House Sold - Now What?

Question

So I sold my house and pulled out everything I had invested in it. I bought the house for $280k, sold it for $350 and paid $10k in expenses on top of the $60k for the renovations, so in short... I broke even. I have $82k in student loans. I made the decision to pay off one large student loan with 7.5% interest at $29k. There are (2) more loans at 7.5% interest rate that regardless of where this cash goes I will focus on the next 2 years (29k and 7k) with any money I'm saving monthly. Remaining loan totals = $54k.

I've already decided that if I can pay off the high interst loans at the 7.5% interest, I'm okay with having the $300/month monthly payment the remaining loans require because they will be paid in full by 2026 (some earlier than that). So most important to pay down is the $29k + $7k student loans at 7.5% interest.

On the other hand, I'm extremely motivated to continue my real-estate investing journey. I've prided myself on home ownership since the time I was 24 and have reaped the benefits of those labors (my first flip made me $40k). I want to continue this journey and believe in the results. I want to focus more on rentals for that long term wealth building.

So that leaves me with this... I have $27k left from the sale of my house after paying off one very large loan ($29k). The idea of being out of debt sounds great, but maybe not at the price of delaying investing in another property for years. I'm currently house hacking a duplex with my fiance that leaves me with a VERY small home payment ($400/month including utilities). I'm able to save $2k/month min. We will have lived there for a year in April.

Long winded, but my final question is this. In the BIGGERPOCKETS communities opinion should I: 1. pay off as much student debt as possible with my remaining money and wait to buy another property as a live in house hack next spring (min $20k for the small multi-families we're targeting in A areas) or 2. invest my remaining money in another house hack now as my primary residence and pay off the debt in small chunks monthly as my savings allow

Let the advise begin... :)

Brandon Roof · Answer

If you look at it in a vacuum and remove any emotion or risk tolerance, it should simplify the question to look at each avenue for it's financial efficacy.  Will any money you invest provide you with a greater than 7.5% annual return (surpassing the rate on your loan)?  If so, invest.  If not, pay down the loan.

Hilary Stalder · Answer

@Jonathan Greene Debt-free has a nice ring to it!

@Nicole Heasley I tend to agree. I love the idea of owning something that will pay off the debt for me!

@Kevin Sobilo Yes! I need to do more research into the BRRRR strategy. It seems to combine the best of all real estate investing worlds into one very powerful strategy! Plus I thoroughly LOVE rehabbing.

@Brandon Roof Yes, I need to get more creative with how to find deals! Most of the great deals I find require a good amount of upfront capital to get into top-renting shape where you're hitting those 10%+ returns. I'll keep digging!

@John Wijtenburg Great advise! I'll add it to my reading list :)

Jonathan Greene · Answer

You will get a lot of invest, invest, invest advice, but I don't agree. You will increase your freedom exponentially if you spend the next couple of years paying off the loans. If you are running virtually debt-free at that point, your ability to scale up from one to the next will be much better.

Nicole Heasley Beitenman · Answer

I always advise investing over student loan payoff. Why pay off debt when you can invest in an asset that will cash flow and pay off that debt for you?

Kevin Sobilo · Answer

@Hilary Stalder, time is your strength here. You have a lot of years to invest. Most investors wish one thing, that they would have started sooner! You have started, so keep going to reap the long term rewards.

If you have the time and interest, consider using the BRRRR strategy. A good way to take your money and readily increase your rental holdings.

John Wijtenburg · Answer

@Hilary Stalder thank you for being so candid. I know it's not easy to put it all out there.

Student loans are a pain, and lots of people are in a similar situation as you. The good news is that there are lots of loan mod options available, so I would look into income-based repayment and other, similar options, first.

Deleverage vs. invest is a difficult question. Big companies even have this issue, and their solution is something that you may want to consider.

Find a capital partner.

You have something that many aspiring real estate investors lack - track record and experience.

With the right capital partner, you can stretch $20k to $200k in equity. That would allow you to buy a $1 million property, which comes with a lot of benefits.

Get a copy of Raising Private Capital by Matt Faircloth from the BP library. It will completely change your perspective on real estate investing. This strategy will also send you down the path to financial independence  if you play it right.

Hilary Stalder · Answer

@Michael A. I tend to be conservative as well. Especially if I had children to think about! Thanks for the feedback!

@Carlos Salazar I agree! Gotta go with whatever Mr. Kiyosaki says right?

Carlos Salazar · Answer

@Hilary Stalder thank you for sharing. My personal opinion is this: You are a very reasonable and astute individual that if you decided to invest it would work out. I would recommend investing given your track record of success and use the proceeds to pay off the student loans. This would be a win-win. The cashflow would pay off the loan and on the back end you will take advantage of the principle pay down and possible appreciation (not to mention the tax benefits) in the meantime.

As Robert Kiyosaki would say.... "This is a simple case of having money work for you."

Good Luck!

Michael A. · Answer

@Hilary Stalder Thanks for sharing. You’re getting some varied feedback - so here’s my two cents as well. I am really cautious when it comes to investing of any type. Before I allowed myself to by my first rental recently, I made sure that my big high interest debts were paid, had enough cash emergency fund to feel comfortable, and made sure my retirement account was on target. Having a wife and child (2nd one in a month) means that I absolutely cannot risk my financial security on a bad investment, or on something that doesn’t end up being right for me. If I lost my rental tomorrow I would be sad but not damaged financially. Just my mantra - hope that helps! Either way you are in good shape because of how early you have begun to do this.

House Sold - Now What?

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