{"id":110814,"date":"2019-05-14T14:30:45","date_gmt":"2019-05-14T20:30:45","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=110814"},"modified":"2024-02-13T18:53:26","modified_gmt":"2024-02-14T01:53:26","slug":"pay-student-loan-invest-real-estate","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/pay-student-loan-invest-real-estate","title":{"rendered":"Should I Pay Off My Student Loan or Invest in Real Estate?"},"content":{"rendered":"\n<p>Over the years, many people have asked me this very question: should I pay off my student loans or take that money to invest in real estate?<\/p>\n\n\n\n<p>This is a great question that really has no &#8220;right&#8221; or &#8220;wrong&#8221; answer. Ultimately, it depends on your financial goals and financial situation.<\/p>\n\n\n\n<p>In the video below, I share my thoughts on this very important topic. I also discuss some important things to consider as you navigate this situation to determine what is best for you.<\/p>\n\n\n\n<p><iframe loading=\"lazy\" src=\"https:\/\/www.youtube.com\/embed\/EGU77o8th-4\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Pay Off Student Loans? Or Invest in Real Estate?<\/h2>\n\n\n\n<p>From those in college, to those fresh out, to those in their 40s, a lot of folks in America are dealing with student loans. They&#8217;re also wrestling with the decision about whether to focus on paying them off or start investing.<\/p>\n\n\n\n<p>If this sounds like you (or someone you know who should watch this video), here&#8217;s what to think about:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Your Credit<\/h3>\n\n\n\n<p>The first thing you want to consider is your credit score. Your student loans can pull down your credit, especially if you&#8217;ve missed any payments. So check your credit.<\/p>\n\n\n\n<p>Is your <a href=\"\/renewsblog\/2015\/07\/29\/invest-real-estate-bad-credit\/\" target=\"_blank\" rel=\"noopener noreferrer\">score super low<\/a>? Do you only have bad debt? If you can&#8217;t show a good payment history, it&#8217;s likely dragging down your score. Make regular payments and show you&#8217;re a good debt payer.<\/p>\n\n\n\n<p>Alternatively, maybe you just don&#8217;t have any credit at all. If that&#8217;s the case, go get some good debt, like a small credit card, to prove you can make on-time payments, and build up your credit score.<\/p>\n\n\n\n<p>You need to be focused on having decent credit before buying real estate. Otherwise, you won&#8217;t be able to get a bankable loan. Talk to a banker to check your status or get more advice.<\/p>\n\n\n\n<p><em><strong>Related: <\/strong><\/em><em><a href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-build-credit\" target=\"_blank\">How to Build Credit From Scratch<\/a><\/em><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">2. Return on Investment<\/h3>\n\n\n\n<p>Look at the return on investment (ROI) on an investment property versus what it costs for debt. (I learned how to do this playing Robert Kiyosaki&#8217;s cash flow game.)<\/p>\n\n\n\n<p>Say I buy a piece of real estate that returns 15 percent. That 15 percent beats the ROI I get if I pay off my student loan at 6 percent. And I could even take the <a href=\"\/renewsblog\/2013\/01\/04\/how-to-rent-your-house\/\" target=\"_blank\" rel=\"noopener noreferrer\">cash flow from my rental property<\/a> and maintain my student loan with it.<\/p>\n\n\n\n<p>So if I&#8217;ve got $20,000 I could use to pay off my student loan, maybe I&#8217;d be better off taking that money and buying a rental property with it (as long as I can qualify for a loan). I&#8217;d be coming out ahead in the long run\u2014by a lot.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. House Hacking<\/h3>\n\n\n\n<p>This is what I did. I bought a 3-bedroom\/1.5-bath for my first rental property.<\/p>\n\n\n\n<p>I got it for $150,000. My mortgage payment was $940. I bought it on a 3 percent down <a href=\"\/renewsblog\/fha-guidelines\/\" target=\"_blank\" rel=\"noopener noreferrer\">FHA-backed mortgage<\/a> and laid down $4,500, plus closing costs. So all in, it was maybe $8,000 or $9,000.<\/p>\n\n\n\n<p>Then I rented two bedrooms to friends for $500\/month. They also each paid a third of the bills.<\/p>\n\n\n\n<p>So I was living for free (and actually making $60\/month), plus I had a pretty good job. In two years, I was able to pay off all my student loans and my credit cards.<\/p>\n\n\n\n<p>Therefore, I highly recommend that you take the ROI equation and parlay it up with a <a href=\"\/renewsblog\/2013\/11\/02\/hack-housing-get-paid-live-free\/\" target=\"_blank\" rel=\"noopener noreferrer\">house hack<\/a>. Then you can take what income you&#8217;re earning and save yourself a housing expense while simultaneously drilling down on your debt.<\/p>\n\n\n\n<div id=\"hero-block_62ee867235a1c\" class=\"first:mt-0 hero-block py-4    has-background has-slate-300-background-color has-text-color has-slate-800-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-slate-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Put Your House to Work<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px\">Discover why so many successful investors use the house hacking strategy\u2014and learn from a frugality expert who has \u201chacked\u201d his way toward financial freedom. Serial house hacker Craig Curelop lays out the in-depth details to make your first (or next) house hack a huge success.<\/p>\n\n\n\n<div id=button-custom-event-block_641384b1eb1d8 class='button-custom-event'>\n      <a\n    href=\"https:\/\/store.biggerpockets.com\/products\/the-house-hacking-strategy?utm_source=blog&#038;utm_medium=marketing_block\"\n        x-on:click=\"window.analytics.track('Blog Block | Publishing: House Hacking Book', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/pay-student-loan-invest-real-estate',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/HH_cover_mockup_01-e1679001015982.png\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Many people have asked: should I pay off my student loans or take that money to invest in real estate? This is a great question with no right or wrong answer. Ultimately, it depends on your financial goals and money situation. Here are three things to consider in order to determine what&#8217;s best for you.<\/p>\n","protected":false},"author":1673,"featured_media":109084,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7399],"tags":[],"class_list":["post-110814","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-diversifying-investments"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/110814","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1673"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=110814"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/110814\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/109084"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=110814"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=110814"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=110814"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}