All Forum Posts by: Samantha Springs
Samantha Springs has started 8 posts and replied 35 times.
Post: Selling Rental to Pay off Crazy Student Loan
- Investor
- Los Angeles, CA
- Posts 35
- Votes 23
Quote from @Travis Biziorek:
Hey Samantha, I'll take a stab at this.
It sounds like there are really two separate decisions to make here. Do you sell the rental? Do you use the proceeds to pay off the student loan?
It sounds like you're leaning toward selling the rental. You aren't enjoying the management side of it and it's not making you a ton of money. Why not realize those tax free gains and move on? It sounds like selling is the right move for you.
Now, do you pay off the 7.5% interest student loans?
That's hard to say. I think many will say "absolutely" but I don't believe it's that cut and dry. Is that payment a burden for you? As soon as you pay those loans you're giving up a pile of cash that you could invest out of state with. And yes, you could do better than 7.5% in the right market.
Will you regret giving up that access to capital?
Also, are you able to do anything to reduce the student loan interest rate? I'm not too familiar with them but I'm wondering if you can refinance at a better rate somehow.
Lastly, I have no clue how much money you make, how much other savings you have, etc. The big question here is how quickly will you be able to start investing out of state? Without much cash on hand it could take awhile to get going.
Thank you so much for the thoughtful response. I am an attorney and I make a good salary, so I do think I could start investing out of state pretty quickly. That said, you've given me a lot of food for thought as to the best use of the proceeds if I do sell.
Post: Selling Rental to Pay off Crazy Student Loan
- Investor
- Los Angeles, CA
- Posts 35
- Votes 23
Quote from @Jamie Jones:
Quote from @V.G Jason:
You should have never bought a rental until you paid off such loans. I think the only "debt" someone should have before investing in physical real estate is maybe their own primary home mortgage, but that's it. If you have any other debt, don't invest in physical RE. You got caught leveraging upon leveraging in the historically low, low interest rate environment. That's not forever, and you're going to learn the hard way. Sell the rental, pay off all debt(s) you have. Then invest in a position of strength. Quit thinking mathematically, think behaviorally.
You say she should never have bought a rental until she paid off such loans. However, my guess is she probably would have never been able to pay off the debt if she had not purchased the rental. Sounds to me like she made a very wise decision to purchase when she did, and can now compound that decision into freeing herself from that large amount of debt. I do agree that people should invest from a position of financial strength but with that amount of student debt, she likely has a decent paying job and (even with the student loans) was able to purchase an investment property in one of the country's most expensive market. That doesn't sound like a place of weakness to me. It would be different if she was talking about six figure credit card or multiple pay-day loans.
Great job @Samantha Springs
Thank you! I did the best I could with the information I had at the time and I generally feel very good about the purchase.
Post: Selling Rental to Pay off Crazy Student Loan
- Investor
- Los Angeles, CA
- Posts 35
- Votes 23
Quote from @V.G Jason:
Quote from @Jamie Jones:
Quote from @V.G Jason:
You should have never bought a rental until you paid off such loans. I think the only "debt" someone should have before investing in physical real estate is maybe their own primary home mortgage, but that's it. If you have any other debt, don't invest in physical RE. You got caught leveraging upon leveraging in the historically low, low interest rate environment. That's not forever, and you're going to learn the hard way. Sell the rental, pay off all debt(s) you have. Then invest in a position of strength. Quit thinking mathematically, think behaviorally.
You say she should never have bought a rental until she paid off such loans. However, my guess is she probably would have never been able to pay off the debt if she had not purchased the rental. Sounds to me like she made a very wise decision to purchase when she did, and can now compound that decision into freeing herself from that large amount of debt. I do agree that people should invest from a position of financial strength but with that amount of student debt, she likely has a decent paying job and (even with the student loans) was able to purchase an investment property in one of the country's most expensive market. That doesn't sound like a place of weakness to me. It would be different if she was talking about six figure credit card or multiple pay-day loans.
Great job @Samantha Springs
Thanks for your feedback. I was not close to paying off the debt as I utilized the FHA loan program and only had to put 3% down (roughly $25K). I definitely could have made different decisions in regard to my debt back then, but I didn't and here I am now, so trying to make my next move my best move.
Post: Selling Rental to Pay off Crazy Student Loan
- Investor
- Los Angeles, CA
- Posts 35
- Votes 23
Post: Selling Rental to Pay off Crazy Student Loan
- Investor
- Los Angeles, CA
- Posts 35
- Votes 23
Hi BP Fam! I am considering selling my duplex to pay off my insane student loans and would love to hear from the BP brain trust.
My student loans are $355K total with a 7.5% interest rate. Once repayment starts in October, I will pay about $1,300 monthly (but that will increase as my income increases, which it will continue to do as I get regular raises and have a promotion coming in the near future). I am about 10 years from payoff given the loan repayment program I am in.
My partner and I are currently renting in Los Angeles and intend to continue (interest rates and home prices are too high for it to make sense for us right now) and the duplex is also in Los Angeles. My current interest rate on the duplex is 2.75% (bought during COVID, what a time).
I would only sell if I could pay off my loans in their entirety, which would require a sale price of about $1.1M (which I think is doable in this market) and I owe about $737K. I have owned for almost 3 years and I lived in it for the first 2.5, so I would be exempt from a large portion of the capital gains, though I know depreciation recapture is a consideration.
I just started renting out the front unit on a medium term basis and combined with the long term rent in the back unit, I about break even right now, but could hope to cash flow around $200/month (on the conservative side) once I get more reviews and stays under my belt.
From a non-financial perspective, I am not loving the property management aspect of the home as it is not in a great neighborhood and even as the best AirBnb host ever, there are environmental factors that I can't control. My goal is to start investing out of state where I can do much more with my money and afford to pay a property manager, cash flow in a more meaningful way, and generate passive income to subsidize (and maybe eventually replace) my W2 income.
Should I sell to payoff the debt or keep it and keep paying on my student loans? Or do something else? Any thoughts are welcome!