Student Loans v.s. Real Estate Investing

[Account Closed]

Hello All,

I am just getting started on my path to financial freedom through Real Estate. With my first post on BP, I would like to ask for any advice regarding my current situation.

I am a recent pharmacy school grad with about 85k student loans at around ~4% interest rate. 

I've been predominantly using my income to pay off this debt as fast as I can and am expecting to pay it off completely within 2.5 years.

My question is this: Rather than dumping the extra money into my student loans, should I save that money to invest it in a duplex? 

My thinking is this: If I can manage to find a duplex to house hack, I would be benefiting from

• 1. Saving money on rent. I pay about 1k in rent right now, so if I can pay anything less than that while living in the duplex.. win?
• 2. Appreciation in the value of my home
• 3. Building Equity in the home early (My plan is to take out a HELOC for my second investment, hopefully in the near future)
• 4. Tax deductions

The downsides:

1. 1. I would be paying more interest during the time I am saving up for this investment
   1. If my ROI is better than 4%, would I be offsetting this cost?

1. 2. What if my duplex turns out to be a nightmare (Unforeseen expenses and repairs, Bad Tenant, ETC)

Any insight on this is greatly appreciated! Anyone been in a similar situation? Am I missing any pros/cons? 

Best,

JYC

[Jonathan Bombaci]

It’s a very valid question that I get quite a bit from people looking to househack. You’re thinking about it the right way where if you can live in a duplex for less than $1k a month that savings can help you pay down your debt but while you save for the downpayment you’re incurring that 4% interest on the loans you could be paying off. It ultimately comes down to your risk tolerance. You can take the 4% guaranteed return by paying off your loan or see if you can get a better return by househacking. 4% is a low waterline to beat but it’s all about your personal tolerance.

All that being said I’d recommend talking to a lender to make sure the student loans won’t prevent you from getting a preapproval high enough to buy a duplex and see what downpayment you’re going to need. That info can help you make a decision.

All that being said I’m a strong believer that house hacking is the best way to get started in real estate. 

Best of luck!