I have $25,000 in cash. What should I do?

5 Replies

Hello everyone,

I finish my undergrad at San Diego State University this past spring. I’m 14k in debt. I did receive a full ride to graduate school, which is a one year program at UC Merced. 

My end goal is to work at a consulting  firm, while being a landlord on the side.

My original plan was to start working on consulting after grad school. Save up some money and buy a triplex using FHA loan, which I would live in and rent the other two units.

Surprisingly, I did happen to come up on 25000 cash. What should I do? Pay my loans off ? Or invest?

I am  The first of my family to go to college. I feel like I have a good opportunity in my hands and I don’t want to screw it up. 

Any and and all advice is welcome. 

Thank you.

My advice would be to pay up the student loan debt. What is the interest that you pay on that? I am assuming it's somewhere between 5 and 7%? Over time that adds up to a lot if you run a compound interest calculation. Having been there, done that, I think you want to make sure you have no handcuffs on you before you start running! Try to pay off the loan as soon as you can (ideally within 3 years of graduation) and then save up for RE investing. 

@David Dumas

I’d find 3 other buddies with 25k each. Pool your money and buy a college house. When you guys are all done living there, buy out your buddies. While you’re living in the house, take the money you’ll be saving paying rent and pay your bills. There, you killed two birds with one stone.

Would you borrow $25000 with an interest rate to invest? Of course you wouldn't, that's how it looks like on the balance sheet if you invest that money instead of paying off the loan. Pay off the loan.

@David Dumas - Depends on the rate of the loan. But keep in mind that you only have $9k in the eyes of the bank. I would say consider your monthly cash flow on any investment plus the annual interest expense on the student loan before you consider doing anything. That interest expense is cash out of your pocket that could either be saved or put towards an investment that pays you each month, not costs you. Keep building your cash or find a way to sweat equity into a RE deal. 

Lastly, if you were the first to make it to college in your family, you won't screw up. It's great that you feel that obligation but you can't let it be a psychological burden. Have confidence that you made it this far and that you'll continue to succeed because you've been successful already. Let the accomplishment and the obligation you feel you have to your family humble you, not scare you. Find people who you trust who are looking for someone young and driven to do their heavy lifting for them on RE deals so you can learn the "game". You've got goals, you know where to go and how to ask the right questions and you seem eager to build a career for yourself that gives you autonomy. You're doing all the right things, IMO and you're far ahead of myself at that age. God speed. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you