Pay off student loans or invest?

7 Replies

Hi all,

So, I am new to this site and am very excited to learn and hopefully grow in the real estate world. I am itching to get into rental properties, but know I need to do some research and saving before I can make that initial investment. 

having graduated from grad school last year, I have a lot of student loan debt. I have been paying it off aggressively and am very proud of my progress there. I have also managed to save a good portion every month. My goal would be to use these savings to purchase a rental property. SO, a couple questions....

-Should I pay off ALL of my student loans before investing? (This would likely take 3 more years to do completely)

-Would you recommend single family homes or multi unit buildings for a first investment?

-How much do I need saved for a down payment? is 20% accurate? should I put down more?

-Is buying a property that is cheaper, but maybe needs a new kitchen or bath better than paying for a nice upgraded property?

Thanks for any advice!!!

@Madeline Jary - a lot of answers to your questions are in the forums and blog posts so I highly recommend searching those and listening to BP podcasts. 

To summarize a response to your questions

(1) Would only pay off student debt if interest rates are >7.5%... else would save money for investment purposes

(2) First investment.. duplex or triplex would get you the most income (paying most if not all of your PITI payments). I did a duplex as my first investment property

(3) Down payment for owner-occupied SFHs can be as little as 3.5%. On multifamilies it varies by state/lender. I'm in Philly and on a duplex/triplex and owner occupied building.. you can put down 5%, conventional mortgage, 30 year term, as long as the rentals pay a good amount of your PITI, you're fine

(4) YES.. usually (but not always) buying a property that needs some rehab work will net you more money in the long run because of your forced appreciation in fixing the place up (read: sweat equity).  I will say that buying a turnkey place in an "up and coming area" (if it's really up and coming) may make you the same or more money in a few years.  

It’s hard to answer the debt question without knowing the interest rates. If it’s above 6 percent is for sure pay those off. It’d s guaranteed return on your money.

My opinion is you want no other debt besides mortgage debt.

As far as first investment type, of you househack (meaning owner occupy a 2-4 unit) then go that route.

If you’re not doing that I would start with a single family, just to keep it simple.

Originally posted by @Caleb Heimsoth :

It’s hard to answer the debt question without knowing the interest rates. If it’s above 6 percent is for sure pay those off. It’d s guaranteed return on your money.

My opinion is you want no other debt besides mortgage debt.

As far as first investment type, of you househack (meaning owner occupy a 2-4 unit) then go that route.

If you’re not doing that I would start with a single family, just to keep it simple.

I do have some loans still above 6%, but not much. So would you recommend once that higher student loan debt is paid off to funnel the money I was putting towards student loans into saving for investing? And just reduce student loan payments to the minimum. 

Also, I own my own home, so the househacking option won't work for me.

@Madeline Jary we’ll definitely pay off the 6 percent loans. How much is your total student debt?

Obviously if you have any other high interest debt like credit card debt pay that off first.

I would still stand by what I said earlier and pay off all student debt first.

My mortgage debt is almost all at 5 percent and I’m already paying that down ahead of schedule.

I’m more conservative by nature than a lot in this site but that’s what I’d recommend.


Also, I own my own home, so the househacking option won't work for me.

We also own our home, and have massive student debt- but found a way to house hack with Airbnb! Last month I made a few hundred above the mortgage- so if you have a spare room...or even a couch, you could start house hacking!  It has been such a success that I may go this route for the new units we are finally acquiring as investment properties.

There are resources of BP and YouTube about hosting Airbnb, also be sure to check the law in your town. 

As a member of the 6 digit grad school federal student loan club, with loans around or below 6%; I am in more of a hurry to max out my investments prior to loan pay off... Check out the Bigger Pockets Money Podcast #22 about student loan pay off.

Best wishes!

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