Pay down car payment or save up for first property?

Question

I am bouncing back and forth between two 2021 goals:

1. Pay off $25,000 in auto loans

Or

2. Save $25,000 for an investment property down payment

I realize that real estate should appreciate more than a 4.5% auto loan; however, I will free up $500 of cash flow for 2022 if the vehicle is paid off.

Thoughts?

Ken Naim · Answer

Sell the cars and get 2 used cars for cash, build you your real estate investments and use debt as a tool for making money not buying depreciating assets. In short order you'll be able to afford any luxuries you want.

Patrick Cozadd · Answer

@Tanner Ladsten

Getting your portfolio started is a huge first step. It will get the wheels turning and lead to other deals. Definitely pursue the down payment.

Theresa Harris · Answer

I agree with the others. If your car loan is preventing you from being able to get a mortgage, then pay it down.  Otherwise, start with the rental.  The extra money you make from that can be used to pay your car loan down faster.  just make sure you keep enough for tax time.

Joe Aiola · Answer

@Tanner Ladsten I agree with @Randall Alan - if you can beat the 4.5% auto loan in real estate, then go that route. It wouldn't hurt to talk to a few lenders, though. If you aren't able to qualify for a great mortgage, and the car loans are hurting you, then maybe it makes sense to attack the car loan first. Paying off the car loan first also doesn't mean you necessarily have to put real estate off for a year, because you could change your strategy a bit and find a partner to work with.

Hope this helps and good luck!

Pay down car payment or save up for first property?

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