Share this story...
(FreeStockPhotos.biz)
Latest News

Dave Ramsey says: Skip interest-only loan, reconsider buying rental property

(FreeStockPhotos.biz)

Dear Dave,

I’ve been out of college for a few years, and I have no debt. I’d like to start investing, so I’m thinking about buying a triplex, living in one of the apartments, and renting the other two.

Should I get an interest-only loan for this?

— Chad

Dear Chad,

Never, ever get an interest-only loan!

If you can’t make this idea happen on a 15-year, fixed-rate mortgage that takes no more than 25 percent of your take-home pay, then you can’t afford this project.

Think about this, too: If you buy a complex and live on the property, you’ll have to set down and enforce some strict renter’s guidelines.

Living with renters can be tricky, because they’ll have access to you 24 hours a day, and some of them will abuse the privilege.

Then again, you’ll have that kind of access to them as well. Not exactly a bad thing when you have people living in a complex you own.

Here’s an option. What if you just bought a nice, inexpensive single-family home for yourself?

You wouldn’t have the cash flow, but you will have the appreciation and a better chance of reselling down the road. Plus, if you want to invest further, there are always mutual funds.

Real estate plans work out just like you want them to only about half the time. Don’t discount the risk and expense either!

— Dave

Related Links