Pay off student loan right now... or buy first property?

Member since 2018 · 10 posts · 5 votes

Hello Everybody! My name is Drew Roqué, 22 years old, and I am aspiring to be financially independent! I graduated from a Maritime Academy with a 3rd Mate’s License and I am now working for a shipping company. To make a long story short, I am able to pay off all my student loans ($30,000) in about 4 months. I was wondering if I would be better off paying off my student loan as soon as I can... or pay the monthly payments on them and instead use the saved money to conduct my first BRRRR method. Let me know what you think and why! Thanks!

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Tchaka Owen

Real Estate Agent · Merritt Island, FL · Member since 2017 · 986 posts · 1k+ votes

@Drew A Roque - I'm going against the recommendations above and say invest in your first BRRRR. Yes, it's good to rid of debt, however educational debt is often not considered 'bad' debt. That's different than a racked up credit card. Imagine completing a BRRRR that pays your monthly student loan obligation, then imagine a 2nd BRRRR that enables you to double your monthly obligation....before long it's paid off. Meanwhile you have 2 properties (likely more) that have mortgages being paid off by others.

Another option is to do a few BRRRR, then pay off the student loans lump sum. The difference is that though you'll be $30k lighter in either scenario, one has you dancing in your bellbottoms because you own 2 cash-flowing properties, the other doesn't.

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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Drew A Roque. Pay off student debt and move on
10 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@Caleb Heimsoth Thanks! I read your profile... how did you first start?
1 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
Originally posted by @Drew A Roque:
@Caleb Heimsoth Thanks! I read your profile... how did you first start?
I saved for 10 months and educated myself md bought an out of state single family rental in memphis (while living in Dallas). That was almost 2 years ago
2 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@Caleb Heimsoth I’m also looking to rent out of state. Do you mind if I personal message you? I want to know what it was making your first deal and what it’s like working with another partner.
0 Reply
Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
Originally posted by @Drew A Roque:
@Caleb Heimsoth I’m also looking to rent out of state. Do you mind if I personal message you? I want to know what it was making your first deal and what it’s like working with another partner.
Sure feel free to message me. I started alone but I have a business partner now.
1 Reply
Christopher Giannino
Real Estate Agent · Hamilton, NJ · Member since 2013 · 464 posts · 311 votes
7y
I've seen a few posts here on BP about this subject and it seems like people's responses show that it really is all dependent upon your situation. Some people respond with just focus on paying off your debt and then get into investing. Others suggest buying an asset who's cash flow will cover your debt payment. Some of the factors to consider... What is your risk tolerance? What is your loans interest rates? What are your future goals? etc.
For what its worth, my opinion is just pay off the student loans since you say you can pay it off in 4 months. 4 months is nothing in the grand scheme of your investing career and then you'll be debt free (from student loans at least) and have more monthly cash flow to put towards investing.
At the end of the day, the fact that you're thinking about how best to treat this debt is a good sign. Best of luck!
6 Reply
Tchaka Owen
Real Estate Agent · Merritt Island, FL · Member since 2017 · 986 posts · 1k+ votes
7y
@Drew A Roque - I'm going against the recommendations above and say invest in your first BRRRR. Yes, it's good to rid of debt, however educational debt is often not considered 'bad' debt. That's different than a racked up credit card. Imagine completing a BRRRR that pays your monthly student loan obligation, then imagine a 2nd BRRRR that enables you to double your monthly obligation....before long it's paid off. Meanwhile you have 2 properties (likely more) that have mortgages being paid off by others.
Another option is to do a few BRRRR, then pay off the student loans lump sum. The difference is that though you'll be $30k lighter in either scenario, one has you dancing in your bellbottoms because you own 2 cash-flowing properties, the other doesn't.
12 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@Christopher Giannino
Thank you so much for the great response. I was also thinking whether if my potential cash flow could pay off the loan. I guess I just have to wait a little longer to start my journey toward financial freedom! Thanks again.
1 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@Tchaka Owen
Thank you! What I’m really worried about is vacancy and then having to pay more debt. I also work out at sea so I would need to have the property managed by somebody else (which I want to have done anyway). I guess I’m a little afraid of commit to my first investment.
0 Reply
Andrew B.
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
7y
My answer is usually a long winded post about risk profile, your current and future career prospects, possible rate of return, etc. However, if I had the option to buckle down for 4 months and pay it off, I would always choose that options since 4 months is such a short term. If you were talking about 2-3 years, you would get the long winded answer.
2 Reply
John Collins
Member since 2019 · 23 posts · 39 votes
7y
Pay off that student loan debt and celebrate. It's a step towards financial freedom and you will be rewarded for that down the road. Take a year and get educated, networked, and understand your market. You're young and time is on your side.
5 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
Student load debt is permanent debt so it is the worst kind of debt. Permanent means it survives bankruptcy.
Pay off the student loan and save up for rental property. It is literally the top of the real estate market right now, so there is no reason to rush into this business.
Don't listen to the risk tolerance nonsense. That is just people trying to rationalize careless financial decisions. Risk tolerant people play poker, but that doesn't mean it is smart.
4 Reply
Kevin Dean
Rental Property Investor · Chantilly, VA · Member since 2017 · 104 posts · 149 votes
7y
Hey @Drew A Roque I had this same question! For me it was easy. I asked myself the following question....
Can I generate a higher return on investment than the interest rate on my Student Loan?
If yes > Invest in Real Estate
If no > Pay off your Student Loan
This simple equation however does not account for the feeling that you might receive from being debt free. If it is hanging over your head, then maybe the incremental return is not worth it to you. If you are like me, and are okay with the debt, then put that money into a house hack, reduce your living expenses, and then evaluate whether you want to pay off that debt quickly or not.
3 Reply
Ayne C.Pro Member
Rental Property Investor · Tampa, FL · Member since 2018 · 251 posts · 124 votes
7y
@Drew A Roque. Depends on your risk tolerance and goals. But in a general sense I would ask myself, how long it would take me to save up another $30,000. If you can pay this now and be done with it, and save the BRRRR money in a relative short timeframe, I would pay the loan. You are so ahead of the game already, kuddos to you, young one.
1 Reply
Calvin OzanickBusiness Member
Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes
7y
@Drew A Roque I believe you should pay off your student loans first. First of all, paying off one liability will improve your credit and help in the loan process. Also, opening a second loan in your name will lower your credit score even if just for a short time. Besides, if you can make it 4 months, you will have a very bright and Financially Independent future for yourself as it is. If you are looking to invest out of state, I would be happy to help. I work with numerous out of state investors and some out of country even. Here in southern Wisconsin we are seeing some excellent rates of return and would love to share some of that information if you are interested. Congratulations on graduating and best of luck in all of your investing from here on out!
Wisconsin Property Managers4.7416 Reviews
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1 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@Kevin Dean Thanks! So you had the same experience as well? What decision did you make? How did it work out?
0 Reply
Tchaka Owen
Real Estate Agent · Merritt Island, FL · Member since 2017 · 986 posts · 1k+ votes
7y
Originally posted by @Drew A Roque:

@Tchaka Owen
Thank you! What I’m really worried about is vacancy and then having to pay more debt. I also work out at sea so I would need to have the property managed by somebody else (which I want to have done anyway). I guess I’m a little afraid of commit to my first investment.
Good point. Be sure to add management in your model when you find a property (or properties) since self-management is not advantageous to you. Hopefully, your income will be tax free each month you're away from the US. Don't be afraid of commitment, if your numbers are done properly, you'll be fine!
1 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@Calvin Ozanick
Thank you for the reply! I'd love to learn more and potentially work with you!
0 Reply
Angelica Garcia
Specialist · Anaheim, CA · Member since 2018 · 1 post · 1 vote
7y
@Drew A Roque Hi Drew, I can help you with buying rental properties out of state. You can message me directly and hoping to talk more with you soon.
1 Reply
Drew A Roque
OP
Member since 2018 · 10 posts · 5 votes
7y
@angelica garcia Awesome! I'll connect with you right now!
0 Reply
Kelly Iannone
Rental Property Investor · Orlando, FL · Member since 2018 · 301 posts · 354 votes
7y
@Drew A Roque since you are talking about being able to pay off the student loans in only 4 months I would focus on that and never look back!
0 Reply
Matt Millard
Lewisville, TX · Member since 2015 · 344 posts · 264 votes
7y
@Caleb Heimsoth
Kudos to not investing in Dallas. I don’t like living here either & am saving to move to Colorado Springs soon too & flip a property prior to move in!
1 Reply
Gretchen P.
Rental Property Investor · Littleton, CO · Member since 2014 · 150 posts · 114 votes
7y
Pay off your debt, and in the meantime educate yourself, start looking at properties, analyzing them and meeting other investors in your area. If you can pay off the debt that quickly, I assume you can amass savings at a similar pace once the debt is gone.
0 Reply
Matt McConkey
Rental Property Investor · Phoenix, AZ · Member since 2015 · 222 posts · 126 votes
7y
@Drew A Roque I have a couple questions to help assist answer your questions first: 1) How quickly can you get back the 30k via savings, job, second job, etc.? 2) what's your living situation like right now? 3) where are you living/planning on living? 4) are you making a good salary?
0 Reply
Zach CumminsPro Member
Real Estate Agent · Carlsbad, CA · Member since 2017 · 53 posts · 68 votes
7y
@Drew A Roque
Congratulations on graduating! Big achievement! I know Dave Ramsey method can be fairly controversial on bigger pockets but the intent of the focus to paying off debt first especially if you can knock it out in 4 months!? Then apply the same payments you were making towards your student loans once they are paid off and put that towards your first investment. You will knock it our in no time. Of course the price of your property you want to invest in will determine how much you want to save up.
Side note- I also suggest an emergency fund to go with your first investment property, never know what things are going to cost you!
Good luck
Zach
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