Should I Pay Off Debt Before Starting Wholesaling Properties?
Should you pay off your existing debt before getting started wholesaling properties?
Many people have outstanding debts and is the reason they want the extra income that real estate investing and wholesaling properties can deliver. However, an increasingly popular question is whether they should pay off their debts first before getting in.
So what’s the answer and if there isn’t a clear cut one what tests should be used to determine when it makes sense or doesn’t?
Firstly is it important to remember that since you aren’t applying for conventional mortgages when wholesaling properties there is very little need to worry about the impact of debt on being able to flip homes successfully. However, depending on your exact strategy being able to pay down revolving debt and fix negative credit items can help with borrowing more money from some sources. Of course the savviest real estate investors continue to refuse to use their own credit even if it is good.
Reducing your consumer debt is a smart thing to do and is very different to good leverage used wisely for investments. However, your real estate investment income can also be used to pay off that debt and probably a lot faster than trying to whittle away at it with what’s left over from your regular paycheck. If you have to rely on that you might never get the debt paid off and begin wholesaling properties.
Plus there is far more to gain by investing now rather than putting it off, especially considering that we are now on the verge of a new boom, yet with plenty of motivated sellers and discounted properties available.
If it is a question of where to use the money you have on hand consider what debt you are thinking about paying down. There is no question that high double digit rate credit card debt is expensive and virtually impossible to retire by just making the minimum monthly payments.
However, this is in stark contrast to low rate student loans or deferred payment credit. You can make a lot more by putting that money to work in real estate than paying off the debt.
If you still aren’t sure put it to the test and do the math.
Most will find it much better to get started wholesaling properties right away. You really don’t have to have your own cash or very little of it and at a minimum, using what you have to build your investment education is something that will keep paying you big bucks for many years.
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