Invest or pay down student loans

[Alec McGinn]

Hello BP, I just graduated with almost 85k in student loan debt. This is between my fiancée and I. Our household generates 95k in W2 income. Now that I have money coming in I’m not sure what is the best thing I should be doing with it. Should I be paying down student loans then flood my investments when they are gone or should I go for a balanced approach? I have a 403B and Roth IRA account for options and I own a house that I live in and intend to rent. What would be your strategy?

[Michael Pearse]

@Alec McGinn Great question. I am sure many other graduates are in the same situation and are looking for an answer.  At a high level all you need to consider is what interest rate your student loans are at, and what type of return can you get with real estate. If you can achieve a return higher from real estate than your student loan interest, then you are making money.

If your ROI from real estate is higher than student loan interest, then you can appreciate these perks as you develop your technical knowledge. 1. You are learning the business 2. Networking, 3. Building equity, 4. Have the opportunity to take advantage of the tax breaks that come with real estate.

In my opinion you should find a balance of paying down student loans and investing in real estate as you are comfortable with. I would not recommend paying down only student loans as you may fall into the cycle of thinking that you will learn more about real estate when all the student loans are gone. Which could be 2+ years from now, and who knows if you will still have the energy or motivation to get involved in this business. If you can save money for an RE investment, you can get over the biggest hurdle (buying your first investment property), and focus on refining your systems to make even more progress on the next deal. Good luck