How are you guys handling your loans

[charlestweed]

Where exactly are these properties that you buy for 125K and rent for 3K month? That is very atypical.

Yeah, those are pretty good rental investments. I bought all my rental properties in Orange county, CA because they are easy to sell and retain their values very well. They all have 3-4 beds, 2 baths and their prices at the time of purchase were between $295k to $455k....and the highest amount that I can rent out is only $2400/month

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[charlestweed]

If you are young, healthy and can practice dentistry for a long time, then it's better to grow your money by investing in stocks, real estates, or setting up your own office etc than to pay off the student loan ASAP. And hopefully, the profits you earn from all your investments will be much greater than the student loan's accrued interest amount. You also need to discipline yourself not to over-spend the investment profits on things like luxury cars, boats, gamblings etc while you still owe in student loan. Overspending is the problem that many dentists, doctors and other high income earners have and that's why many of them can't save enough for their retirements and have to work past their retirement age.

The problem with student loan is you can't walk away from it as long as you are still alive. If you can no longer practice dentistry due to an unforseeable illness such as carpel tunnel, chronic back pain that becomes unbearable, a permanent disability caused by skiing or car accident etc, your spouse will be responsible for paying back your loan and your kids will suffer. This is another reason (beside not knowing what to invest my money on) why I paid off the student loan ASAP. After paying it off, I continued to I work hard when I still had a pain-free healthy body and full of energy to work 6-7 days/week. My disability insurance only paid $5k/month, which was only enough to cover the loan repayment.....what about the kids? Who would feed them? I've seen so many parents, who are around my age (mid 40s) and already have serious illnesses (kidney failure, cancer etc)....some died of cancers and heart attacks and their kids are still very young.

 

[DDS9994]

Yeah, those are pretty good rental investments. I bought all my rental properties in Orange county, CA because they are easy to sell and retain their values very well. They all have 3-4 beds, 2 baths and their prices at the time of purchase were between $295k to $455k....and the highest amount that I can rent out is only $2400/month

YEs, I typically see a 1% rate based on home values.

 

[DreamingOfOrthodontics]

If you are young, healthy and can practice dentistry for a long time, then it's better to grow your money by investing in stocks, real estates, or setting up your own office etc than to pay off the student loan ASAP. And hopefully, the profits you earn from all your investments will be much greater than the student loan's accrued interest amount. You also need to discipline yourself not to over-spend the investment profits on things like luxury cars, boats, gamblings etc while you still owe in student loan. Overspending is the problem that many dentists, doctors and other high income earners have and that's why many of them can't save enough for their retirements and have to work past their retirement age.

The problem with student loan is you can't walk away from it as long as you are still alive. If you can no longer practice dentistry due to an unforseeable illness such as carpel tunnel, chronic back pain that becomes unbearable, a permanent disability caused by skiing or car accident etc, your spouse will be responsible for paying back your loan and your kids will suffer. This is another reason (beside not knowing what to invest my money on) why I paid off the student loan ASAP. After paying it off, I continued to I work hard when I still had a pain-free healthy body and full of energy to work 6-7 days/week. My disability insurance only paid $5k/month, which was only enough to cover the loan repayment.....what about the kids? Who would feed them? I've seen so many parents, who are around my age (mid 40s) and already have serious illnesses (kidney failure, cancer etc)....some died of cancers and heart attacks and their kids are still very young.

What do you recommend investing in? I'm scared because it's risky but I've heard somewhere that if you invest for 15 plus years in mutual bonds, you can get like an 8-9% return. Is that true? I really have no idea, are there CE courses to help understand this or any classes

 

[Blackca3]

If you are young, healthy and can practice dentistry for a long time, then it's better to grow your money by investing in stocks, real estates, or setting up your own office etc than to pay off the student loan ASAP. And hopefully, the profits you earn from all your investments will be much greater than the student loan's accrued interest amount. You also need to discipline yourself not to over-spend the investment profits on things like luxury cars, boats, gamblings etc while you still owe in student loan. Overspending is the problem that many dentists, doctors and other high income earners have and that's why many of them can't save enough for their retirements and have to work past their retirement age.

The problem with student loan is you can't walk away from it as long as you are still alive. If you can no longer practice dentistry due to an unforseeable illness such as carpel tunnel, chronic back pain that becomes unbearable, a permanent disability caused by skiing or car accident etc, your spouse will be responsible for paying back your loan and your kids will suffer. This is another reason (beside not knowing what to invest my money on) why I paid off the student loan ASAP. After paying it off, I continued to I work hard when I still had a pain-free healthy body and full of energy to work 6-7 days/week. My disability insurance only paid $5k/month, which was only enough to cover the loan repayment.....what about the kids? Who would feed them? I've seen so many parents, who are around my age (mid 40s) and already have serious illnesses (kidney failure, cancer etc)....some died of cancers and heart attacks and their kids are still very young.

Good food for thought. But there are federal programs for discharging federally backed student loans in cases of disability. You could also take a home equity loan to pay down your debt and now the equity loan can be discharged under bankruptcy.

All of my properties are 5 bedroom properties rented to students. Per bedroom the individual doesn't pay that much but as a group of 5 it adds up.

 

[bilbany12]

Do you think you will still have the energy at the age of 60 to continue to work hard to support your 15 yo son/daugher? ....and have to drive them around for braces appointments, school, doctor's appointments etc?

I didn't mean start having them at 60! Hahah. I meant if you had a spouse + children (which are hopefully 15 when you are 45 or so), then it would be safe to assume your spouse could help provide an extra income at that point.

Just wanted to add, I completely agree with rolling your money into investments rather than student loans off-the-bat. I think if you had a decent amount of cash flow coming in by 45 from real estate (for example), you wouldn't be working those extra hours to make that $50k/year.

Also, because I think someone else mentioned it: I'm a dental student and I've already got shoulder issues/muscle pain. For me, the goal is to put myself in a position where I'm not doing crazy hours in dentistry in my older age. I really don't think my body will handle that well.

 

[charlestweed]

What do you recommend investing in? I'm scared because it's risky but I've heard somewhere that if you invest for 15 plus years in mutual bonds, you can get like an 8-9% return. Is that true? I really have no idea, are there CE courses to help understand this or any classes

I wish I could answer your questions. I am just as clueless as you are. I am only good at things like being willing to work a lot more days than most of my colleagues, being less picky about the job offers (that's why I have had no prolem getting so many work days), working on weekends, and knowing how to keep the overhead low. That's why I went for the least risky route and that was to pay off the student loan in 5 years. I didn't start investing in rental properties until the crash of the housing market in 2008, which had allowed me to buy them at very low prices. If I was smart, I would have done a lot of things diffferently such as setting up an office right away (instead of 4 years later), driving a cheaper car (instead of leasing a new one every 2-3 years), and buying several rental properties when they were very cheap in the early 2000s etc.

 

[charlestweed]

Good food for thought. But there are federal programs for discharging federally backed student loans in cases of disability. You could also take a home equity loan to pay down your debt and now the equity loan can be discharged under bankruptcy.

I believe the spouse will still have to pay tax on the amount that was forgiven due to a disability. And only federal loans can be discharged. If you have private student loans, your spouse will still be responnsible for paying them back.

All of my properties are 5 bedroom properties rented to students. Per bedroom the individual doesn't pay that much but as a group of 5 it adds up.

That's a very smart move to rent your properties to students. I know some property owners who put up the dry walls to divide one house into 2-3 different sections with separate entrances and rent them out to multiple families......and earn much higher monthly income than renting it to just 1 family. With more tenants, they will have more headaches and higher maintenance cost to deal with....but hey, nothing is easy in life.

That's how my parents, who made just slightly above the mininum wage, could afford to pay for the home mortgage. They bought a 5 bedroom house (well, only 4 bedrooms...the 5th room was a garage). All 5 of us lived in 2 bedrooms (and shared 1 bathroom) and my parents rented out the other 3 rooms to 3 different tenants.

 

[Blackca3]

I believe the spouse will still have to pay tax on the amount that was forgiven due to a disability. And only federal loans can be discharged. If you have private student loans, you spouse will still be responnsible for paying them back.

That's a very smart move to rent your properties to students. I know some property owners who put up the dry walls to divide one house into 2-3 different sections with separate entrances and rent them out to multiple families......and earn much higher monthly income than renting it to just 1 family. With more tenants, they will have more headaches and higher maintenance cost to deal with....but hey, nothing is easy in life.

I've heard of similar things before but the main reason being is some areas have a "brothel law" in which you can't have more than 3 unrelated people living in a dwelling so they put up the walls to have it labeled as multi family. College rentals are great investment. Recession proof and having all patents cosign to gurantee a joint lease is the norm. The more you can get under a roof the better. I'm at a point now where I've been able to hire a company to place and manage all tenenants and manage the properties.

From a cursory google search it looks like it is still taxable but it also looks there are cases were you are tax exempt. ADA has done wonders to make sure that people with disabilities still have opportunities to continue working. SO is a social worker who works in this field and it amazes me at the number of resources available to help out individuals with disabilities.

 

[TanMan]

Not sure how it was a mistake considering a few months of practice is nothing in the longterm, compared to eliminating the only form of debt that you can never walk away from.

Because the amount of debt is negligible in the grand scheme of your professional career, and missing a few months of opportunity cost can be more than the debt itself. Also, timing is very important. If you can open when there aren't that many dentists first, you can have an advantage over your competition. Those few months costs me a few months of my life and around 100k/month in opportunity costs (if I were to have worked in my own practice v. using that money to pay off loans). I felt it was a good decision at the time, but in hindsight, it was a stupid decision.

Paying off student loans early feels like a really risk adverse decision. I’m a very risk adverse person. I’ll be coming out of school with around 150k ball park of debt. Do you think with that low of a debt load it’d be a bad decision to service this as quickly as possible? Or should I still put it on 10 yr repayment and get into ownership as quickly as possible (what I want to do after an AEGD).

Get into ownership as quickly as possible. Why put 150k towards a loan (which does not generate income) and instead, put it towards a practice (which can generate a lot more than 150k and a lot more than what you could make as an associate). Now, if you don't want to ever own a practice, then you will have to produce a lot of dentistry to make 500k+/year.

I don't know where people are getting the idea that they have to be a slave to this debt forever. I believe that people should be finding ways to get out of the debt asap, not defer or forgive them over many years. Your office will be your cash cow. Whatever money you make from your practice, invest that money and retire early. That's my strategy at least.

 

[DDS9994]

Because the amount of debt is negligible in the grand scheme of your professional career, and missing a few months of opportunity cost can be more than the debt itself. Also, timing is very important. If you can open when there aren't that many dentists first, you can have an advantage over your competition. Those few months costs me a few months of my life and around 100k/month in opportunity costs (if I were to have worked in my own practice v. using that money to pay off loans). I felt it was a good decision at the time, but in hindsight, it was a stupid decision.



Get into ownership as quickly as possible. Why put 150k towards a loan (which does not generate income) and instead, put it towards a practice (which can generate a lot more than 150k and a lot more than what you could make as an associate). Now, if you don't want to ever own a practice, then you will have to produce a lot of dentistry to make 500k+/year.

I don't know where people are getting the idea that they have to be a slave to this debt forever. I believe that people should be finding ways to get out of the debt asap, not defer or forgive them over many years. Your office will be your cash cow. Whatever money you make from your practice, invest that money and retire early. That's my strategy at least.

You know what they say about hindsight being 20/20. You don't know how things could have turned out, paying off that debt was a known result its gone, how successful your practice was going to be was not.

 

[TanMan]

You know what they say about hindsight being 20/20. You don't know how things could have turned out, paying off that debt was a known result its gone, how successful your practice was going to be was not.

That is true and what I did was essentially a gamble that paid off. However, I would probably be better off if I started a few months earlier. Every month counts... but I'm not a slow and steady wins the race type of guy .
That, unfortunately, is my weakness as well as my strength.

 

[IHO]

What do you recommend investing in? I'm scared because it's risky but I've heard somewhere that if you invest for 15 plus years in mutual bonds, you can get like an 8-9% return. Is that true? I really have no idea, are there CE courses to help understand this or any classes

If you are investing for retirement with a 10-20 year time range (or longer) invest in low cost stock index funds (mostly SP500, some international and small cap) and bond index fund (mostly total US bond market, some international and some high yield). Depending on your age, 70-80% in the stocks, 20-30% in bonds. As you get older, the ratios should gradually flip. Put the money in, consistently, faithfully...every month. reinvest all dividends. DONOTTOUCHIT! DONT SELL when the market tanks...keep buying. DONT SELL when the market is booming...keep buying. Try to invest 15-20% of your net pay, but do at least 10%. Over 20-30 years this will be a wonderful retirement nest egg.

To answer your question, bond funds are paying around 2% per year, high yield bonds around 4% per year.
Go to Fidelity or Schwab website...lots of educational info and you can set up an account easily and get started. Set stuff up to automatically transfer from your account every month and automatically invest every month. Keep it simple...3 stock funds, 3 bond funds. The important thing is do it every month and never ever sell until retirement.

Igy

 

[princeafrica]

So if I'm going to get out of dental school with just about $80,000 in student loans, should I pay that off quickly or stretch it out?

If you are young, healthy and can practice dentistry for a long time, then it's better to grow your money by investing in stocks, real estates, or setting up your own office etc than to pay off the student loan ASAP. And hopefully, the profits you earn from all your investments will be much greater than the student loan's accrued interest amount. You also need to discipline yourself not to over-spend the investment profits on things like luxury cars, boats, gamblings etc while you still owe in student loan. Overspending is the problem that many dentists, doctors and other high income earners have and that's why many of them can't save enough for their retirements and have to work past their retirement age.

The problem with student loan is you can't walk away from it as long as you are still alive. If you can no longer practice dentistry due to an unforseeable illness such as carpel tunnel, chronic back pain that becomes unbearable, a permanent disability caused by skiing or car accident etc, your spouse will be responsible for paying back your loan and your kids will suffer. This is another reason (beside not knowing what to invest my money on) why I paid off the student loan ASAP. After paying it off, I continued to I work hard when I still had a pain-free healthy body and full of energy to work 6-7 days/week. My disability insurance only paid $5k/month, which was only enough to cover the loan repayment.....what about the kids? Who would feed them? I've seen so many parents, who are around my age (mid 40s) and already have serious illnesses (kidney failure, cancer etc)....some died of cancers and heart attacks and their kids are still very young.

 

[LFA20]

So if I'm going to get out of dental school with just about $80,000 in student loans, should I pay that off quickly or stretch it out?

Pay it off ASAP

 

[AppalachianDentalBoy]

Not a dentist but that money being saved and put down as a deposit for a practice loan would probably lead higher returns.

 

[TanMan]

Pay it off ASAP

Hell no! Go put that money towards an office. You have a lot more to gain from an office than paying down that relatively small debt

 

[princeafrica]

If I were to stretch it out, how long would I stretch it out? I only need to get take out ~20k per year in loans and I think I will qualify for the couple loans that have no interest during school

 

[TanMan]

If I were to stretch it out, how long would I stretch it out? I only need to get take out ~20k per year in loans and I think I will qualify for the couple loans that have no interest during school

Stretch it out as long as you need. Once you're off your feet and making a lot of money where 80k is nothing, go ahead and pay it off. If it's no interest. Pay it off as slowly as possible/required. You have better uses for that money than a 0% interest loan.

 

[charlestweed]

So if I'm going to get out of dental school with just about $80,000 in student loans, should I pay that off quickly or stretch it out?

If you are the only income earner in the family, have to buy your own healthcare + other insurances, and only make $120-130k/year as an associate, it’ll still take you at least 4-5 years to pay off that $80k loan. I remember when we applied for a $120K loan to buy an existing practice for my wife from BofA and we got denied despite having very good incomes. That’s because we owed $450k in student loan. We had to apply loan at a smaller bank that charged higher interest rate. With only $80k loan, I think you should have no problem getting good low interest business loan to setup (or to purchase) an office. This is the advantage you have over your colleagues who owe a lot more in student loan.

I think you should work for someone else for 1-2 years to gain the experience first and then start your own office. With experience, you’ll be able to save a lot in overhead. And hopefully, the amount of money you save (for not buying fancy equipment and for not hiring highly paid staff) will help you pay off the student loan off a lot faster.

 

[princeafrica]

If you are the only income earner in the family, have to buy your own healthcare + other insurances, and only make $120-130k/year as an associate, it’ll still take you at least 4-5 years to pay off that $80k loan. I remember when we applied for a $120K loan to buy an existing practice for my wife from BofA and we got denied despite having very good incomes. That’s because we owed $450k in student loan. We had to apply loan at a smaller bank that charged higher interest rate. With only $80k loan, I think you should have no problem getting good low interest business loan to setup (or to purchase) an office. This is the advantage you have over your colleagues who owe a lot more in student loan.

I think you should work for someone else for 1-2 years to gain the experience first and then start your own office. With experience, you’ll be able to save a lot in overhead. And hopefully, the amount of money you save (for not buying fancy equipment and for not hiring highly paid staff) will help you pay off the student loan off a lot faster.

Can I come work for you? lol

Thank you so much for your advice and insight! I didn't know a combined student loan debt could get you denied for just $120k loan

 

[charlestweed]

Can I come work for you? lol

Thank you so much for your advice and insight! I didn't know a combined student loan debt could get you denied for just $120k loan

Despite having very good income and making on time payments on all of our debts, we still got declined on a lot of things: a loan to buy furniture from Ethan Allen, credit card applications from the department stores. My wife (who was my fiance at the time) had to cosign a loan for my used $38k BMW. My father-in-law, who only made $20k/year, actually had a better credit score than us and he helped us cosign the loan to buy a $5k TV (a TV used to cost that much). When we bought our first house 6 month after graduation, having 2 month pay stubs to demonstrate our good income was not good enough; we aslo had to provide the lender our diplomas to prove to them that we are dentists.

 

[averageasian]

how do you go about paying debts when you've loaned everything for DS and 2-3 years of residency tuition?

Thats probably 700-800k in principal alone. Tack on interest and idk where that lands you. Not to mention buying a home, bills, practice, feeding kids etc.