How I Got Into 900k of Debt in 4 years

In the pursuit of Financial Independence, I deliberately went insane and put myself into massive debt. This is how I got myself in 900k of debt in 4 years using leverage from real estate. During that time I also used credit cards and loans to fulfill my Financial Independence need.

Buyer Beware

This is not the ideal situation and this path is not for most people. A person reading this should not follow my lead. This article is an example of what not to do. The stress that comes with having massive debt is unbearable for most people including me. I tell this story to prevent others from making the same mistakes I made in my quest for financial independence. 

How It All Started

In September 2014 after I had decided that I was going to be the first millionaire in my family. I decided to do it using leverage because I thought Debt was the best thing ever.

Sleeping under stepmom’s roof is not a very good way to be a millionaire. My first option was to do a house hack. I would Live in one unit while my tenant in the other unit helps me pay off the mortgage.

First I needed to get rid of the 15k debt that I was Carrying. Doing so would make me look good to the banks and help me get approved for a mortgage.

My first act was to take out a $30,000, 401k loan to wipe out my current debts. I had no savings so I had to get it from somewhere, and that seemed as good as a place as any.

I took out the 401k loan cleaned out all my debt. That left me with 15k leftover to use as closing costs and repairs. It took my wife and me 8 months to find a foreclosed duplex in an awesome neighborhood for 385k. I used a VA, 0% down loan with a massive MPI of 3% for a closing cost of about 13k. I was well on my way to be a millionaire but had no money left to fix the house.

The Second Part of My Master Plan

Since my 401k allows two types of loans, a 5-year term for general spending and a 15-year term for real estate spending.

I had the 5-year loan for 30k so I decided to take the 15-year loan for repairs to the house.

just to get going, I took out another 20k loan, I was willing to do whatever it took and I was not looking at the consequences of these loans because according to Rich Dad debt is the new way to get rich. 

We called every contractor in the phonebook to get a quote for the work that needed to be done. when I realized no one will come to even give me a quote on the work I started getting discouraged.

My only response came from Mr. Handyman who said they can come to do the work for $156 per hour. I accepted the quote but then they told me that they would not have time to come for another four months.

Contractors Are Not on Your Side

I quickly realized that if this work was going to be done I had to do it myself, So I did what any self-respected Millennial would do and went to Youtube. With help from Mrs. MinorityFI,  my brother and my best friend, work started on the house. I worked at night so it was easy to put in massive hours during the day to move along quickly.

My strategy was to watch YouTube videos all night at work while I go and try out what I learned during the day. Mrs. MinorityFI pitched in and did some work at night while I was at my night job. 

Because I had no experience at being a handyman and had no tools I had to buy tools as I repair the house. Something as simple as a trim could not be put up until I had a miter saw, a nail gun and a compressor to do the work with. 

By October we had our first new tenants in a brand new renovated apartment. The second apartment that we lived in was still trashed but we figured we’ll do a live-in flip. Once a little extra money came in we can use it to repair as we go. 

During the next 2 years, I accumulated tons of tools and with lots of soft skills from YouTube, I was successful at repairing the second apartment with the help of everyone mentioned above.  I estimated that we spent about 40k on repairs and tools during those two years.

Sacrifices Made

While the apartment and our bedroom were being repaired Mrs MinorityFi was a champ. She put up with me as we slept on various substances such as the floor, couch, and airbeds for a year and a half.

Our bedroom was one of the last things to get done.

I was glad to see the happiness on her face as we climbed into a bed for the first time in a year and a half.

We also bought a new 2016 Tacoma to put to work in the “business” to the tune of 34k because we “needed it”.

At the time we thought we needed a new car because we were taking so many trips to home depot and Lowes that no maintenance and no breakdowns made a lot of sense to us. 

The realization came after we spent 6k in repairs over the last year on our 2001 Dodge Dakota with 190k miles which we had bought with 187k miles. We got fed up with the Dodge and decided we needed a working truck that would not cost any maintenance for at least 4 to 5 years. 

In comes the 2016 new model V6 Tacoma SR5, $34,000, 4.25 interest, 72 months term at a whopping $584 per month with 0% down, (YES!!) we had made it. 

Now Let’s Play With The Big Boys 

In July 2017 we decided to do a cash-out refinance with our duplex. In the two years that we’d own it and all the repairs we did brought the value of the house to 475k.

Since it was a VA loan I was able to refinance for the 100% loan to value ratio. My new mortgage became 490k since the VA has that high 3% MIP. I was able to walk away with 83k in cash. 

I estimated that we spent 40k in repairs and tools. Cashing out 83k means we got more than a 100% COC (cash on cash return). With the 83k I bought a second duplex in a Class C neighborhood with 25% down as another rental.

With the rest of the money, we bought a single-family house fixer-upper in a class B neighborhood.

The plan was to move our family into it so the kids would have their room finally.

We spent all the refinance money, but now we were real estate investors with 4 rental units and a single-family. We were on our way to being millionaires.

The Great Balancing Act

Going into 2018 we owned two duplexes and one single-family. The two duplexes brought in $5730 a month and all three of my mortgages equaled $5700 a month. All I had to do is hang on to this formula for 30 years and I would be a millionaire like I wanted. 

The new duplex and our new single-family although great deals were still fixer-uppers and needed much work. We spent all of our income fixing the houses. Whenever there was a turnover in one apartment it would hurt us because I would be working on it during the day while I go to work at night. It was impossible to save any money.

MFI’s Debt picture

What our Debt Looked Like From September 2014 to August 2018.

  • In 2014 I took my first 401k loan for 30k
  • 2015 we bought our first Duplex for $385k. We took another 20k 401k loan. our new total debt was $435k
  • 2016 we added the brand new 34k Tacoma in the mix to move our liabilities to $469k
  • 2017 we did a cashout refi on the first duplex for $490. We then bought another duplex at 170k and bought a single-family at 187k bringing our total liability to 847k
  • in 2018 we used a combination of credit cards, construction loans and 401k loan to blast our way over 900k in four years

Since I still had not to figure out the contractor problem and had no money to pay them. I would do everything myself while paying the rent for vacancies, look for tenants, and trying to get them in.

Since I could not afford to give a real estate agent that much needed one month’s rent. I ended up being a contractor, property manager, landlord and babysitter. Since I had so many repairs I went to credit cards and used them to pay for the much-needed materials.

Before I knew it my credit cards were all maxed out. With no money and no credit card, I turned to Mrs. MinorityFi’s credit cards to help out with our common problem. 

Mrs. MinorityFI also left her day job during that time due to health issues. With less income coming in to do the repairs we went and took a 15k construction loan to bridge the gap.

The Loan was to do some much-needed upgrades on the second duplex.

how i got into 900k of debt in 4 years

Around that same time, we finished paying off one of the 401k loans. In Aug 2018 I took another 401k loan for 20,500 to pay off the high-interest construction loan. That last loan allowed us to continue with repairs on the duplex.

Waking up from A nightmare

In August 2018, one month before the 4th anniversary from when I took that first 30k 401k loan, I found myself just over 900k in debt.

I also found the ChooseFi podcast at that time, my new besties Brad and Johnathan thought me that consumer debt was bad and that Financial Independence was achievable for someone like me. I also learned that I did not need to be hanging over a cliff while getting on the Financial Independence bandwagon.

Listening to the Podcasts such as Afford Anything, Biggerpockets money and House of FI changed my mindset and I no longer Thought Debt Was The Best Thing Ever. 

I was ok with most real estate debt as long as the houses were cash flowing. Credit cards, construction, and vehicle loans had to go.

I decided at that point to start working on a plan to bring down the $900k of debt to something more manageable. 

I wasn’t sure how we were going to do it, but if we didn’t work on this problem, we would be in stuck the Rat Race forever

Now follow my next post, how we knocked out 536k off our debt in one year by making one hard but simple decision.


If I had to do it all over again I would have slowed down a bit. 4 years after buying my first duplex I realize that the deals are still out there. It just takes some time to find them.

When it comes to Real Estate even though you can jump pretty fast at the start there is a point when you get in over your head and need time to refocus.

Not having a three to six month’s cash reserve was detrimental to my Real Estate experience.

6 thoughts on “How I Got Into 900k of Debt in 4 years”

  1. Wow, I was stressed out reading that post, but I think it’s important to share your story so others can learn from it. It’s also good that you didn’t go into debt buying fancy things but instead had income-generating assets. Can’t wait to read the next post on what you did to lower your debt though! I’m on the edge of my seat!


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