minneapolis, MN · Member since 2017 · 3 posts · 2 votes
Hi everyone,
I'm a big fan and followed a ton of the posts.
Right now, I own a multifamily property bringing in 2K cash a month (if I don't live here)...Right now, I live for free and make a few hundred bucks a month.
I have 180K in student loans at 7% a month, so nearly 900 alone is just the interest. The kicker is that I work for a non profit organization, which is supposed to forgive my loans in 7 years. But, with the current administration, I don't think that program will last long.
I could sell my place and pocket 250K before taxes and pay it all off like that.
I have about 70K in savings for another duplex or triplex and some additional backing needed to start this again (but without all the lingering debt.
Any thoughts on hanging onto the property or just selling it and moving on?
Having a ton of bad debt is not only stressful, but it makes it difficult even when you want to pull money out of your house to use towards a down payment on another rental.
I'm going to be honest here, but as a tax payer, I and the president don't want to pay for the school loans you signed a promissory note to pay back. Buck up and pay off your student loans. Waiting 7 years is a joke for those of us who want to become wealthy. Your broke and cannot afford a multi family. Sell it. Your not making anything on it that's even exciting at the least. Work hard like the rest of us and pay off your student loans. This me generation has to stop.
The best Ive seen is 5 percent and if I refinance, I lose the option of loan forgiveness because it will not be a direct loan if I refi. Thanks for your help.
I basically want to get the monkey off my back, but I also know that when this property is paid off, it could bring in 8-9K a month 20 years from now (assuming rent increase).
I owed $150K after professional school. Loan forgiveness wasn't something I considered so I refinanced with a online company (not sure if I'm allowed to say any name here) earlier this year. Brought interest rate down from 6.8% to 3.375% (with autopay). My employer helps with loan repayment so that helps as well. It was a monkey on my back but I feel much better now. I use the extra money to save for REI.
Your multifam generates more income than the loan. You have 2K per month = 24K per year cashflow on 250K equity, giving you a return of ~10% (gorilla math). If you sell the multifam, you are essentially giving up 10% - 7% = 3% spread in return for reducing your liquidity and leverage risk.
All of this assumes that the loan forgiveness program is halted.
I would honestly hold out and go for the loan forgiveness in 7 years. Even with changes, the government typically allows grandfathering.
I would spend more time researching taxation on the 250K, you likely will have much less than 70K in savings for another duplex
You could also look into refinancing/getting a heloc on the multifamily and paying off your loan immediately
You need to speak with Dave Ramesy. Id like to say things but youd call me a HATER................lol. One thing Refi is only kicking the can down the road-its not a solution!
Assuming the 2k is all-in cash flow from your currently property which allows you to live rent free + pocket a few hundo, I would keep this property without question. Not sure what the market is in MN but I would leverage the other 70k you have to purchase additional property that covers your student loan nut with monthly cash flow. This way it should:
Be less stressful
Allow you to pay your student loan note + gain from mortgage loan pay down, tax benefit, and appreciation
As for the 250 in equity, look around for a bank that will give you and investment line of credit (ILOC) -- took a while for me and mine is less than $250k, but I found a local bank that makes it quite attractive.
In my case I am now purchasing a 2 unit BRRRR with a local bank loan for $80k @ 20% down, will use the ILOC to fund the $25k rehab, then Refi with the same ILOC bank @$110k for 30 years...will take me 90 days and they have waived the seasoning period since it is "all-in-the-family". On paper I even get $5k of my deposit money back but in truth that will be used up in holding / closing cost.
Using the BRRRR calculator here (and using high expense numbers) the deal in the end will cash flow about $300 a door if I self manage / $225 if not.
I see Bernie isnt a Dave R fan. Dave would laugh at OP thinking of buying more property....................................lol. OP needs to get rid of that debt.
Mr Jason- how do you surmise OP has high income. He works at a non-profit.
I'm going to be honest here, but as a tax payer, I and the president don't want to pay for the school loans you signed a promissory note to pay back. Buck up and pay off your student loans. Waiting 7 years is a joke for those of us who want to become wealthy. Your broke and cannot afford a multi family. Sell it. Your not making anything on it that's even exciting at the least. Work hard like the rest of us and pay off your student loans. This me generation has to stop.
Oh for goodness sake, the "me generation" came of age when Reagan was president. That's over 30 years ago, and its members are far closer to retirement than college.
Come to think of it, there was probably a "me generation" before that, and one before that, and one before that.....
@Carrie Johnson It is very unlikely that the loan forgiveness program would be phased out without being grandfathered for a while. You need to check about how it is done, and if you need to consolidate you loans now. @Marcus Johnson Knows nothing of the program. In fact, he seems to be completely unaware of the hand outs property owners get in this country.
Thanks for working at a job in the public interest.
@dan Schwartz
So be it, but I paid for my student loans by working 3 jobs in school and right after college. Reality check. I work for a major University and college student take out ridiculous loans to pay for vacations, cars, fancy new apartment buildings that have pools and workout centers, for coffee and beer. I'm not paying for any of that as a tax payer. Parents are the main problem, they cannot say no to their kids. And to bring this back to a real estate discussion, it isn't wise to invest until the student loans are paid off, especially when you have 180k in debt. No one will ever convince me otherwise.
Assuming your duplex is completely paid off - why not cash out refi & pay off the student loans? You'd only be trading debt (at a lower interest rate), but then you could use your $70k in savings to look for another property. You lose any potential benefits of the Loan Forgiveness Program (which I looked into and didn't qualify for, but it involved 10 yrs of employment by a non-profit and the government would grandfather - those already enrolled in the program - in after changing the rules). Can't forget that student loans are forgiven in death vs. refinanced loans are usually at the company's discretion on a case by case basis - that's a negative to consider about refinancing privately.
It is unfortunate how the cost of education has sky rocketed the last 10-20 years. I graduated professional school in a similar boat (with a wife in an equal amount of student loan debt). The same generation saying they don't want to pay for someone else's education also went to college for <$10k and came out making 6-12x their debt load....now a doctor graduates with $180k+ in debt and is lucky if their 1st year's income is 1:1 with their debt load....but, I'll stop rambling about higher education costs - it's a racket.
I like the idea of refinancing the duplex - at a low rate 3.5-4.5% - paying off the student loan debt (if you are a high income earner their won't be any tax break for student loan interest, but you would get the mortgage interest break) and then look to invest some of the $70k into another property while maintaining a nice cushion for personal or RE related emergencies.
@michael Biggs
You may want to bite your tongue before you make false claims. Obama's forgiveness of student loans both in 2010 and 2014 are both terrible ideas. The real problem is that the government backs these federal student loans and we as tax payers are on the hook for whatever the borrower owes are the end of the term determined by the program. I can give you some websites to learn about the program.
Not really on topic here but do you know why college costs have skyrocketed? Because of the availability of student loans. College education has been pushed upon the middle class like crack is pushed on a street corner. Everyone says going to college is the thing to do otherwise you will be flipping burgers the rest of your life. Flipping burgers for minimum wage is better than coming out of college with a job that only pays yearly the amount equal to a fourth of your student loan balance.
@michael Biggs
Not sure about your tax returns but because my income property is profitable those tax cuts that all classes of income have don't me from having to pay taxes on that income. It's callled a success tax.
The interest rate on your school loans doesn't really matter if they will be forgiven. Any interest that accrues will be paid off by the government. So, don't compare returns on investments against loan rates. Do what is in your financial best interest. I think you are making the prudent decision to save money and invest it while working toward loan forgiveness. I am in the same boat and I'm nearing forgiveness. I will have paid about $150k over the course of tens years before forgiveness kicks in.
I'm very conservative in terms of bad debt.
I don't have any and don't want any.
So if I were you I would sell the house all together, pay down the student loan and be done with it, move to a very small and humble place to save rent. And then I will use the 70k saving and all the left over from the sell to buy another property or something. And meanwhile working my *** off to increase any earned income and save as much as I can to buy more and more property which is pretty much what I'm doing right now... I rent a living room to save rent and save money for rental property...
Although it's hard to let go of something you already own, I think it can set you free (from the student loan at least) and you can start over pretty quickly and own another multi family soon, even a better one than you have now. You seem young, ambitious and smart so it shouldn't be a problem for you.
Just my .02
no brainer. You'll be able to buy more real estate down the road with less stress looming over your head.
Don't play around with interest rates and refinancing. Just get that thing out of your life! I'm not like a Dave Ramsey obsessed guy. I just think 180k dollars in loans changes the way you make decisions and will postpone your ability to build wealth.
Pay it off and start working on your next real estate deal. It'll just be so simple and you'll feel good about it. If you think about it you'll be in a really great situation! You could have no loans with some cash laying around for your next deal. That sounds like a great situation.
I wouldn't make assumptions about legislation. No way to know or predict what will happen. Even assuming you get forgiveness, I'd still sell it and pay it off. By the time those years are up you could have 15 properties or more (assuming you have a decent income from your degree)
All just my opinion of course. Who knows what I would really do in your situation, but I think I'd pay it off.
I question if you should be working at a NP with 180K is student loan debt. Usually, only the few at the top make good money and I would trust them to pay off my debt in 7 years. It is Poor Dad thinking to sell your assets to pay off the debt (also how Dave Ramsey thinks). I would look for the best paying job I could find with that expensive education, refi the loan as has been suggested, keep my assets and invest in more real estate. If you can't make more than 7% investing in real estate then you're doing it wrong. Good luck.