So I've closed on my first fourplex using FHA owner occupy and plan to refinance in the near future. Even with living in one unit I'm still making 250 a month on rent.
So I still have 12k in student loans at 6.5 interest rate and I would like to get rid of this since it is my only debt.
I recently have been given an offer to buy a condo for 125k and owner finance. Mortgage would be around 1100 and it rents for 1200 so it's barely paying for itself.
There is also a fourplex on homepatth for 170k that needs some fixing up. The market in Alaska is very good and I wouldn't have any problems renting or sellin it quickly. It's assessed at 330 before foreclosure and I could get the rehab loan with it to fix it up.
Should I focus on paying off student loans or should I take a risk and jump on one of these offers?
Remember there will be costs associated with that condo outside the mortgage, so if the mortgage is only $100 less than the rent you should walk on that. And do your own comparison on the fourplex, the assessed value isn't very reliable.
As far as whether the pay off your student debt first, I think you have to ask how aggressive you want to be. Real estate investors need to be comfortable with debt, but there are different degrees of comfort. Do you want to invest aggressively to build a large portfolio or do you want to invest conservatively to build up your nest egg without as much risk. You want to stay consistent with your investing philosophy, so I would decide on that first and the rest should follow.
Personally, I'd go for the fourplex if the numbers work. Seems that the income from the homepath fourplex would help you pay down your loans while building equity and providing long term income.
The key to me would be being making sure the rehab numbers are solid for the fourplex.
Sounds like a great start for you!
As Andrew advises, determine your investment philosophy before you start. Your school debt is at a high cost. I like to make 3 percentage points above my cost of money on my investments so I would be definitely paying off my school debt first. It also looks like none of your investments will cash flow in the long term.
@Andrew Syrios and @Rodney Wehr make good points. The condo will association fees that could put you in the red with that deal. The fourplex could provide enough income for you to pay off the student loan and then you would still have that income to either pay off the mortgage faster or save and use to buy another property. On the surface, I would go for the fourplex, but I would a bit more research on the numbers first.
Best of Luck!
I like to think of myself as aggressive but I do put a lot of time and consideration Into my investments. I don't make quick jump decisions.
My fourplex I currently live in is not cash flowing but you have to remember that I'm living in It for free instead of making payments to somebody else or a 1800 month mortgage like most Alaskan friends I have.
I think that I will focus this year on paying 1-2k a month on my student loans and get it out of the way for next year. I don't see my investments immediately outweighing the heavy 6.5 interest rate.
The good thing about my situation is that I work on the north slope of Alaska and make a decent living in the oilfield on a two week on two week off rotation. So I can afford to get this loan out of the way this year and come tax time next year out that 5% down on that property and get some hands an rehab it in two weeks.
I think that I could rehab this fourplex and flip it but I think I'm leaning more towards buying and holding.
Your plan to pay off your student loans faster is sound.
Alternatively, if you don't want to take the additional hits to your monthly cashflow, you could consider refinancing the loan to make the loan "cheaper". To me, that 6.5% sounds unreasonably high.
With the recent Real Estate rebound, your existing property may have some equity in it. Consider getting a HELOC and using the proceeds to pay off the student loan.
You could also refinance with a different bank. There are companies out there that specialize in refinancing student loans. My wife refinanced her student loans and we saved several hundred dollars a month, just from a simple interest rate reduction. Do some rate shopping, it will be worth your time.
Also consider 0% introductory rates on credit cards... you will just need to pay attention to the expiration dates for the introductory rate and make sure you have a plan before that happens.
If your asking me, I'm more risk adverse and would pay off the school loans, because if they Fannie Mae, you cannot bankrupt them should you go broke. So pay them off first. I sleep better at night knowing that I have no debt besides my primary residence mortgage.
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