll do that,'” he said.
He also found ways to make more money, in addition to his salaried job. His main side hustle was flipping items from estate sales. During the weekends, Keane-Rivera would attend estate sales looking for furniture that he could buy and resell.
“I only bought something if I knew I could triple my money,” he said. “It doesn’t take that much skill. Do I know that much about coffee tables? No. But as someone who recently bought a coffee table, I know how much they are, what’s out of stock, or what’s in high demand.”
If you want to get into real-estate investing, think about ways you can earn more. “You can cut your expenses, but at the end of the day, you have a fixed amount of income and a finite resource to work with,” he said. “Experiment with a few side hustles. See what consistently brings in a few hundred dollars a month and use that money, in addition to your savings, to really accelerate the amount that you can save in a certain period of time.”
