1505

Dave Says: No, No, No!

Dear Dave,

Should I take $20,000 out of my thrift savings account to use as a down payment on an investment property? My payment would be $1,200 a month, and I could lease it for $1,500 a month. It will also give me a better return than if I left it in my savings account, even with all the penalties. What do you think?

Cecilia

Dear Cecilia,

So, you want to cash out retirement, and take a penalty, to buy an investment property. And on top of that you’re going to take on debt, too? This is like combining two dumb things into one big mess. I don’t think so!

I understand the allure of real estate. I love real estate. But it’s pretty obvious you’ve never been a landlord. Bringing in $1,500 and paying out $1,200 sounds good to you, but there’s also a lot of risk involved, and that’s something you haven’t figured into the equation. Sometimes you have places that just sit there empty. Other times you have renters who don’t pay, things that need fixing, or people who just tear stuff up.

The idea that you’re going to make a bunch of money off this situation is pure fantasy. Don’t go there!

—Dave
 
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