Using life savings to pay off student loans vs starting REI

[Travis Eid]

Hi,

I was hoping to get some advice from BP members. I love this site and have learned so much already. I've always been interested in real estate and would love to get started with buy-and-hold investing. I want to have a semi-passive source of income, which I hope to grow and be able to retire early (for me that would be when I hit 40k per year in cash flow). 

I just graduated from veterinary school with $180,000 in debt. I have a job in the central valley, CA that pays ~$100,000 per year. I have $40k in savings and very low living expenses. For my loans, I'm currently on an income based repayment plan with monthly payments of $1000 for 25 years. 

My question is, should I use my savings to help pay off the loans or would it be smart to use it to get my foot in the door in real estate? I'm not very excited about the market here in California, and with my busy schedule, I'd be looking at investing in turnkeys (right now looking at Atlanta, Austin, Chicago but much more research is needed). I'm currently looking at areas that cash flow well and also show some hope of appreciation, and ideally MFR.

Thanks for any help!

[Frank Patino]

If I were in your shoes and I landed a deal where I would use my 40k as a down payment and cash flow $500-700 monthly you can then use that towards your loans on monthly basis (assuming you keep some for reserves, etc). You would also have instant equity if you buy correctly. Keep in mind you make your money when you buy the property so make sure you don't over pay. 

Last year end of year I had about 40k and I decided to select the flip strategy. I also have a W2 job and work 45-60 hrs week so I always kept an eye on the market and told everyone I came across I was looking to flip. A few months later a realtor called me about a property. I used a hard money loan since the property needed work and used the 40k for down payment and rehab costs. I profited 15k when I sold it. I rolled all those funds into another flip I working on now which also came from a realtor and estimating a 30k profit. 

Whatever route you choose make sure you don't overpay and you have a solid tenant applicantion process so you avoid any headaches. If you're looking to invest 40k as down payment you can invest in a decent area. Good luck.