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Old 05-16-2016, 12:23 PM
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Where should I put my money?

My wife and I are Realtors. We have extremely modest lifestyles that cost about $3,500/mo to uphold. Here's our approximate cost breakdown:
  • Mortgage #1 ($1300)
  • Mortgage #2 ($1600)
  • Monthly Cash Flow from Mortgage #1 Rental ($400)
  • Groceries ($200)
  • Gas ($200)
  • Entertainment ($200)
  • Healthcare ($400)
  • Insurance, Home Maintenance, MISC: ($1,000)
  • ZERO car debt, ZERO consumer debt

Our pie-in-the-sky investment goal is to have 10 rental properties before we turn 40, which puts us on track to pick up 1 every 14-16 months. The average duplex in our market costs about $220,000-$250,000, and we're able to put away about $75,000 a year in savings (we net about $120k after business expenses and taxes).

I'm a little torn on where to start first. We sort of lucked into our first rental by buying our first home before that particular neighborhood took off. We only had 5% down at the time and bought for $205,000. It's worth about $250k now which gives us an equity position of about +$62,000. We also bought our second home at 5% down for $250k in a growing neighborhood and now comp it out at about $275k. Our equity position in this house is about $38,000.

We've only put 5% down on our homes because we've been throwing nearly every disposable dollar we make at our student loans. We each went to private grad school and racked up a combined $155k in debt (oops) at 6.8%. We've paid off $105k of it so far and have just about 50k to go. Do we wipe out these student loans, which are currently in deferment until next July before picking up our next rental property, or do we buy the rental and use the cash flow to subsidize about 80% of the (future) payment? Given our income and modest lifestyle, does it really even matter what order we do things in? I understand paying off the debt is an immediate return of 6.8%, however there is no asset to back it, no cash flow, and virtually no tax bennies. I'd love to hear someone's thoughts on this.



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Old 05-16-2016, 08:22 PM
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Originally Posted by plush View Post


#1Do we wipe out these student loans, which are currently in deferment until next July before picking up our next rental property, or do we buy the rental and use the cash flow to subsidize about 80% of the (future) payment?[/b]



#2Given our income and modest lifestyle, does it really even matter what order we do things in? I understand paying off the debt is an immediate return of 6.8%, however there is no asset to back it, no cash flow, and virtually no tax bennies. I'd love to hear someone's thoughts on this.
#1Do we wipe out these student loans, which are currently in deferment until next July before picking up our next rental property, or do we buy the rental and use the cash flow to subsidize about 80% of the (future) payment?=====>I guessit depends and hard to decide; your situation is more or less a personal fianc? issue rarther than a tax issue; in my opinion, unless it is a big burden to repay your loan If you can afford to pay more than your required monthly payment - every time or now and then - you can lower the amount of interest you have to pay over the life of the loan. To pay down your loan more quickly, make sure to include a written request to your lender specifying that the extra amount be applied to your loan balance, and continue making payments each month. Otherwise, your prepayment may automatically be credited to a future payment and you may not be billed for the next month. , But it may depend;for example, If your income fluctuates because you're self-employed, you can also set up an income-sensitive or income-contingent repayment plan. aslongas you're considering paying off one or more of your loans ahead of schedule, start with the one that has the highest interest rate. If you have private loans in addition to federal loans, start with your private loans, since they almost always have higher interest rates and lack the flexible repayment options and other protections of federal loans.
The federal government offers relief for taxpayers with student loans. Presuming your income makes you eligible, you may deduct the interest you pay up to a maximum of $2.5k (max deduction is $2,500 (married or not). a year. The income limits to qualify for a full or partial deduction are less than $90k if you're single or $180kif you're married filing jointly.so, there is a cap on the amount of interest you can claim each year on your 1040 You can reduce your income subject to tax by up to $2.5k of qualified student loan interest annually.


#2;Given our income and modest lifestyle, does it really even matter what order we do things in? I understand paying off the debt is an immediate return of 6.8%, however there is no asset to back it, no cash flow, and virtually no tax bennies. I'd love to hear someone's thoughts on this.==> I guess you need to contact a finaiical planner for more wise financial/ professional help.



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