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Student loans smother millions of borrowers in unmanageable debt that can hound them for decades, stunt their financial growth and prevent them from building wealth. But some find relief in real estate, which offers unique advantages that no other investment class can match.
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For instance, real estate investing can generate passive income while building ownership equity and provide appreciating value as a vehicle for long-term wealth-building. That, and the many tax advantages reserved only for property owners, can make real estate a remedy for student debt that is exclusive to this asset class.
While most student borrowers sacrifice their lifestyles and wealth-generation potential to satisfy their college loans, real estate investors can amass wealth while paying their debts — without living like broke college students. One clever and creative student borrower went that route, and when he wiped out his debt, the properties he leveraged to do it continued to make money. Only now, that money goes to him instead of the bank.
Michael Chien is the CEO and marketing director of 101 Karaoke, a site that sells high-end karaoke systems for parties, events and industry professionals, as well as cloud-based song library subscriptions. But life as a successful e-commerce entrepreneur is just his side hustle.
Chien is an experienced structural designer who works in the mechanical and industrial engineering industry. However, upon graduating from St. John’s University with a business management degree in 2014, he was just one of tens of millions of college graduates with tens of thousands in student debt hanging over their heads.
Chien’s degree was worthwhile, but it wasn’t cheap.
“I owed approximately $40,000 in student loans, facing monthly payments of around $400,” he said. “Considering the long-term commitment and interest, it was projected to take me nearly a decade to clear the debt.”
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His pursuit of a high-income degree and a well-paying field qualified Chien to borrow money for an investment property despite his hefty college debt. Then, he decided to leverage the former to pay off the latter.
“I embarked on a journey to pay off my college loans through strategic real estate ventures,” said Chien. “Recognizing the potential of real estate, I explored investment opportunities in New Jersey’s burgeoning market.”
Chien chose to pursue slow, steady rental income over the potential for quick cash from a flip as part of a two-pronged strategy designed to eliminate his loans while building wealth for the future. The plan was to use his tenants’ monthly rent payments to satisfy his mortgage obligations — he was lucky to purchase when interest rates were still low — and put any that was left over toward his student debt.
If all went according to plan, his renters would pay off his property and his college loans as the property appreciated toward his future wealth.
“I began by investing in rental properties, leveraging the income generated to supplement my monthly loan payments,” he said. “This approach not only accelerated the debt payoff but also allowed me to build equity in real estate simultaneously.”
Chien didn’t have a background in real estate, but he succeeded in property investing the same way he succeeded in building a successful e-commerce platform — by applying the analytical skills and methodical research and planning techniques he honed in his engineering work to his latest side gig.
“I meticulously analyzed properties, focusing on areas with strong rental demand and growth potential,” he said. “Through careful financial planning and reinvesting rental income, I strategically allocated funds to pay off both my student loans and property mortgages.”
Upon launching 101 Karaoke, Chien now had three income streams — his online business, rental properties and day job — to beat back his student debt.
“By diligently managing my e-commerce business and nurturing my real estate investments, I successfully reduced the loan payoff timeline by half,” he said. “What could have taken a decade was achieved within five years.”
While his student loans are now a thing of the past, his properties are still generating income, building equity and appreciating in value.
“This dual strategy empowered me to not only secure my financial future faster but also cultivate a diversified portfolio for lasting wealth,” said Chien.
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This article originally appeared on GOBankingRates.com: How I Eliminated $40,000 in Student Loans Through Real Estate Investing
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