I am a commercial real estate broker and I am expecting some large commissions that will double what I have in savings to about $150,000. I have about $50,000 in total debt including student loans and a car loan. I just bought a two unit building with my fiance and am renting out one unit. I want to buy another building as an investment but I also want to pay down my debt. I know I should keep some savings on the side as well. I am not sure what to do. Please help me. Thank you.
Terry Says: Well, first, congratulations! It looks like you put your education to good use! I would absolutely pay down those student loans. Even in real estate you can’t be sure of earning a return that will top the interest rate you are paying on the loans. Just get them off the books right now while you have the cash. You’ll be glad you did! I won’t presume to advise you on real estate, but you should also have some savings (even though it won’t earn hardly a penny) AND you should put something away in an IRA every year (you earn too much to make it a Roth IRA), but at least it will grow tax diversified for your retirement. Try a basic “equity-income” fund available at T. Rowe Price (full disclosure, I have owned theirs for, gosh, 30 years!) or at Fidelity or Vanguard.
Finally, spend $10 on my website and buy a copy of The New Love Deal — and go through the exercises with your fiancé. At this stage, that might be your best investment!!