Should a newlywed couple with two cash flowing rental properties sell one to pay off $92,000 of student loan debt?
What percentage of your portfolio should you have in rental properties?
What’s the smartest way to approach rental property investing, particularly if you get anxiety thinking about tenant requests?
How much should high interest rates impact your decision to buy a rental?
I answer these four questions on today’s episode, plus, I have a big announcement regarding the future of real estate Ask Paula episodes, so check it out. 🙂
Stephen asks:
Should we sell a rental house to pay off student debt, or not?
Our background: we’re recently married and we have two rental properties: one used to be my wife’s primary residence, and the other we purchased as an investment property.
My wife’s house has appreciated greatly in the last few years – comps are selling at $220,000, and we owe roughly $157,000 on the mortgage.
The rental house grosses $1,600/month and with PITI, vacancy, maintenance, etc. nets about $320/month.
We have $92,000 in student loans at around 6.5%, but we have a solid three-year plan to crush them using our regular W2 incomes.
We’ve been going back and forth on selling the house and dropping the lump sum (roughly $45,000-$50,000) on the debt, versus sticking to our payoff plan and in three years, having no debt and two rentals (which we would like to use to build our retirement portfolio).
One last note: if we sell now, we won’t pay taxes since it was a primary residence for two of the last three years.
How would you approach thinking through this?
Anujan asks:
I’m 19 years old and have been managing my parent’s rental properties since I was 16. I learned a lot, but my parents weren’t that prepared for real estate investing, so I want to take a smarter approach. I want at least one rental property before I’m 30. What’s the smartest way to approach rental property investing?
I also heard that you can subsidize your retirement with rental properties, but that sounds like it could be stressful. I get anxiety when I receive an email from one of my parent’s tenants, so I’m wondering if this is a feasible or possible solution?
Gerardo asks:
I want to start investing in real estate in my country (Mexico), but the interest rates here are pretty high, between 10%-12% annually. Does this high interest rate make real estate a bad investment?
Mike asks:
How do you choose what percentage of your portfolio you have in rental properties?
In your interview with Larry Swedroe, he shared that 3% is the new 4% rule. Based on this new 3% rule, do you think it would be better to plan to move more of my traditional retirement funds to rental properties when I’m 59 ½, to have them generate better cash flow (using your one percent rule)?
I’m thinking that having one million in rental properties generating $100,000 in pre-expenses is much better than the $30,000 with the 3% rule that Larry shared.
I have two rental properties that are cash flow positive each month. I hope to have their mortgages paid off in six to seven years. I’m 53 now with traditional retirement accounts with balances around $675,000 (between my wife and myself).
My goal was to buy a rental property each year for the next 15 years, but I wasn’t able to do that. What do you think?
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