It’s the first Monday of the month, and you know what that means …
Time for another Ask Paula episode! On today’s show, I answer a handful of phone calls from listeners who posed questions about real estate investing.
One caller from Atlanta said that he’s thinking about buying a rental property from a turnkey investing company. (These are companies that buy, renovate and rent out properties, and then sell those properties to investors.)
On the surface, this sounds appealing: all benefit and no work. But what are the drawbacks? Are those risks worth it? Should this listener buy a turnkey property? Or should he stay wary of red flags?
Another caller, who says he loves real estate investing, mentioned that he’s curious about the lack of compound interest in the real estate game. If you’re investing in an index fund, he noted, your dividends and gains are automatically reinvested. That’s not the case with a rental property.
Sure, you can reinvest the cash flow from that property into buying more properties (or buying other investments, like index funds), but that’s not the same thing.
So … what does this mean? When you take compound interest into consideration, are rental properties still a good deal? Or are real estate investors missing out on this crucial wealth-building tool?
Another caller wanted to hear more details about a couple whom I mentioned in Episode 4, The Ultimate Beginner Guide to Real Estate Investing. This couple’s strategy is to buy a home as a primary residence, live there for at least one year, move out, convert their former home into a rental property, and repeat. They’ve done this over and over, and now they’re raking in the rental cash.
The listener wanted more details about that strategy … which I offered in droves. (And yes, I led myself into another little rant.)
Finally, one listener called to share his success story. In an earlier episode, he asked whether he should repay his credit card debt, or save for the downpayment on a house. I told him to pay off his credit cards … and he’s now DEBT-FREE!!!!!! He tells his success story on today’s show.