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Money-Guy 06-24-2011
I’ve told you guys before that this show is a truly organic process. The topics come from various sources of inspiration and this week, it happened to come from one of you. We recently received an email from a listener wanting to know more about my experience with the vacation rental property that I own. Because real estate is such a huge part of what is going on in our economy, today’s show is focused on the pros and cons of playing the rental property game.
First, let’s talk about traditional real estate investing. (The kind where you hope to buy a house, bring in a good tenant to cover the mortgage and taxes, and you eventually own the property outright.) Back in 2006, we actually did a podcast about real estate investing and the “get rich quick” schemes that many unfortunate people fell for during the housing boom. Since so much has happened in the industry since then, I dug through the archives to see if the tips I offered back in 2006 are still relevant today:
I think that this is all still very pertinent advice for those who want to get involved with real estate. I did think it was funny, though, to see that I mentioned the rarity of foreclosed homes in 2006, and now you see foreclosure everywhere. By the way, a great resource if you are interested in searching for foreclosures in your area is the Fannie Mae website.
A 2010 article I found, Tips for the Prospective Landlord, identifies some additional advantages and disadvantages involved with rental property:
Now that I’ve covered traditional rental property, I will share a few of my experiences with owning a vacation home. Personally, I am ready to get out of the game. First of all, I am not a handy guy, which means I have to pay someone else to handle any and all repairs. Secondly, by purchasing the house in 2007, my timing was awful. What I’ve also noticed is the lack of enjoyment that my family actually gets from the house. Due to the BP oil spills, last year is the first time we got to use the house during a summer month! Even that came with a downside because our July rent income in 2010 was only around $400, while this July we expect to bring in $6000 in rent.
My thought on rental property is: If you’re making good money and you have a good financial plan, why complicate your life? However, if you have decided that it’s the right step for you, keep these last few tips in mind:
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