So I started working for a contracting company on the road. The job is only temporary but with this job I will be able to save around 15k in like 6 to 8 months. The job could last longer but it’s not guaranteed. I was able to move out of my apartment and store the furniture I kept at my parents houses. The bills I have currently total about $638 per month. $338 of this is from my car loan. I owe about $10000 on the car loan at the moment. My question is should I just pay this off as soon as I can. Or should I save all of the money from this job and try to put it towards my first real estate investment? I will be moving back home when this contract ends.
It would really depend on how much interest your car loan is charging you and can you make more from your $15k investment.
For example, if you buy a rental property with $15k down which cash flows $250/mo. Or you can pay off your car loan for $10k and save $338/mo.
My opinion is to pay off your debt. I personally think there is more to the equation than just comparing interest rates. Make sure you have the cash reserves to handle emergencies (both personal and in your real estate investing). I suggest 3-6 months for personal expenses as well as for whatever your investments will require.
I personally only take on debt if I'm leveraging an investment asset to increase my rate of return. I'm not a fan of carrying consumer debt or car debt, because those are liabilities that are going down in value and slow me down on the path to financial freedom.
Imagine how much less stress there is when something breaks on a rental property or tenant moves out and you have plenty of savings to handle the lack of cash flow for a few months.
Buy your first rental ! It will give you an early lesson in real estate and the power of compound interest. It will motivate you tremendously.
@Neil Klinges Buying your first will provide much more value to you than paying off a car loan. You will learn about the process, build connections, and be one step closer to your RE goals. Use RE debt to make money and get involved. Cheers.
Apartment building, next question?
I bunk I’ve answered this question 3 times today.
Car loans are the number one reason people don’t build wealth In the US. Pay it off or sell it and Downsize.
i was listening to one of the podcasts from bigger pockets and it was one with a cpa. She was saying how important debt to income ratio is when getting funding. I am leaning towards paying it off. So this week i will be paying half of it off to start. I should still have 5 to 7k in savings when it is paid off and the job finishes. So i should be able to get the first property hopefully.