New job, trying to buy rentals

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New job, trying to buy rentals

Taylor K.
Dilliner, PA · Member since 2015 · 50 posts · 14 votes

Hello, 

I am going to be starting a new job soon with a salary of 50k. I have around 18k in student loan debt. I have around 8k in savings and a  credit score of 670. 

I am trying to start acquiring cash flowing rental properties. I live about an hour south of Pittsburgh, so real estate here is pretty cheap compared to other places. 

I would like your guys opinions on if I should be trying to pay off my student loans first before trying to invest. Thanks in advance  

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Adam Anderson
Developer · Palm Harbor, FL · Member since 2015 · 307 posts · 96 votes
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I'd recommend investing as you continue to pay off your debt, don't wait to invest! You can use the cash flow from your future rental to pay off the student loan. 

Adam

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  • Deadrick Colbert
    Investor · Easley, SC · Member since 2013 · 248 posts · 51 votes
    11y

    What interest rate are you paying on the student loans?

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    I tend to lean towards investing in real estate over paying off debt (unless you must pay off debt in order to invest). The reason I believe it is more beneficial is because building an asset will continue to work for you. Paying off your school debt just holds you back from starting to invest. The way I figure is if you can cash flow enough money you may be able to get into a scenario where the cash flow helps pay off the loan.
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  • Perry Ivy
    Investor · Jonesboro, AR · Member since 2015 · 241 posts · 132 votes
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    I'm not sure that's the right question. Perhaps a better question is how can you do both, or perhaps can I afford to do both. It's very easy to get in debt, but very hard to get out. Real estate investing requires some working capital. I know as I'm currently replacing a floor in my rentals kitchen, dining room and living room. The ac line broke under the house and I had a stopped up ac coil, this caused water damage and then bad floors. I had to take it down to the floor joist and then jack up the joist. I was able to cover the cost due to low debt and retained earnings. Real estate investing is good but remember if it can go wrong it will at some point and the quicker you accept and prepare for that, the better you'll be. Good luck!!
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  • Adam Anderson
    Developer · Palm Harbor, FL · Member since 2015 · 307 posts · 96 votes
    11y

    I'd recommend investing as you continue to pay off your debt, don't wait to invest! You can use the cash flow from your future rental to pay off the student loan. 

    Adam

    1Reply
  • Account Closed
    investor · McDonough, GA · Member since 2015 · 230 posts · 77 votes
    11y
    Originally posted by @Adam Anderson:

    I'd recommend investing as you continue to pay off your debt, don't wait to invest! You can use the cash flow from your future rental to pay off the student loan. 

    Adam

     Great idea! This is what I would try to do to pay down the student debt. 

    1Reply
  • Ricardo S.
    Flipper/Rehabber · Atlanta, GA · Member since 2014 · 166 posts · 88 votes
    11y

    @Taylor K.

    A decent credit score doesn't guarantee a mortgage. They also look at your debt to income ratio. 

    Since you have 18k in loans and 8k in savings. Throw the 8k at your debt. That will leave 10k. You can easily pay off the remaining in 5 months or so making 50k.

    Then save up for a downpayment and closing costs. You can have a property by the end of 2016.

    Your welcome.

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  • Wilson Churchill
    Madison Heights, MI · Member since 2014 · 471 posts · 132 votes
    11y

    Do whatever offers a higher rate of return. The rate of return of paying additional towards the student loans is equal to the rate of interest on the loans adjusted for the tax savings of paying the interest. Your returns in real estate should be much higher. I recommend focusing on finding really good deals and putting your money into them, along with any cash flow they generate. Just keep rolling the money into additional properties, but keep adequate cash reserves.

    I still have some student loans that I could have paid off easily years ago, but have opted to purchase a number of properties (some for cash) instead. Remember, the sooner you start investing, the sooner you can compound your investment returns. Whatever you do, just make sure you don't lose any money.

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