Investing Advice - Buy rental property or Buy long-term mutual funds

[HewlettDMD]

We just graduated dental school and started work a few months ago. We bought an affordable home ($230k) using a physicians loan with a 15 year 3.25% rate, and the only other debt we have is $51k in student loans that I just refinanced with CommonBond at 2.2%. We're living well below our means and are saving as much as we can toward retirement.

I'm looking for some feedback on what to do with the $50,000 cash from our prior home sale. With the rates so low on the mortgage and student loans, I don't really feel like paying those down as there has to be a better use for the capital. I'm currently debating between using the $50k cash toward a downpayment on a positive cash-flowing duplex near where I work, or investing the money in a long-term mutual fund for retirement. I'd love to get any feedback on the potential pros and cons of each option. Thanks!

[Kamban]

Many similar threads here.

Bottom line : Stock market is better with less headaches.

[jfoxcpacfp]

HewlettDMD wrote:

We just graduated dental school and started work a few months ago. We bought an affordable home ($230k) using a physicians loan with a 15 year 3.25% rate, and the only other debt we have is $51k in student loans that I just refinanced with CommonBond at 2.2%. We’re living well below our means and are saving as much as we can toward retirement.

I’m looking for some feedback on what to do with the $50,000 cash from our prior home sale. With the rates so low on the mortgage and student loans, I don’t really feel like paying those down as there has to be a better use for the capital. I’m currently debating between using the $50k cash toward a downpayment on a positive cash-flowing duplex near where I work, or investing the money in a long-term mutual fund for retirement. I’d love to get any feedback on the potential pros and cons of each option. Thanks!

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Take your time - it won't hurt a bit to let that money sit for a few months while you think through your options. There may be another, better use for it that you haven't thought of yet.

Otherwise, my thoughts are similar to Kamban's.

[bjbanjo]

Fund all tax-deferred retirement accounts available to you and your spouse to the max.

[Passive Income MD]

In the spirit of the recent election cycle, you'll find passionate people on both sides and each thinks they're absolutely right.

• Talk to a physician who has only invested in the market and built up a significant portfolio, they'll tell you the market is the only way to go.


• Talk to a physician who has invested heavily in real estate and they'll tell you that real estate is the best way.

Just like most things in life, there is more than one way to reach a goal and people shouldn't follow one way blindly without figuring out which way works better for you. So spend some time really exploring your multiple options like jfoxcpacfp recommended.

I actually don't know too many physicians that are truly financially free - they could retire from medicine today and know that they & their family set until they pass. It just happens that out of the ones I do know, almost all are in real estate. Maybe that's just the group of people I live & work around though.

At the end of the day, for me, it came down to how active I was willing to be with my investments. Time and time again it's been shown that for almost all investors, the more passive you are with your stock market investment, the better off you'll be (ie. invest in index funds and forget it). With real estate investments, it's by no means purely passive, there's a good amount of work you have to put into it, especially early on. However, because of that work, you can really shape and affect your outcome.

Personally I make sure to fund all tax-deferred accounts, but outside of that I put the rest of my funds into real estate investments. So without knowing too much info, if given the choice between buying that investment property or sticking it into a non tax-advantaged mutual fund, personally I'd start a real estate portfolio. Good luck, keep us all updated!

[The White Coat Investor]

I do both and see no reason not to. There is really little downside to investing in stocks through low cost index funds invested inside tax-protected accounts or taxable accounts. The main downside of investing in real estate, the time and work commitment, can be mitigated in many different ways from REITS to syndicated shares to turnkey properties to direct ownership of a place down the street.

It's not an either/or.

[HewlettDMD]

Thanks for the feedback, I think it makes sense to think it terms of both options rather than just 1 or the other, so we have the option of investing some of the money in long-term mutual funds and using some of the other money toward downpayments on property. The nice thing with the small town area I'm looking, there are several multi-family property options under $100k where the financial analysis makes them enticing. I'm using a spreadsheet from the biggerpockets website to help in analyzing the options and trying to talk to people "in the know" for the area about things to be aware of before we decide to move forward. Thanks for the advice so far and I'll keep you posted with the progress!