Accountant · Atlanta, GA · Member since 2014 · 9 posts · 0 votes
I want to invest in my first property, but I have a significant amount of college loans outstanding. Does anyone have any advice or suggestions related to how I should determine when I should focus on paying down my debt versus investing in my first property?
Investor · Plano, TX · Member since 2016 · 38 posts · 21 votes
10y
Compare your college loan interest rate to potential returns from investing. Say your loan is at 4%, and you can earn 10% through investments. Use the profits from the investment to pay off some of that college loan. The math will ensure that you will come out ahead. Just be sure to do the math right, and include contingencies in your expected rate of return on the investment.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
10y
You'll get answers all over the spectrum. There is a huge debate on this in terms of the thinking of Dave Ramsey (pay off debt/don't incur new debt) and Kiyosaki (use leverage).
I've got debt and I use the famous Dave Ramsey Debt Snowball, so I do BOTH.
The Debt Snowball, if you haven't heard of it, is where you line up all your debts from highest interest rate to lowest. Make minimum payments on all but the first debt. And throw everything you have at the one debt. And then roll on to the next debt.
Paying off your debt ahead of time will help your credit situation, no matter what it is.
Accountant · Atlanta, GA · Member since 2014 · 9 posts · 0 votes
10y
Thanks Kerry! That is very helpful. I've been using that methodology and it has been effective. Unfortunately, the result is a delay in any potential investment in real estate. It's an unfortunate situation, but I think paying off at least a significant portion of my college loans will result in a greater ability to invest in the future.
Investor · Plano, TX · Member since 2016 · 38 posts · 21 votes
10y
Compare your college loan interest rate to potential returns from investing. Say your loan is at 4%, and you can earn 10% through investments. Use the profits from the investment to pay off some of that college loan. The math will ensure that you will come out ahead. Just be sure to do the math right, and include contingencies in your expected rate of return on the investment.
Investor · Rockford, MI · Member since 2013 · 116 posts · 54 votes
10y
I agree with looking at your return vs your interest rate. I was/am in the same situation. Bought my first duplex 2 years ago and have since used the cash flow to pay down my student loan. Has gone much faster as a result. Personal preference.
Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes
10y
agree with @Hank A. If your student loan rate is lower than the rate of return that you can gather from real estate, then keep making the minimum payments on the student loan. Plus the student loan interest is tax deductible ;)