Paying extra money to student loans or save up to buy a house?

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How much student loan interest can I write off at the end of the year vs. the mortgage loan interest if I buy a house right now? Can anyone help?

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As others have said, this decision really employs many factors, but I would say that for most people in most markets, you will be better off renting as a newly minted pharmacist (at least in theory). Renting allows you the flexibility the relocate for better opportunities, and better fluidity in your cashflow. What I have not heard people talk about, however, are the behavioral advantages to being an owner vs renter. Owning a house (and thus paying a mortgage) compels you into forced savings and generally makes you a more responsible person. Additionally, many studies have noted that owners have between 30 and 50 times the net worth of renters, so even though mathematically you may be better off renting, having the responsibility of owning a home may actually make you wealthier.

I do think in many situations people would be better off renting, but you have to be very disciplined not to increase your standard of living and embrace a vagabond lifestyle. On the other hand, a home owner also must be disciplined due to the added responsibility of owning real estate, and herein lies the catch 22 of this decision. At the end of the day, building wealth really is a simple formula that can be accomplished both by owning and renting, so really think more about your lifestyle goals and personal needs when deciding.
 
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As others have said, this decision really employs many factors, but I would say that for most people in most markets, you will be better off renting as a newly minted pharmacist (at least in theory). Renting allows you the flexibility the relocate for better opportunities, and better fluidity in your cashflow. What I have not heard people talk about, however, are the behavioral advantages to being an owner vs renter. Owning a house (and thus paying a mortgage) compels you into forced savings and generally makes you a more responsible person. Additionally, many studies have noted that owners have between 30 and 50 times the net worth of renters, so even though mathematically you may be better off renting, having the responsibility of owning a home may actually make you wealthier.

I do think in many situations people would be better off renting, but you have to be very disciplined not to increase your standard of living and embrace a vagabond lifestyle. On the other hand, a home owner also must be disciplined due to the added responsibility of owning real estate, and herein lies the catch 22 of this decision. At the end of the day, building wealth really is a simple formula that can be accomplished both by owning and renting, so really think more about your lifestyle goals and personal needs when deciding.
Can't say it better myself. Most people spend their money for sh1t that don't really matter (but their ego) just because they have some extra cash laying around.
 
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Well friends and coworkers have been telling me to buy a house for the tax benefits.

The more you spend, the more you save!!

You will get "tax benefits" if you buy a new Tesla and have 10 kids too but it doesn't mean you'll save more money.
 
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Is this another thread about the same damn thing by this OP? The mere fact that he needs to ask indicates he's probably not ready/knowledgeable enough yet to buy a house and come out of it with a profit. Not to mention I'm pretty sure he's a new grad, single (though apparently has people to support), and has major loans.

Honestly, it sounds to me like the people you're supporting just want a nicer place to live and are just coming up with reasons to support it. You're really not in a good position to buy a house just yet.
 
I have $60k student loans left

I bought a duplex in January for $580,000 with 5% down ($29k) + closing costs (blah blah close to $40k) thinking "hey, it'll appreciate. Last sale price was $420k 3 year ago!"

2 mo's after purchase, it dropped to $553,000 (effectively wiping out my down payment) and value flat lined. Very few comp sales in the area to indicate it may go up. Interest rates are going up soon...property price will likely fall. Only way I can get it up is renovate and ^^ rents.

Had I not bought the house, I would've paid off my student loans. Sucks. Yeah, I only pay ~$1,700 mortgage and get tax benefits (which I won't see until year end), but I saved a $ load more when I paid $600/mo to rent a room.

Pay off the loans. Your timing is too late to buy a house and make it up in appreciation. Sure, buying a rental helps, but you gotta put a huge down payment for it to math out...at which point that down payment could've paid off your loans.
 
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I have $60k student loans left

I bought a duplex in January for $580,000 with 5% down ($29k) + closing costs (blah blah close to $40k) thinking "hey, it'll appreciate. Last sale price was $420k 3 year ago!"

2 mo's after purchase, it dropped to $553,000 (effectively wiping out my down payment) and value flat lined. Very few comp sales in the area to indicate it may go up. Interest rates are going up soon...property price will likely fall. Only way I can get it up is renovate and ^^ rents.

Had I not bought the house, I would've paid off my student loans. Sucks. Yeah, I only pay ~$1,700 mortgage and get tax benefits (which I won't see until year end), but I saved a $ load more when I paid $600/mo to rent a room.

Pay off the loans. Your timing is too late to buy a house and make it up in appreciation. Sure, buying a rental helps, but you gotta put a huge down payment for it to math out...at which point that down payment could've paid off your loans.

Yeah but did you post a picture of the duplex on FB? That itself is worth at least $10 k in baller status points.

Btw, why is closing cost so expensive? $40 k?


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How much student loan interest can I write off at the end of the year vs. the mortgage loan interest if I buy a house right now? Can anyone help?
There is an income limit of $80k single/$160k married for deducting student loan interest. It phases out starting at $65k/$130k. It's also limited to $2,500 in interest.
 
How much student loan interest can I write off at the end of the year vs. the mortgage loan interest if I buy a house right now? Can anyone help?

Sorry but if you don't know why you aren't eligible for the student loan deduction then you have no business purchasing a home.
 
Yeah but did you post a picture of the duplex on FB? That itself is worth at least $10 k in baller status points.

Btw, why is closing cost so expensive? $40 k?


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LOL Facebook hasn't been touched since 2010? Sad part is front unit I live in is not even a baller house...1942 build 630sq feet...eek

I forgot what closing costs were...maybe $7-8k? I am just saying down payment plus closing costs was almost $40k total. Just saying that $$ could've gone towards loans...
 
Buying a house in your current financial situation and stage of life sounds like a bad idea. Focus on paying down your student loans and saving an emergency fund in case of job loss.

I am really glad I did not buy a house right after school. I just paid down student loans and saved, while living in a cheap house with a roommate. I am now 5 years out of pharmacy school and we did buy a house last year. We are both settled and happy with our jobs and know we want to stay in this city longterm.

I do not see any of my rental payments as waste, renting was the right thing to do at the time. It provided a roof, lived in a fun area of town and allowed for flexibility.

Don't buy a house just because others are telling you to do so. Also spend this time to learn more about home ownership pros vs cons, learning to budget and save for retirement and a rainy day. It seems like you have a lot to learn about financial mgmt, which is perfectly okay. Start learning and saving.

Best of luck.
 
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update - one positive about a house are flexibility/options

When I rented, the payment stayed the same for 1 maybe 2 years, then went up $100-$200/month (in socal)

The house I bought qualified for an FHA streamline re-finance and I just dropped my monthly payment $200/month after making 6 months of mortgage payments. Now I just need to find ways to get the rents up (through renovations) so that they will cover the mortgage, then I can move out and repeat.
 
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My experience with my fiance ( who graduated in the same class as me) was pay down her grad plus as soon as we started working. That was about 20k out of the 150k she started at. We bought a house after 8 months of working for 247k while putting down 15%. We then paid enough on the house right away to get 20% paid off to drop the PMI. The next year we worked like crazy and paid off the rest of her student loans. I enrolled in repaye after I got my federal job and am going for PLSF. We are now paying down the rest of the house while having for our wedding. Dual income helps a lot.

Also notable is that her car is paid off and so is mine. When I worked retail, I think I had the second worst car at my store, including front end associates lol.

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LOL @ dual income comment...in the back of my head, it's a practical consideration. My parents are desperately trying to get me married to a traditional, stay-at-home, Indian wife and baby make 1-2 kids ASAP...I'm thinking - if she doesn't make XYZ amount to cover her own expenses + kid expenses+ and pay into mine (mind you, a partner/spouse now means I lose the rental income & cost sharing of a roommate) how am I going to get out of debt faster? PASS...I'll stay single unless she's really rich...which 99% of the time means, she can do better than me anyways LOLOL

But I dunno about the "worst" car comment...my parents have owned plenty of beater cars that cost $2-3,500/year to maintain. I still think civic/elantra/corolla/camry are the most inexpensive vehicles to own...I'd bet an '05 camry is cheaper to run than an '96 Dodge Caravan/dodge neon/old pontiac grand am/certain GM A-body's/99ish taurus/etc.
 
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I'm going to say the opposite of everyone. Buy a house and pay the mortgage off asap. Paying a mortgage is similar to putting money in your bank.

You will have a tangible asset that has value to other people besides yourself...while your loans don't.

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that doesn't work when we hit a housing bubble- speaking from experience, I bought a house - owned it for 8 years, and sold it for a 15% loss - I know another friend who bought a house for 450k - 5 years later the exact floor plan across the street sold for 180k - and FYI - neither of these were in cali
 
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that doesn't work when we hit a housing bubble- speaking from experience, I bought a house - owned it for 8 years, and sold it for a 15% loss - I know another friend who bought a house for 450k - 5 years later the exact floor plan across the street sold for 180k - and FYI - neither of these were in cali

Most houses don't go up at all. 3-4% nominal return, 0-1% real return. If you hit the bubble, your dp is wiped out and your leverage play (taking a mortgage) turn to be a nightmare. A lot of people seem to think house go up forever/best investment vehicle lmao... Investors again and again always fall to recency bias. They just don't know any better.
 
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that doesn't work when we hit a housing bubble- speaking from experience, I bought a house - owned it for 8 years, and sold it for a 15% loss - I know another friend who bought a house for 450k - 5 years later the exact floor plan across the street sold for 180k - and FYI - neither of these were in cali

I would have walked away from that latter situation assuming you were in a non-judicial, single action state. That level of equity loss makes the 3-4 year hit on a credit report worth it.


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Most houses don't go up at all. 3-4% nominal return, 0-1% real return. If you hit the bubble, your dp is wiped out and your leverage play (taking a mortgage) turn to be a nightmare. A lot of people seem to think house go up forever/best investment vehicle lmao... Investors again and again always fall to recency bias. They just don't know any better.

Yup, houses aren't investments, they're tax advantaged places to live that are supposed to give you the feels and access to higher end school districts for nominal property tax rates that remain constant.

It can also provide difficult-to-access forced savings....aka equity.


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that doesn't work when we hit a housing bubble- speaking from experience, I bought a house - owned it for 8 years, and sold it for a 15% loss - I know another friend who bought a house for 450k - 5 years later the exact floor plan across the street sold for 180k - and FYI - neither of these were in cali

Yes and my real estate buddy can tell you how many people made a 100-300% gain from buying during the crash.

Just because something at some point had a negative return, it should not mean you need to stay away from it forever. Stocks are another example... Everything is up at least 100% since the crash. My pharmacist buddy invested 300k and its value today is 1.1M.

Any "investment" involves risk. I'm not saying a house is a good investment. I'm just saying you will recoup MOST of your money back if needed. On your loans you can't recoup anything if needed.

When purchasing a house you need to do your due diligence on the house.. buy one comparable to a blue chip stock



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I would have walked away from that latter situation assuming you were in a non-judicial, single action state. That level of equity loss makes the 3-4 year hit on a credit report worth it.


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not when you paid cash - can't walk away - or no real point
 
Hi,

What are your thoughts?

It depends on where you're buying and their rate of appreciation.

Here's an example.
We bought a rental a year ago for $367k. The house now sells for $480k.
If you decided to pay down debt instead of buying this particular house, it would cost you an extra$110k for waiting a year. Sure you paid off what, an extra $40-50k in debt? But now your purchasing power is crimped by $110k.

ALSO...you're going to be paying an extra $110k in taxable value (in California, I don't know how other states work), so you'll be paying out of pocket an additional $1,300-1,400 in taxes ANNUALLY just because you waited a year.

Make sense?

Cash flow, is often more important than total debt, so always keep that in mind, and never put yourself in a situation where you have to work a job you hate.
 
It depends on where you're buying and their rate of appreciation.

Here's an example.
We bought a rental a year ago for $367k. The house now sells for $480k.
If you decided to pay down debt instead of buying this particular house, it would cost you an extra$110k for waiting a year. Sure you paid off what, an extra $40-50k in debt? But now your purchasing power is crimped by $110k.

ALSO...you're going to be paying an extra $110k in taxable value (in California, I don't know how other states work), so you'll be paying out of pocket an additional $1,300-1,400 in taxes ANNUALLY just because you waited a year.

Make sense?

Cash flow, is often more important than total debt, so always keep that in mind, and never put yourself in a situation where you have to work a job you hate.
Here is an example, I buy xxx stock a yr ago for $10/share, now it is worth 20. Wow me! I'm a genius. Next yr it will be 40/share.

Looks legit in paper. Must follow.
 
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Ok, so real estate is good when the market is going up, and bad when the market is going down. Did I get that right?

The problem of course is that you don't know which way it will go in the future. I have even experienced both the downs and the ups in just the past 8 years. Bought in 2008 for $355k. House was newly built in 2006 for $660k but the original buyer walked away due to the housing crash, so I thought I was getting a bargain. Not so. Value continued to fall until 2011 to $260k or a $95k loss! I could've walked away like everyone else but instead I just hung on, and in fact I paid off the mortgage in 2015. Current market value is now around $430k but the best feeling is not having a mortgage payment, so I really don't care which way the market goes. The way I see it, if the market goes up I can sell it for a good price but I'll also have to pay a high price for my next house. If the market goes down, that's ok. I can stay put, or move into another inexpensive house.
 
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Ok, so real estate is good when the market is going up, and bad when the market is going down. Did I get that right?

The problem of course is that you don't know which way it will go in the future. I have even experienced both the downs and the ups in just the past 8 years. Bought in 2008 for $355k. House was newly built in 2006 for $660k but the original buyer walked away due to the housing crash, so I thought I was getting a bargain. Not so. Value continued to fall until 2011 to $260k or a $95k loss! I could've walked away like everyone else but instead I just hung on, and in fact I paid off the mortgage in 2015. Current market value is now around $430k but the best feeling is not having a mortgage payment, so I really don't care which way the market goes. The way I see it, if the market goes up I can sell it for a good price but I'll also have to pay a high price for my next house. If the market goes down, that's ok. I can stay put, or move into another inexpensive house.

$95k paper loss walk away would have been dumb. My advice is usually to walk away at $250k loss and other mitigating factors. Credit returns to relative normalcy within 3 years (credit score to ~700 post default).


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$95k paper loss walk away would have been dumb. My advice is usually to walk away at $250k loss and other mitigating factors. Credit returns to relative normalcy within 3 years (credit score to ~700 post default).


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You keep making it sound like it is so easy to walk away with no consequences or repercussions, but I don't agree. For Pete's sake, we're still recovering from the housing crash of 2008 because so many people walked away. First it was people in the housing industry like realtors, builders, mortgage brokers, etc. Then other people stopped spending because their home equity was drying up, and eventually they were underwater so they walked away too. Then it snowballed and everyone was getting laid off including pharmacists because no one was spending. Then the banks and stock market collapsed and it was very nearly game over. Do you want to see this sort of thing happen again?
 
$95k paper loss walk away would have been dumb. My advice is usually to walk away at $250k loss and other mitigating factors. Credit returns to relative normalcy within 3 years (credit score to ~700 post default).


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depends on what state - many states (my state) allows for the the bank to sell the house and sue you for the difference in what the value of the loan was, and what they get - and considering we make 6 figures plus, and many of us have at least 1/2 million in the bank/retirement - beleive me, they are going to go after it
 
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depends on what state - many states (my state) allows for the the bank to sell the house and sue you for the difference in what the value of the loan was, and what they get - and considering we make 6 figures plus, and many of us have at least 1/2 million in the bank/retirement - beleive me, they are going to go after it

That's what we need. A thread about asset protection. I can't believe the schools don't at least provide a little seminar concerning this. They just send us little sheep out into the wilderness clueless about the pitfalls.
 
if you have less than 200k, you should be able to pay it off or most of it within 3-4 years really.
came out residency pgy1 w/ 186k in loan, went HAM and about 20 month later I'm at 99k, so technically w/ interest I paid 100k in 2 year, its doable but you just gotta be frugal.

I'd at least get your student loan to less than 50k before considering buying a house.
 
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Here is an example, I buy xxx stock a yr ago for $10/share, now it is worth 20. Wow me! I'm a genius. Next yr it will be 40/share.

Looks legit in paper. Must follow.

my point, genius, is that waiting to buy a house can really crimp cashflows. That's why I mention the additional taxes people often overlook when they buy in higher. I didn't guarantee returns, I was giving an EXAMPLE.

and yea, I'm sure you're financial wizardry is superior to all.
 
my point, genius, is that waiting to buy a house can really crimp cashflows. That's why I mention the additional taxes people often overlook when they buy in higher. I didn't guarantee returns, I was giving an EXAMPLE.

and yea, I'm sure you're financial wizardry is superior to all.
Your example makes a point to NOT WAIT another year. Dumb ass example. Buy now, cash flow better next year WOOT!

I am glad you realize you can't get a guarantee just because you buy a house. Tell that to people that WAITED 4 years from 2007, I am sure they pay high taxes and their cash flow is crimped just because they waited a couple years (your word), right?
 
House price will crash only if there is another major recession (massive job loss) and stock market crash.

People are not going to sell their house at a loss unless they have to right? They are going to sell their stocks, cash out their 401 k, sell their car first before they sell their house. That is why housing is relatively stable compared to other assets. However, that doesn't mean it is a good investment. It is pretty expensive to maintain a house.


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By paying off your student loans early, you are also increasing your future net cash flow by saving on interest. It's a guaranteed 6% or so rate of return, depending on your loan interest rate.

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depends on what state - many states (my state) allows for the the bank to sell the house and sue you for the difference in what the value of the loan was, and what they get - and considering we make 6 figures plus, and many of us have at least 1/2 million in the bank/retirement - beleive me, they are going to go after it

Yeah I wouldn't recommend walking away in a two-action state.


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You keep making it sound like it is so easy to walk away with no consequences or repercussions, but I don't agree. For Pete's sake, we're still recovering from the housing crash of 2008 because so many people walked away. First it was people in the housing industry like realtors, builders, mortgage brokers, etc. Then other people stopped spending because their home equity was drying up, and eventually they were underwater so they walked away too. Then it snowballed and everyone was getting laid off including pharmacists because no one was spending. Then the banks and stock market collapsed and it was very nearly game over. Do you want to see this sort of thing happen again?

It is easy if the underlying judicial (or non-judicial) rules governing defaults supports it.

I'm not addressing the macroeconomic effects of mass default, but instead the microeconomic benefits to individual debtors to exercise the no-pay clause of their contracts.

Remember, all actions and consequences are already contractually accounted for in any home loan.


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here's some more data for ya...buy a house and it REALLY hinders your ability to pay down debt.

disclosures:
1.) houses in CA are expensive
2.) I commute pretty far - the district (awesome DM/customers!!) is the richer/nicer part of socal...but where I bought the property is the older/cheaper part of socal
3.) car registration/ins in CA pretty expensive
4.) yes, I put a price on my sanity. I will go out for dinner with friends, I will buy an aca'i bowl, I will make it to birthday events (and eat) = $250/month
5.) I owe $60k in loans - I'm on the "10 year plan" for higher monthly payment/quicker pay off. If I went to 25 year plan, I'd have a lower $$ payment.

$4,898 - mortgage payment on duplex + student loans
$272 - utilities (cell phone $50...internet $50...$19 gas....$33 electric...$120 water (for BOTH units)/recycling/trash)
$250 - gasoline (see? I drive a lot...this is at $1.99/gallon for CNG)
$50 - gardener (I have a rental property...part of my duties)
$250 - groceries, starbucks/out coffee, birthday dinner, social dining, entertainment
$91 - average monthly cost of car insurance ($900/year) + registration ($194/year on 2001 Ford)
-----------------
$5,611 - total expenditures

Pay: it's roughly $6,100/month take home + $2,050 rental income. I contribute 12% to 401k, set my withhholdings at 3 (no kids/wife), insurance, disability...and I don't always get 80 hours.

Assuming *all* my other expenses outside [mortgage/loans/utilities/food/gas/registration] fall at ~$500/month ... I can at best save $2,000/month. That's over 2 years on $60k...4 years on $120k...over 6-1/2 years on a$160k student loan.

This is assuming you live on $500/month...which hardly happens. Go to 1 wedding out of state (all RPh school friends are getting married about now) or book a flight to see my parents or see a baby/nephew/niece and $600-$900 gone. Buy tires for your car and $350 gone. Get brakes done and $600 gone. Tenant's circuit breakers stopped re-setting. Panel push-button switches are not really used much nowadays, and are $50/switch. 4 switches are broken and they saw a ton of cockroaches. $200 in switches + $100 electrician + $150 for pest control this month.

Mind you, being able to put $2,000/month towards student loans is with tenants paying over half the mortgage. I am assuming the OP wasn't getting a rental property. This also means if you want equity, you need to do renovations for it to appraise higher. A kitchen is $6,500-$20,000.

Just pay your darn student loans first...the timing isn't right.
 
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here's some more data for ya...buy a house and it REALLY hinders your ability to pay down debt.

disclosures:
1.) houses in CA are expensive
2.) I commute pretty far - the district (awesome DM/customers!!) is the richer/nicer part of socal...but where I bought the property is the older/cheaper part of socal
3.) car registration/ins in CA pretty expensive
4.) yes, I put a price on my sanity. I will go out for dinner with friends, I will buy an aca'i bowl, I will make it to birthday events (and eat) = $250/month
5.) I owe $60k in loans - I'm on the "10 year plan" for higher monthly payment/quicker pay off. If I went to 25 year plan, I'd have a lower $$ payment.

$4,898 - mortgage payment on duplex + student loans
$272 - utilities (cell phone $50...internet $50...$19 gas....$33 electric...$120 water (for BOTH units)/recycling/trash)
$250 - gasoline (see? I drive a lot...this is at $1.99/gallon for CNG)
$50 - gardener (I have a rental property...part of my duties)
$250 - groceries, starbucks/out coffee, birthday dinner, social dining, entertainment
$91 - average monthly cost of car insurance ($900/year) + registration ($194/year on 2001 Ford)
-----------------
$5,611 - total expenditures

Pay: it's roughly $6,100/month take home + $2,050 rental income. I contribute 12% to 401k, set my withhholdings at 3 (no kids/wife), insurance, disability...and I don't always get 80 hours.

Assuming *all* my other expenses outside [mortgage/loans/utilities/food/gas/registration] fall at ~$500/month ... I can at best save $2,000/month. That's over 2 years on $60k...4 years on $120k...over 6-1/2 years on a$160k student loan.

This is assuming you live on $500/month...which hardly happens. Go to 1 wedding out of state (all RPh school friends are getting married about now) or book a flight to see my parents or see a baby/nephew/niece and $600-$900 gone. Buy tires for your car and $350 gone. Get brakes done and $600 gone. Tenant's circuit breakers stopped re-setting. Panel push-button switches are not really used much nowadays, and are $50/switch. 4 switches are broken and they saw a ton of cockroaches. $200 in switches + $100 electrician + $150 for pest control this month.

Mind you, being able to put $2,000/month towards student loans is with tenants paying over half the mortgage. I am assuming the OP wasn't getting a rental property. This also means if you want equity, you need to do renovations for it to appraise higher. A kitchen is $6,500-$20,000.

Just pay your darn student loans first...the timing isn't right.
That's pretty scary cash flow. If they tenant lose a job and you have to evict, you only have ~$500 positive cash flow for months. I'd never consider it in the first place. I have over 1/2 my paycheck intact if tenant can't pay me for a couple months. But, it doesn't matter much because my liquid investments and savings can pretty much pay for mortgage in full if need to.
 
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Muse600- have you included property tax in your calculation?


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That's pretty scary cash flow. If they tenant lose a job and you have to evict, you only have ~$500 positive cash flow for months. I'd never consider it in the first place. I have over 1/2 my paycheck intact if tenant can't pay me for a couple months. But, it doesn't matter much because my liquid investments and savings can pretty much pay for mortgage in full if need to.

@Momus - that is correct, I am pretty leveraged. Had I gotten a 3-4 plex I would be more protected from risk since I'd have 3 other tenants helping to cover the mortgage, but the FHA lending laws changed in September. No 3-4 plex will pass an FHA sufficiency test in socal without 20-25% down payment (which at that point, just go conventional). There is no sufficiency test on a duplex...that's why I got in w' 5% down.

I have *some* wiggle room here:
1.) I get "rent" from 2 places - a back house & from a roommate. So technically both would need to lose their jobs and stop paying for me to have to float the full mortgage.
2.) My student loans are on a 10 year plan (~$1,200/month)...if I switch it out to the 25 year plan, it reduces to $560/month to "free up" some money.
3.) I leave around $30k liquid - if I lose my job AND I lose all my tenants, I have about 6 months to float completely. If that goes sour, there's ~$100k in 401k money that (with early w' drawal + taxes) could float me a bit longer depending on how much future wealth I'd forfeit to "keep the house". Hopefully well before that happened, I'd move quickly, sell the property & rent a room. After 6% real estate commissions, selling for market value would cover what's left on the note. I'd lose the down payment.
4.) Financial moves:
-I just did a re-fi, dropping my mortgage payment $211/month.
-I'm raising the rent on my tenant because he is way under market (it hasn't gone up in ~4 years...and only up 15% total over 15 years before that).
-If the house does appreciate 15% equity (avg 3.75%/year) over 4 years, I'll get into a new loan without PMI (frees ~$300/month)
-My student loans done in 4 years or less (frees up $1,200/month)

So after 4 years, my mortgage payment should be ~$2,500 (which I can float...less than 1 paycheck) and rents ~$2,450 (or cash flow positive if I rent the whole thing and move out to rent a room). Hopefully, I will have enough equity/appreciation to get out of the duplex entirely, and 1031 exchange into a 4 plex w' the equity so I have 3 other tenants protecting me from floating the mortgage myself, and hopefully it cash flows positive from day 1, instead of 4 years later.

After all that - could I have just paid off my loans first, and saved up ~$200k for a down payment on an $900k 4 plex in socal instead?

I don't know...

@BMBiology - property taxes are included in the calculation. When I got a mortgage, an escrow/impound account was created to cover my PMI & budget for property taxes (roughly $5,600/year). I just got the supplemental bill which I have to pay myself - I owe another $576 by December and $576 by next April. But being a home owner on a rental property, I'm expecting a hefty tax refund for mortgage interest ($1,700+/mo!) and depreciation. After that I'll adjust my withholdings to minimize that tax refund for 2017
 
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@Momus - that is correct, I am pretty leveraged. Had I gotten a 3-4 plex I would be more protected from risk since I'd have 3 other tenants helping to cover the mortgage, but the FHA lending laws changed in September. No 3-4 plex will pass an FHA sufficiency test in socal without 20-25% down payment (which at that point, just go conventional). There is no sufficiency test on a duplex...that's why I got in w' 5% down.

I have *some* wiggle room here:
1.) I get "rent" from 2 places - a back house & from a roommate. So technically both would need to lose their jobs and stop paying for me to have to float the full mortgage.
2.) My student loans are on a 10 year plan (~$1,200/month)...if I switch it out to the 25 year plan, it reduces to $560/month to "free up" some money.
3.) I leave around $30k liquid - if I lose my job AND I lose all my tenants, I have about 6 months to float completely. If that goes sour, there's ~$100k in 401k money that (with early w' drawal + taxes) could float me a bit longer depending on how much future wealth I'd forfeit to "keep the house". Hopefully well before that happened, I'd move quickly, sell the property & rent a room. After 6% real estate commissions, selling for market value would cover what's left on the note. I'd lose the down payment.
4.) Financial moves:
-I just did a re-fi, dropping my mortgage payment $211/month.
-I'm raising the rent on my tenant because he is way under market (it hasn't gone up in ~4 years...and only up 15% total over 15 years before that).
-If the house does appreciate 15% equity (avg 3.75%/year) over 4 years, I'll get into a new loan without PMI (frees ~$300/month)
-My student loans done in 4 years or less (frees up $1,200/month)

So after 4 years, my mortgage payment should be ~$2,500 (which I can float...less than 1 paycheck) and rents ~$2,450 (or cash flow positive if I rent the whole thing and move out to rent a room). Hopefully, I will have enough equity/appreciation to get out of the duplex entirely, and 1031 exchange into a 4 plex w' the equity so I have 3 other tenants protecting me from floating the mortgage myself, and hopefully it cash flows positive from day 1, instead of 4 years later.

After all that - could I have just paid off my loans first, and saved up ~$200k for a down payment on an $900k 4 plex in socal instead?

I don't know...

@BMBiology - property taxes are included in the calculation. When I got a mortgage, an escrow/impound account was created to cover my PMI & budget for property taxes (roughly $5,600/year). I just got the supplemental bill which I have to pay myself - I owe another $576 by December and $576 by next April. But being a home owner on a rental property, I'm expecting a hefty tax refund for mortgage interest ($1,700+/mo!) and depreciation. After that I'll adjust my withholdings to minimize that tax refund for 2017

Update: the 2nd property I bought went up $120,000+ in 10 months... already had my mortgage broker verify this with an appraiser

Issue is you don't know which houses will appreciate like crazy....my duplex barely 5% in almost 2 years. Sales commission is 6% so I would barely get my down payment back plus whatever loan was paid off by my tenants. Fortunately they pay over $3,500/month so a lot of paid annually... unfortunately it will take many years to say "Wow awesome!" Since most of mortgage is interest the first few years

So it's hard for me to 100% recommend buying a house with loans present...if this happened to me as a new grad on the duplex, then no...but on the 2nd home I could've sold it and paid off my loans in under a year

I will likely sell it, take the gains, and exchange this into units that cash flow for financial security
 
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PAY OFF STUDENT LOANS FIRST!

Somebody said "tax advantages." Beware... tax advantages usually work something like this: If you spend $1, you can save $0.25. If that is something that interests you, then we need to get in touch. I have a bunch of quarters for sale. Just $1 each!
 
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LOL I have observed that as well...every time I posted for help preparing my return with a W2/1099, I had a few people say that buying a home generated a large tax advantage absent from just renting. Well I bought a couple properties...and I spent a ton buying them...now I don't have that much more of a refund.

So yeah...tax advantages are minimal...you have to spend more money first so it's not exactly more in your hand

but like I said - it depends entirely on which property will appreciate...I am now up to $134,000 in appreciation in 11 months...looking to sell it, use the $100,000 for a down payment on a tri-plex that will cash positive $1,500/month and then I can start saving nearly all of my RPh paychecks as I can very easily live (comfortably) under $1,500
 
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