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Ask Dave

Don't do it!

Jeremy and his wife are recent graduates, and they have $300,000 in student loan debt. They want to buy a rental property, with ideas of the income helping to pay off their debt, but Dave leaves no doubt he thinks this is a bad idea.

QUESTION: Jeremy and wife are recent graduates, and they have almost $300,000 in student loan debt. He asks about purchasing some rental property, thinking they can handle it after recently selling their house and paying off about $10,000 in debt. They have advanced degrees, and the plan is to have a $400 mortgage on the property, charge $800 a month rent, and have an extra $400 to help pay off debt. Dave leaves no doubt in the caller’s mind that he thinks it’s a bad idea.

ANSWER: You’re broke! You’re $300,000 in debt, and you call me up wanting to buy a rental property? No, no, no, no, no!

You have a crisis. You’re like Congress, and you have a mess. No! You are on beans and rice, rice and beans. No vacations, and you will not see the light of day. You will work like an animal until you get this mess cleaned up!

No, you do not buy rental property. Even if you did, this plan assumes that it’s rented and the renter pays. Those are two pretty big assumptions. You have $300,000 in student loan debt, dude. Don’t talk to me about buying a rental house, please. Use your money to get out of debt, and keep your life simple. Quit trying to borrow your way through all of your dreams. You’re going to turn them into nightmares. Pay off the debt!