I’m a Real Estate Investor: Don’t Pay Off Student Loan Debt — Buy Properties Instead

In a recent YouTube video, real estate investor and marketing professional Joshua Baldovino advised graduates with student loan debt, “Do not pay off your student loans.”

If you save or come into a large amount of money, your first instinct might be to use those funds to pay off your student loans. But it might not be the wisest investment since student loan debt typically has low interest, and you may even be able to defer payments based on your salary.

When Baldovino married, he and his wife had a combined total of $80,000 in student loan debt from their graduate degrees. To save money, Baldovino and his wife moved in with their parents for three years, and through frugal living and the absence of rent or mortgage payments, they managed to save $100,000.

“But we didn’t pay off the student loans,” he told viewers. “Instead, we bought rental properties.”

The rental properties, in turn, generated a positive cash flow of $400 each. “Instead of you taking that $100,000 and dumping it into your student loans, your tenants in your rental properties are now paying down your mortgage, they’re paying down your student loans, and the house is appreciating,” he explained.

Factors Working in Baldovino’s Favor

First, let’s dissect the many things that made Baldovino’s plan successful – with the recognition that only some have these circumstances. Baldovino and his wife:

• Had the option of moving in with their parents, possibly rent-free, to save money.
• Held jobs that gave them enough income to save money at a high rate.
• Purchased investment homes in a market where real estate was rising in value so that they could build equity.
• They were able to rent the houses quickly to generate cash flow.

Many factors are working in Baldovino’s favor to make it possible. That’s not to say the couple didn’t sacrifice and save, but not every married couple can live with parents – or would want to – to secure a better financial future. And only some couples earn enough after college to grow their savings steadily, even if they keep their monthly expenses low.

Can You Pay Off Your Student Loans Through Real Estate Investments?

The question remains: If you save, inherit, or otherwise receive a large lump sum of cash, should you put it toward student loan debt? We asked Dr. Mark Poole, founder of SmarterPropertyInvestment.com, what he thought of this wealth-building strategy.

Poole pointed out that you’d have to first “earn enough to meet the minimum payments on the student loans as well as having spare income to save towards rental properties.”

He acknowledged, “You will need significant funds, so you should be able to save relatively large sums each month.”

He noted that you will need at least a 25% down payment, closing costs, and, potentially, additional funds to rehab or renovate the property before renting it out.

“I would suggest a minimum amount of $40,000 to buy a $100,000 property and scale that amount to the purchase…