New dentist: balance between paying student loans & beginning REI

[Eric Palmer]

Good morning BP! First post, here’s my intro: I’m a new dentist finishing a 1 year residency training soon, the plan is to then work in a group private practice for 2-3 years then become a practice owner.

One big question I have right now (maybe specifically for other dentists, but welcoming all comments) is the following: My wife and I are interested in learning about and beginning REI, especially rental income properties. Because dental school is so awesome, my student loan balance is $380k. For theses first years in my dental career, how do you recommend I balance the following:

A) pay down extra student loan balance

B) begin using that cash for REI

[Kevin Dean]

Hey @Eric Palmer, when I first graduated I had to battle with this same question. This is how I thought about it...

If I believe that my ROI from investing will be greater than the interest rate on my student loans, I invest. 

If I believe that my ROI from investing will be less than the interest rate on my student debt, pay off my loans as quick as possible.

To play devils advocate for the thought above here are some additional things I considered....

1. This simple equation does not account for the feeling you will receive after being debt free. 

2. If you dedicate 100% of your time towards being the best dentist possible, you may create more wealth in the process than you would have created by sticking your toe in the water in real estate investing while maintaining the full time dentist job.

3. The opportunity cost of not investing right now may outweigh the return you will get from putting that extra money towards you loans.  

4. But with no experience and a demanding schedule as a dentist, you may not have the time, energy and focus needed in order to create outsized returns above that of your interest rate. 

5. Another option could be investing with partners who have more time to spend sourcing, underwriting, acquiring and managing investments, enabling you to focus on your work, while investing that money into real estate and potentially receiving a return above that of the interest rate on your student loans. 

Just some of the thoughts that ran through my head when I was contemplating the same question. For the record, I chose to invest!