Question by Kirk A: Is buying rental property a good or bad idea?
I was considering refinancing my mortgage and taking an additional 40k out as a down payment to buy a rental house. Is this a good idea? What are the advantages/disadvantages?
Answer by just_my_02c_worth
Well, most people would say that buying property is never a bad idea, however, I once read that Warren Buffet said that if you need to feed it or repair it, then it’s not a good investment. I mean look at all the hidden costs of real estate, maintenance, taxes, water, insurance, utilities, heating equipment, roof, windows, general repairs and upgrades, interest on mortgage, possible government taking by eminent domain, and you can see how any profit would be quickly erased by those expenses (that generally people don’t keep track of).
And don’t forget about tenants who fall in bad times and skip the rent. I would hire a really good investment planner and invest that $ 40K in good, solid investment vehicles such as mutual funds, bonds, and equities that will give you much more return on your investment than a rental property would.
Good luck and have fun.
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