Is It Wise to Invest in Real Estate When You Have 6 Figure Student Loan Debt?


Today’s guest post comes from Ryan Inman of Physician Wealth Services and He is a financial advisor and a real estate investor, so I thought he'd be perfect to give his perspective on this subject.

Take it away, Ryan.

Many of my physician clients ask me about investing in real estate. They are either ready to buy their first homes after years of training or they want to diversify their portfolios by purchasing an investment property.

However, even though many of my clients are excited to take the next step and own real estate, there’s one thing that concerns them: their student loan debt.

Many of them want to know, “Is it wise to invest in real estate when you have six figures of student loan debt? Would I be spread too thin financially?”

These are great questions to ask and my answer is that it depends.

When considering a large purchase like real estate, you have to consider a variety of factors, namely your risk tolerance, your cash on hand, and your available time. Below I’ll expand on each of these factors as well as offer some alternative ways to invest in real estate that you might not be aware of.

Your Risk Tolerance

I have clients who hate debt and want to get out of it as soon as possible. Just the idea that they owe the federal government or private lenders hundreds of thousands of dollars makes it hard for them to sleep at night.

I have other clients who are comfortable having debt, they have almost become debt immune. These clients are confident in their ability to earn money as physicians and know that they will pay off their debt in the near future. These are also my clients who make financial decisions that are math based. If they can make more of a return investing their money in the market or in real estate, they would rather do that than pay down their student loan debt.

There is no right or wrong way to be, and there is a significant amount of research that shows our emotions dictate how we manage our finances. So, it’s important to pay attention to that inner voice and ask yourself, “How comfortable am I with taking on more debt?”

If you are comfortable with it, then you can move on to the next step, which is deciding whether or not you have enough cash on hand to actually invest in real estate.

Your Cash on Hand

It’s not a secret that you need cash on hand to purchase real estate. Many physicians utilize doctor loans which allow you to purchase a primary residence with as little as $0 down, but you can’t get a physician mortgage for an investment property.

I usually advise my clients to get a conventional loan whether they are buying their primary residence or an investment property because it enables them to own significant equity in their home from the beginning. This means that you’ll need enough cash to put 20% down on your home. Then, you’ll need cash for closing costs and any other expenses you might encounter as a homeowner.

If you don’t have cash on hand but you’re still dedicated to the idea of owning real estate, you could consider borrowing money from someone for your down payment and taking on a personal note, one that’s not recorded anywhere. Keep in mind that this is definitely a more aggressive tactic, but it’s one I’ve used personally to purchase my own investment properties.

Once you have cash on hand, you should spend a significant amount of time vetting properties, looking at deals, and researching neighborhoods. I tend to look at 20-30 homes before I even consider putting an offer in on a property, and that’s after I’ve narrowed it down after looking at hundreds of houses online.

Again, buying a piece of real estate is a significant financial decision, so not only do you need the risk tolerance and the cash on hand, but you also need to be willing to put in the time to ensure you buy the best home for you. You also need to have the confidence and discipline not to deviate from this plan, especially when emotions get in the way and you fall in love with a particular property that might or might not be the best for you.

Time is your friend but don’t get trapped into the analysis paralysis dilemma.

Other Options for Investing in Real Estate

If you don’t feel like you have the time or the money to fully manage your own piece of real estate, there are other alternatives.

These days, you can actually invest in real estate on crowdfunding websites. If you choose to go this route, here is a list of vetted real estate crowdfunding sites to start with. For most of them, you have to be an accredited investor, i.e. someone who has earned more than $200,000 the last two years (or someone with a $1M net worth.) However, there are some companies, like Fundrise, who open certain investment opportunities to non-accredited investors too.

This can be a good option for someone who wants to learn more about real estate investing without actively managing renters or parting with large amounts of cash.

Ultimately, I’m an advocate for investing in real estate, even if you have six-figure debt, but as evidenced above, this strategy won’t be the best choice for everyone.

My wife and I were comfortable holding six-figure debt. We had $180,000 worth of debt when we started investing in real estate, but that debt had interest rates of under 4% after we refinanced it. I looked and based on our budget at the time, we could afford the payments on our student loans and still have enough money to invest in real estate.

We had to make a choice whether to use the extra money we had to pay down our debt quicker or to buy investment properties. At the end of the day, I was comfortable taking on extra risk and buying real estate. I’ve been happy with the results too. We’ve seen higher returns than we would have if we would have aggressively paid down our debt, and our real estate investments have increased our cash flow too.

For more information on investing in real estate as a passive income strategy, check out these posts:

Of course, if you have any questions about my own experience investing in real estate with six-figure debt, please feel free to ask them in the comment section, and I’ll be sure to get back to you quickly.

Ryan Inman is a fee-only financial planner who specializes in helping physicians and their families build a solid financial future through his firm, Physician Wealth Services. As the husband of a pediatric pulmonologist, Ryan has a unique insight into what it’s like to be a part of a physician family and thoroughly enjoys helping his clients. He also runs the site and is the host of the Financial Residency podcast. You can listen to his interview with Passive Income MD here.


  1. Great post! I agree that it really depends on your risk tolerance and how much cash you have in hand. Options to invest are also key.

    Hubby and I are extremely risk averse, so much so that we even want to pay off our current mortgage before investing in real estate.

    • Yes, it’s not always about the numbers, so your plan makes sense. I’m sure the peace of mind of not having a mortgage is an awesome thing. Personally, I’m comfortable with debt knowing that I’m giving my investments time to grow.

  2. Excellent article. Risk tolerance is the key. I’m highly leveraged in real estate investing but am totally comfortable with it. I love the returns, tax benefits and the growth. But your perspective of taking your clients’ mindset into account is crucial to their overall well being.

    • Proper analysis, not over leveraging, investing at your risk tolerance and having a long-term mindset are all needed to succeed in real estate investing. If you have 6% or higher debt, refinance it if possible, and if you can’t you might want to prioritize paying it off before investing in anything other than retirement account contributions. Just my opinion

  3. Great post Ryan! My thoughts:

    In this current student loan environment of 6-8% interest rates, the debt payoff vs. investing debate favors debt payoff.

    Even if you are risk tolerant and follow the “mathematical” approach, there is something else to consider. In my humble opinion, the primary driver of a physician’s wealth is their ability to earn income from their primary vocation (at least initially). You need time and money for real estate investing…two commodities that run a little low for residents. Remembering my residency training, I barely had the time to study for my boards…let alone time to study passive income investments or personal finance. In retrospect, I would have made more time to study the personal finance part but I digress!

    That being said, everyone’s situation is different. From what I understand, you are a financial planner and your wife was a resident…perhaps you had more time (and funds) than she did to study passive income investments.

    • Thanks Vivek for the comment, appreciate it. The student loan debt % is quite the variable and one thing physicians should realize is different for everyone (the whole personal part of personal finance). When my wife was a fellow we were able to refinance her debt to below 4% based on the location we lived and the entity that was willing to lend. I have clients that have used First Republic (based on their location) that have sub 3% rates. While this may not be the norm, its something to consider when looking at the debt paydown vs investing as I would argue that in that circumstance, it favors investing not debt payoff.

      Time, dedication, knowledge and the ability and need to take risk play a huge factor in investing in real estate. Not everyone is cut out to be a landlord, and that’s OK. For some, they are willing to put the time to learn and have the capital to invest.

      And yes you are right, I had the time and was the one doing the due diligence, analyzing the deals etc. while she was earning money from her work as a physician (she was a fellow at the time).

  4. I always admire and appreciate an article that talks about the financial as well as psychological sides of any argument. True that given a certain interest rate, it may make more sense to do one or the other. However, at the end of the day, you’ll only stick to a plan if you really believe in it emotionally.

    For me, since I subscribe to the Rich Dad philosophy of cashflow, I’d always first looks for ways to make my money work for me and produce cashflow that can offset any student loan payments. However, I understand the stock market far far better than the real estate market so that’s where I’d invest.

    Eventually though I do want to invest in real estate as well.

  5. Another great post! I agree regarding risk tolerance and cash on hand. I have a high risk tolerance and have no problem taking on debt as an invest tool (especially if can conservatively illustrate high ROI); my challenge has always been the “cash on hand” piece that has held me back. Definitely some great stuff to chew on here.

  6. I have a question regarding debt payoff on an investment property. Let’s say you have a loan for 100k at 4.5% for 30 years. I know you can deduct the mortgage interest on your tax returns. Is there benefit in paying off the mortgage sooner than 30 yrs, or is it better to take the interest tax deduction and ride it out for as long as the loan will go?

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