Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
Hey guys ! I have about $34000 of private student loans left to pay off at an interest rate of 3.55% that’s approx 675 per month. I’ve also managed to save 40k up until now, I earn about $5200 per month net. With a credit score of 801. Should I use this saved up 40k (which includes my emergency fund) to put 3.5% down on a fourplex in order to house hack it? Or should I just pay off my debt. What would you do in my position? I live in NYC looking for fouplexes in nyc or connecticut.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
5y
The Biden administration is trying to see if they can legally wipe out up to $50K of student debt. Personally, I am not in favor of this activity, but if the government is actively giving away the money, you would be wise to wait and see if it benefits you.
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
5y
@Michael Swan thank you sir! That “rice and beans” line does sound familiar (lol) I definitely want to get out of debt but I fear missing out on inventory and low interest mortgages, a lot of really good investment properties are selling like hot cakes right now, and I fear that if I don’t buy now, I’d be priced out in a couple of years due to appreciation. Lmao and to answer your question I actually just came in from my second job I’m working 65 hour weeks at the moment.
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
5y
@Tyler Williams hello sir! Thank you for your response, see this is a very interesting take, are you suggesting purchasing an investment property then taking out a loan against that said property to pay off my student loans when it has appreciated and cash flowed enough to offset its own mortgage in the next couple of years? If not I currently do not have access to an HELOC since I don't own a home.
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
5y
@Johny Tolman Hey Johny thanks for offering your perspective on this I’m definitely in agreement. This can be good if I crunch the numbers well on this 4plex or 3plex or whatever investment opportunity it may be.
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
5y
@David Call
The low debt to income ratio is definitely a deal breaker, I’m just really hesitant (scared) to start over from scratch with this savings, who knows if I’m going to be priced out in the next couple of years due to appreciation and low inventory when I finally do save up enough to invest again.
@Michael Plante thanks for your response Michael! I’m definitely in agreement with this idea, you and some other posters on here share the same sentiment about this topic.
I was being sarcastic
I think it’s horrible but different people different goals and ambitions
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
5y
@Kamil Baldyga hey Kamil thanks for your input! I’m definitely in agreement especially with the debt to income ratio issue. I just fear being priced out in a couple of years when I finally manage to conjure up a sizable down payment again.
Brooklyn, NY · Member since 2016 · 66 posts · 69 votes
5y
@Michael Plante hey Michael, I’m sorry but what was it that you think is a horrible idea? The paying off my student loans? Or investing the money instead?
@Brad L. Thank you ! My private student loans have weighed heavy on my mind for the past 4 years and now that I have the ability to pay it off does give me a major sense of achievement, however, how about historically low mortgage interest rates? And the cumbersome task of starting over from scratch once these student loans are gone?
Yes rates are low, but prices are also so high. Will prices ever come back down or is this the new norm? The saying goes, "the best time to buy real estate was 30 years ago, and the 2nd best time is now." We don't know if there will be a housing crash within the next couple years or not. People have been calling for another crash for years, even here on BP, and they haven't been right yet.
In a perfect world where nothing can go wrong, I would say keep making your student loan payments and start investing now. But it's not perfect and nothing is guaranteed. Just from your reply above I bet getting this weight off your shoulders would be huge for you mentally. If you buy a rental and the eviction moratorium continues getting extended, are you able to cover your student loan payments and the mortgage, property taxes, insurance & repairs? The $675 going to your student loan payment would go a long way for those expenses.
I'm intentionally contradicting myself in this post because there is no right or wrong answer. To me, most important is doing whatever is going to help you to sleep easiest at night. If I were in your position, I'd pay off student loans first and buy rentals second but I don't like debt. I use debt as a tool to buy, but I fully intend to have every one of my rentals paid off before retirement and most people here on BP would say that's a mistake. So what do I know.
@Brad L. Thank you ! My private student loans have weighed heavy on my mind for the past 4 years and now that I have the ability to pay it off does give me a major sense of achievement, however, how about historically low mortgage interest rates? And the cumbersome task of starting over from scratch once these student loans are gone?
So it seems the general feeling by posters here is pay off your 3.5% college loan
Then save more money and go get a real estate loan at the prevailing rate at time which may or may not be 3.5%
Ok got it
Do you believe a new investor who just cleared out his savings to purchase a rental could cover expenses during an eviction moratorium where tenants aren't paying? COVID has shown us that the government could not care any less about landlords and will use us as the scapegoat in any crisis in any way they can.
Rental Property Investor · Souderton, PA · Member since 2020 · 124 posts · 106 votes
5y
@Gervon Thompson
Is $675 the minimum monthly payment and are you paying rent?
I just broke down the numbers for a friend in a very similar situation. Except he didn’t have the savings you have for a down payment. We broke down 2 situations.
1.) Hammering student loans (as much as possible every month), paying rent, saving for down payment for house after loans are paid. For him this would take a total of 4 years assuming his cost of living and savings rate stays the same.
2.) Making the minimum payment on student debt for him around $300 a month and paying rent and saving for down payment on multi family property. In 14 months he would have enough for a down payment. Live for free (eliminating rent payment), see a little cashflow and then be able to hammer student loans more efficiently.
In the same 4 year time line for both
1.) Student debts paid off and purchased a multi family, no savings and starting the journey.
2.) Student debts paid off, purchased 2 multi family properties with decent savings and cashflow.
I think it’s a no brained for you to take your money and put it towards the down payment and let this property pay for your student debt.
We did a whole podcast on this since I think it’s extremely relatable. Episode 10 of the Young Slumlord Podcast it’s on apple, Spotify, google, YouTube etc. Feel free to check it out!
Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes
5y
I see some people actually believe the government is going to wipe away $50,000 per person of student loan debt. Yeah, that's never going to happen.
Then there was some genius here who said that because interest rates are low you should buy now. Oh boy. What do you think happens to home prices when interest rates rise? here's a clue, they collapse!
if anyone is buying real estate now simply because interest rates are low, I hope you know a greater fool because that is the person you are going to have to sell to in order to make any money!
Hey guys ! I have about $34000 of private student loans left to pay off at an interest rate of 3.55% that’s approx 675 per month. I’ve also managed to save 40k up until now, I earn about $5200 per month net. With a credit score of 801. Should I use this saved up 40k (which includes my emergency fund) to put 3.5% down on a fourplex in order to house hack it? Or should I just pay off my debt. What would you do in my position? I live in NYC looking for fouplexes in nyc or connecticut.
Invest. I'd hope you could easily exceed a 3.55% return with investing in RE.
Specialist · Denton, TX · Member since 2020 · 25 posts · 15 votes
5y
Here's the Dave Ramsey way to ask the question - -- If you had no student loans, would you go borrow $40k and put that money in your checking account? If you say no to that, then pay off the debt. You can always -reborrow money. Most really wealthy people are debt free.
Real Estate Consultant · Denver, CO · Member since 2021 · 661 posts · 389 votes
5y
@Gervon Thompson The interest rates on mortgages is at the lowest point in many years and the tax benefits available to commercial and residential property rentals have never been higher. Facing our fear is a big step toward more self-confidence. With that low student loan rate, why not do what is in your best interest long-term. Think about this, if you purchase a $1 million dollar property and leverage the tax & cash-flow benefits available, you can expedite the depreciation on the new property and have between $60k and $100k in after-tax cash flow available to you the first year. That makes the student debt look pretty small in comparison to the opportunity that awaits you.
Investor · Sacramento, CA · Member since 2019 · 21 posts · 6 votes
5y
@Gervon Thompson invest invest invest invest. Paying those student loans will increase your credit rating & age. Making more than 3.5% off you’re investments should be a no brainer. Later, when your wealthy, you can pay off whatever’s left of your loans if you want to.
Real Estate Agent · Los Angeles, CA · Member since 2021 · 16 posts · 11 votes
5y
with an interest rate that low on your student loan debt, why pay it off? Invest your money and let inflation/time and who knows maybe even the government etc take care of your student loan debt. If your rate was the ridiculous 6%+ then makes sense to pay that off but where yours is at, your money is better served to produce more cash flow for you.
Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
5y
@Steve Vaughan are you serious? You could have bought a house hack in the hardest hit market in the US at the peak of the market and made this interest rate squared. Are you trying to scare people out of investing so you can get more properties? Maybe you Purchased a very poor investment that you could share with us to add value to the community? I don't see what your motive in tell this guy to not go with math is. It's incredible easy to get 10% IRR in real estate not counting appreciation even. if you are willing to do minimal work. Much much higher for house hacking. It is important to have good reserves and maybe you can make a point on him not having the reserves depending on the size of the house. Im interested in what had lead you to say that sub 4% interest is better to pay than to make an amazing investment maybe times more profitable than the cost.