@Cody Smith coming from someone who had the same dilemma a few months ago with similar numbers, I think it all depends on your goals, income, and risk tolerance.
Before I learned about REI and stocks, I had made a plan to pay off my students loans by mid-2021. I was dumping a large amount of cash every month into paying off these loans. But now that I've educated myself on investing, I regret putting all of that money into my loans and wish I would've just made the minimum payments and put the rest of that money towards investments.
I look at it this way: the interest rate on my student loans are 4%. If I make the minimum monthly payments on my student loans, I'll pay them off in 7 years. Within that 7 years, if I invest in REI and stocks, I can make a much a higher return than 4%. The extra interest I'll be paying on my student loans by making the minimum payments will be minuscule compared to the returns I'll get from investing.
The beauty of investing your money comes from compound interest, which essentially means you are earning interest on your interest, and that interest is earning interest and so on — your money works for you instead of you working for money. Because of this, timing is of the essence. Once I realized this, it was a no-brainer for me to start investing my money asap. If I would’ve continued down the path of paying off my student loans super fast, and then spending more time saving up my cash reserves to eventually invest in RE, that’s potentially thousands of future dollars lost. The reason I regret making large payments on my student loans in the past is because I now realize how much potential future money I lost in doing so.
Now, of course, not everyone is comfortable with investing their money, but this is usually because they simply haven’t educated themselves. Once you’ve educated yourself, you’ve put yourself in a position to take calculated risks — you know there is risk involved, but you’ve done your research and understand that there is a higher chance of the investment working out in your favor than there is of losing money. Since you’re on BiggerPockets, I assume you’ve been educating yourself.
Income is another important factor. Personally, I am lucky enough to be able to make a couple monthly PITI payments using my income as opposed to relying on tenants to pay them. So, even if I got unlucky and had a vacant unit for 3 months, I wouldn't be struggling to make the PITI payment. If I was on a tighter budget, however, and couldn't afford a PITI payment on top of my living expenses, I probably would instead put my focus into increasing my income and/or decreasing expenses, as opposed to investing my money.
Additionally, I have a goal of retiring from the 9-5 lifestyle by the time I'm 50 and relying on my RE investments for income. To me, the thought of working for someone else my entire life and helping them achieve their dreams instead of my own is terrifying. So because of this goal/fear, it was important that I got started in REI asap.
The offer on my first rental property was just accepted yesterday and I plan on never looking back :)
Good luck with your decision and know that everyone’s situation is different, so do what’s best for you. But if you have any questions in the meantime, feel free to reach out.
-Brendan
