Pay off student loans vs save for rental property

[Zariyan S.]

Hello,

I need some financial advice. I'm deciding between paying off my student loans or saving for a rental property.

My current house is paid off and I have no mortgage.

I have $350K in Equity in my house.

Here are details about my student loans.

Loan 1) $2,800 @ 3.61%

Loan 2) $6,200 @ 3.15%

I don't have 20% yet for a rental property, but I'm deciding if I should pay off the student loans.. or at least loan 1 for now? and then save for the rental property. What do you think?

Thanks,

Zariyan

[Larry S.]

Hi @Zariyan S.. I, along with many people here on BP, would say that your student loans have such a low interest rate, that it doesn't make sense to pay them off any faster than necessary.  You should be able to get a better return with almost any other investment, rather than paying them off earlier. 

Also, if you have a house worth $350k that you own free and clear, you can open up a HELOC. This way, you can borrow against your house, and end up with 20% down for a rental property, without coming up with any cash out of hand.

Hope that helps