- Peter Keane-Rivera and Karina Mejia have decided to prioritize buying a home over paying off loans.
- They both “hacked their house”, which allows them to live for free and improve their cash flow.
- They also both focused on increasing their income in order to save for a down payment.
Peter Keane-Rivera graduated from graduate school in 2017 with a tab of $45,000 in student loans.
He had a six-month grace period during which he did not have to make any repayments on his loans. After that, however, he had two big financial priorities to juggle: student debt and a house.
Keane-Rivera, 25 at the time, decided to focus on saving for his first property. This meant making minimum monthly payments on his loans.
Now, nearly five years after graduation, the 29-year-old real estate investor is making more than the minimum payment but still owes nearly $40,000 in student loans.
“It’s okay,” he told Insider. “Because instead of paying off that debt, I used that money to buy a house, which appreciated by hundreds of thousands of dollars.”
Keane-Rivera, who moved to Seattle to work after graduating from Purdue University, closed her first property, a $355,000 three-bed, two-bathroom home, in October 2017.
Karina Mejia faced a similar decision after graduating from Boston College in 2019 with student loan debt. She owed $15,000 but also dreamed of owning a house.
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 if she could get more than a 5% return elsewhere, she’d be fine by delaying her repayments. ready.
“It was a question of where my money was better spent,” said Mejia, who closed her first home in Boston the same year she graduated. She always made the minimum payments on her loans each month, but did not feel the need to repay them completely before buying a property.
Mejia, 25, still hasn’t paid off her debt but plans to clear it in 2022, now that she earns more than $350,000 from real estate commissions and rental income.
“We’re taught that debt is bad,” Keane-Rivera suggests, especially when it comes to prioritizing financial and career goals during a time of high inflation.
If you graduate on student loans and start attacking it with big monthly payments, on top of paying rent and car and other expenses that come up in your 20s, “you don’t have to worry about it.” ‘money to work after that to pay a deposit,’ he said.
Of course, everyone’s situation is unique, and in many cases debt can be “bad.” If you have high interest rate debt, like credit card debt, for example, and you’re only making minimal payments, you’ll rack up a ton of interest, extend the length of time you’re in the red and will 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, crunched the numbers and figured that by taking on more debt with the mortgage, they would actually be better off. long-term lot.
Additionally, in Keane-Rivera’s situation, buying a home improved his cash flow because he “hacked the house,” a strategy of renting out part of your home to reduce (or eliminate) your monthly mortgage payment. He bought a three-bedroom house, moved into one bedroom, rented out the other two, and paid $375 to live in his own house. As a tenant, he was paying $700 a month. Now that he has two properties and nine tenants, his rental income fully covers his two mortgages and he lives for free in the second house he bought.
Mejia was also hacked and is currently living for free in one of her five properties.
Saving for a down payment in your early twenties
Mejia was able to save big by returning to her parents after graduating. If you’re able to live with your family early in your career, it doesn’t have to be as big a sacrifice as it might seem, she said. “You don’t have to think you’re giving up your freedom. It’s just a smart financial thing to do for the first year or a few months while you’re getting started and paying off your loans.”
She also focused on pay 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. Additionally, she was earning commissions as a real estate agent, which started as a side job and is now her full-time job.
“There were days when I was working at my business, then heading to my job as a banquet server at night, and then on my break I was calling trying to negotiate real estate transactions,” she said. . “It was really a lot at that time.”
It paid off: By the end of 2019, Mejia had about $30,000 in savings earmarked for her first property, she said.
Keane-Rivera, who paid $32,000 upfront for his first property, found the money in part through an initial $300 investment in bitcoin that turned into $20,000, he said. -he declares. However, he didn’t want to use all those funds for his down payment and supplemented his bitcoin money by saving diligently for about six months.
Keane-Rivera always lived below his means, but he was very frugal during those months. “I literally wouldn’t get my hair cut. I’d be like, ‘If I wait another 30 days, I can save $50. I think I’ll do it,'” he said.
He also found ways to earn more money, in addition to his salaried work. His main activity was to return objects from real estate sales. On weekends, Keane-Rivera would attend estate sales looking for furniture he could buy and resell.
“I only bought something if I knew I could triple my money,” he said. “It doesn’t take a lot of skill. Do I know that much about coffee tables? No. But as someone who recently bought a coffee table, I know how much they cost, which is out of stock or what is in high demand.”
If you want to get into real estate investing, think about ways to earn more. “You can reduce your expenses, but at the end of the day, you have a fixed income and a limited resource to work with,” he said. “Experiment with a few side businesses. See what regularly brings in a few hundred dollars a month and use that money, in addition to your savings, to really accelerate the amount you can save over a period of time.”