Real Estate Investing vs Student Loans

[Phison Vy]

Good morning,

I have been reading and learning more about real estate investing. I really want to take action but is hesitant because my liabilities are so high due to student loans.

I have about $180,000 in student loans. Should I save and invest more toward real estate while paying only the minimum towards my student loans? Right now my wife and I are putting a high percentage of our income towards student loans because we really want to bring it down. It will take about 2-3 years for us to pay all the loan off if we continue at the current pace.

We are both travel Physical Therapists and are making a lot more than usual. I’m afraid that in 2-3 years we might settle down and take a permanent position, leading to lower income. 

My question is, with such a high student loan debit. Is it smart that we are primarily focused on paying it off? 

Thank you in advance for any advice.

[Reid Chauvin]

Hi @Phison Vy - I think it is smart that you are focused on paying off your debt. Whether or not you should be paying more than the minimum towards the debt or paying the minimum and investing the rest generally depends on the cost of the debt vs the returns you could gain through investing. Check out a Debt Payment vs Invest Calculator online to see what I mean. 

I think that given where interest rates are and the fact that you are traveling and will be more hands-off on managing any investment property, generating returns that are higher than interest rates on your debts will be a challenge. Not to mention you will also need to put down at least 15% of the purchase price as downpayment if you are buying an investment property (i.e., you won't be living in it). 

Keep plugging away at paying down your debt and work on stashing away some savings as well, that way you have the capital to cover the upfront costs of buying a property when you're ready. Pursuing a house-hacking strategy in the future where you can leverage a low downpayment loan option may be best for your situation.