This Old House: Millenium Edition

This is a guest post by Debt Movement crusader Katy. Thanks Katy for sharing your story!



House: before and afterLike most of our generation, my husband and I had a lot of debt coming out of school.

Although we worked throughout our education and tried to get all of the internships we could, you just can’t always jump into your career.

Or even hop. Heck, sometimes you can’t even  walk into your career, which is what we found out.

At our modest wedding, we asked for cash instead of actual gifts—we already entered the marriage pre-equipped with housing goods, so the cash would be more worth our while. We were debating what to do with the cash, whether to use it to take a sizeable chunk out of our student loans, but wincing at the thought of dozens of thank you cards filled with,

“Thank you for your gift, we are now less in debt! Hugs and Kisses, Katy and Ryan.”

We were up a creek without a paddle, or so we thought.

That’s when we began toying with the idea of exploring the foreclosure market. After a few months of hefty research on finding what would be our best option, and many dark under-eye circles, we found it. It was close to the local university campus and an adorable house with what many snobby New Yorker writers would refer to as “character.”

We looked it up and found that that we could more than afford a down payment and prepay a significant sum of the mortgage for a long time. And thus a wild idea took hold.

You’re flipping it?

“No way! Like the show?” that conversation times a million comprised the next month or so as we closed.

There’s no way we could afford to flip the house. House flipping, although lucrative, requires timing, experience, and a fat wallet to invest from. And even then, there are significant risks. We had none of these on our side.

So what were we doing? Settling down? Nope.

With school in our recent memories, we knew the demand for nice housing would always continue. Our goal became to live in the house until it was nice and then to rent it out. For the first three months while we were renovating the house, things were rough. First two months, we were paying mortgage and rent at both locations while we tore out some of the more questionable home insulation choices. Beginning of month three, however, we crammed our stuff and our lives into one room of the house. Living off of baked potatoes cooked in a makeshift fire pit dug in the back yard—glamorous and definitely not TLC-worthy.

Nevertheless, once we were able to get the major renovations done, the house looked leagues better than before, and we had developed a great skill set to boot. Due to prepaying and the amount we had put down on the house (with a small sum reserved for renovations), our house payment was the same as renting. So at least we weren’t going further into debt. It took us well over a year to finish renovating the house and making it rentable, so this sort of project is not for the faint of heart.

The following year, we skipped town and began a stint of hostel management through the workaway program, helping us to keep our costs low (another blogpost in and of itself!).

Furthermore, between the location and the changes we made, we were able to settle on charging a rent that was much higher than what we pay on the mortgage. This allowed us to stop paying our mortgage out of our pockets and to start paying it from the rent we accrued. Moreover, our student loan debts are now being passively eaten away by the rental money we have, and we are able to take whatever income we are making now and live off of it and/or save it.

A percentage of the money we make now does, indeed, go towards the occasional maintenance project and paying a small sum to friends in the area who stop in to make sure that the property is being well tended, but otherwise, this investment paid off big time for us. We’ve been on the road for well over a year now, and are happy that our student loans are being gnawed on while we are free to pursue our dreams of travel without getting further into debt.

Admittedly, becoming a landlord is definitely more difficult than we were anticipating; however, the skills we learned about the rental industry and about home renovation are skills we can apply wherever we go.

What inventive ways have you come up with to help eat away your student loans? If your debt wasn’t holding you back, what would you be doing?