Njeri Barrett thought she did everything right. She graduated from college, landed a job earning more than $78,000 a year, got married, and had a child–all by the age of 26. But now seven years later, the Dorchester, Massachusetts, resident finds herself swamped with debt and without a solid wealth-building plan.
“I’m an immigrant. I came here from Jamaica when I was 8 years old, and homeownership was something that was always talked about as a way to build wealth–the American dream. So I pushed myself almost to the detriment of my family to purchase multiple properties,â€ says the 33-year-old executive assistant for a private equity firm.
Barrett and her now ex-husband jumped into the housing market after they got married in 2006. Even though Barrett already owned a condo, the couple purchased a four-family house in which they charged monthly rent of $3,200. That same year they also bought a $400,000 town home of their own to live in.
“As a family we were making great income and we took the money and invested in properties not thinking about the possibility that both of us could get laid off,â€ she reflects. Barrett says when her ex-husband was laid off in 2007 and then she lost her job in 2008, the couple had a lot available in credit, but not enough cash savings at the time, with only between $1,000 to $2,000 in savings. Barrett says: “We were swimming in debt and the tenants were not paying their rent. It was a domino effect from there.â€
Now the divorced mother of one is bouncing back from being laid off for nearly two years. Although she has been earning more than $80,000 a year since 2010, including bonuses and rental income, she is carrying a lot of debt. While she receives child support, she doesn’t receive alimony and during the divorce had to use most of her savings as well as withdraw $27,000 from her 401(k) to help pay the mortgages on the three properties. After the divorce, her ex-husband kept the townhouse as part of their settlement and she kept her condo and the four-family home.
“I wish I had moved back home with my parents from the minute I lost my job but I didn’t. I wanted to do it on my own. I would have saved so much money,â€ reflects Barrett.
Although Barrett can’t afford to live in the condo any longer, she kept it as a rental property. She uses the$1,550 monthly rent to cover the mortgage payments and condo fees. “I don’t want to sell it because one day my family and I may live there. And my credit isn’t good so I can’t purchase another place right now,â€ she fears of her 634 credit score.
Barrett and her 7-year-old son, London Balan, now rent the second floor of Barrett’s mother’s house, where she pays $600 for rent and has a roommate. The move saves her $950 per month. With the savings she was able to pay off a $15,000 personal loan from a bank last year that she borrowed in an effort to keep the multifamily unit from going into foreclosure. With a laundry list of constant repairs and delinquent tenants, the property became too costly for Barrett to handle. She lost the home to foreclosure in 2010 after being denied a loan modification.
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