Debt Versus Investments

[Jameson Wildwood]

So I have a very complex personal finance situation, one that's perhaps causing me more constraints than I'm fully aware of because of it's complexity and obligations. I feel totally ok with sharing some ballpark numbers because it puts things in context.

1) Student Loans,
I have 46k at 4.75%, and 15k at 5.5%

2) Credit Cards,
$23k in debt. I have a variety of credit cards, all the significant balances are being carried at 0-3% because of prolific balance transfer offers. However it still adds up to a fair amount.

3) Real Estate
I own 1 house on my own (~$100k value), and 2 houses (~$50k each) in partnership with my father. These were all bought last year. All of these have conventional 75%LTV financing. I bought these from my trading portfolios and ROTH withdrawals.

4) Good job, work in Software in San Francisco, but that also means my living expenses are high, probably reducible somewhat.

5) A business that I own that throws off a little cash, but it's mostly a "professional hobby" type endeavor. I run social dance events in the city.

Ok, so here's where I get to the crux of why I'm posting. I'm trying to figure out where to put money next. I could:
A) Pay off CC debt
B) Pay of Student debt
C) Buy more houses (I could probably grab two more this year in the market I'm looking in, if I really stretch)

Some of the things I'm considering while debating this in my head.
- Real Estate is much more mentally stimulating than paying off debt, but that could be reframed if necessary
- I'm concerned that if I pay off my CC debt that old habits will put me right back into it
- I'm a Math guy, so it feels difficult to justify paying off a loan at 5% than investing money at 15-20%. It feels like taking on debt to increase passive income is a better way to go. Even though the CC could be considered "bad" debt, and the Student Loans "neutral" debt.

Thoughts? Considerations? Opinions?

[Sharad M.]

Hi @Jameson Wildwood

That's a tough situation. The math guy in me says buy the houses at 10%+ ROI and pay off CC and Student Loans as monthly payments. In order to do this, you will need discipline to be sure that you invest your savings and not spend them.

But at the same time it would be a huge mental relief to pay off the debt and start fresh without any monthly obligation to worry about. You can not put a price on peace of mind.

I have changed my investment strategy to where I am buying properties using cash only and not taking any more debt and it gives me a peace of mind which is very important to me.

It's a very tough call, but if I were in your situation, I would probably pay off the CC and student loans first and then move forward with RE investing debt-free.

Dave Ramsey will be so proud :)