My husband and I are at a financial crossroads in our lives. I recently finished my medical residency, he is about to get his MBA in two weeks. I ran a "debt snowball" calculator adjusted for my new attending physician earnings and we’ll payoff our debts (primary home mortgage, mortgages for 3 investment properties, a credit card and small student loan) in 5 years. This doesn’t include the increase in salary that my husband will hopefully receive, so complete payoff may come sooner than 5 years. We would also save tons in interest saved from early pay off.
On the other hand, we also set the goal of building a real estate property company, eventually transitioning from residential rental to medical commercial rental properties. In aid of this goal, we could capitalize on the weak housing market and continue to purchase residential rental property. This would make us lots of money because our major South Texas city has inexpensive housing that is now even cheaper in this depressed market, but will undoubtedly be worth considerable more in the next five years or so.
My husband and I have discussed this at length, we’ve gone back and forth. Both routes are very attractive. So my question is this– If you were in a similar position, would you just go into "payoff mode" and erase your debt in 5 years or would you continue to build real estate holdings?
Lavista– Totally missed the point. First of all, my degree is worth more than paper. To me and most any country in the world, it gives me license to do what I’ve always wanted to do which is heal people. Additionally, I try to make sure that I’m not caught up by the superficial world (although I admit that this is a constant conscious thing I struggle with) My husband and I live in a neighborhood where the average salary is 1/3 of what our yearly salary is, my car is 10 years old, I still wear clothes that I’ve had since middle school, we seldom shop for any consumer goods and in general try to be good stewards of the earth’s resources. Having said this, I do like to be stable. I like knowing that come what may, I will be able to provide for myself and my family. There is nothing superficial or wrong about this desire especially since I donate more in time and money than the average US citizen. Thanks for the link, though. I’ll check it out. -M
You are definitely on the right track, but I would erase all debt except for your primary residence and "vacation home", as there are significant tax advantages to this debt over others. The rental property interest should be tax deductible as a business expense. When everything else is paid off, you can use the equity in those properties to get money more easily if the real estate market has improved. If it hasn’t, you will have more money to look at properties that would be even cheaper than today.
With the glut of property out there, make sure you have enough savings to carry the property without income for at least 6 months to a year, in case the real estate market continues to deteriorate. It would be a shame to have come this far, but lose it all in 5 years because you overextended now.
If your goal is really to start a real estate company, I would take advantage of the housing prices now and buy a couple more properties. If/when your husband receives a salary increase, then consider paying down debt more aggressively with the salary increase.
It sounds to me like you are on the right track. There is a great website http://www.unlockyourwealth.com that talks a lot about building real estate portfolios and paying off debt. Which looks like exactly what you are trying to do. I’d check it out! I think there are membership plans and you can get one-on-one help if you get the premium one. I listen to the radio show Unlock Your Wealth Radio a lot and I think it has good valuable information. I needed to get out of debt from a awful divorce. Let me know what you think!
try to use some online calculators and get a rounded payment figure and pay it off first. I hate to break it to you…im sorry…but all degrees in America are worth paper and nothing more. Do not fall into the superficial showoff world..where nothing matters….go to alternative news media and see how people are changing their lifes for the better.
type Gerald celente and get his economic views..go to alex jones website and see how people are changing their life by thinking differently than what government would like you to belive