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Kevin's in Boise. Hi Kevin, welcome to the Ramsey Show.
Hey, hello sir, how are you? Better than I deserve. What's up in your world?
Hey, and question: I was trying to find out when, instead of seeing a smart investor pro, at what point do you buy a property for a rental income versus investing it versus, you know, going to an investor pro?
Okay, well, we won't, I wouldn't suggest you start buying rental property unless you pay cash for it after your home is paid off. So if you're using Ramsey lingo, that would be in Baby Step Seven. Then, yeah, Kevin, where are you at financially? Do you have a paid-for house currently?
Yes.
Okay, yeah. We have zero debt. We have nothing. Way to go, it's amazing. Yeah, I would begin right now to pile up some money as fast as I could to pay cash for my first rental, if I was you. And meanwhile, you could probably save 15% of your income still towards mutual funds. That's the way I did it. I got my house paid off and then I just kept doing 15% of my income into retirement in mutual funds. That's not that much, really. And then every other dollar I could scrape together for investing, I just piled it up until I paid cash for my first little rental. And as soon as you do that, all that rental income will help you buy the next one too, so it snowballs in a good direction after you get it going.
Well, I guess that's where I'm at now. We do have the cash available to buy a rental income.
Great, do it, and have it paid for. When you get that money, you do that, so then you get that money. Where do you put the money from the rent? You just put it in some account to go towards another rental?
Yeah, that's what I've done, and I use some of my other money to go towards the next rental because I love real estate. It sounds like you do too, but you don't have to do that. It's not a mandatory part of the Ramsey plan or something. Some people don't like real estate, dealing with renters and all, and they just do mutual funds. That's okay. But what I have done is I would take extra cash and just open up a simple S&P 500, no-commission, low-turnover mutual fund, just an index fund. And I just dump money in that index fund until there's enough in there to buy another piece of real estate, and then I dump money in there until there's enough money to buy another piece of real estate. The interesting thing was it got to the point that it turned out to be a lot of money, because as you get a few properties, that account builds really fast. You know what I'm saying?
Mm-hmm.
So just keep going. It just seems like a better, safer bet with the real estate versus putting it in the funds.
It is safer in some ways, in that you control more of the variables, and real estate is less volatile. It doesn't jump up and down as much in price as the stock market does. It's also a whole heck of a lot more hassle. Stuff breaks on real estate. They never call me from my mutual fund company and want an air conditioner. And the mutual fund company never calls and says, you know, I lost my job, I'm not paying my rent. We don't ever get that from them. So it makes a little less, and it's a little more volatile, but it's also a whole lot less hassle. I just kind of open up my email and see how much money I made. There's not much to it on the mutual funds, but I like the real estate. I grew up in that business, I love real estate, and I've got a bunch of it. So you're doing it exactly in the right order. That's incredible. Paid-for house, has the cash to buy a rental property. I'd go ahead and pull the trigger on this one.
Yeah, and you know, usually when we get that call, it's somebody who's still fighting through their credit card debt or their student loan, and they're wanting, yeah, they see dollar signs. They've been watching some weekend get-rich-quick thing on real estate, and they're about to get themselves into a mess.
Yeah, I see that a lot on TikTok. That's the hot thing: flip houses and real estate investing. And these are the same people who have a hundred thousand dollars in student loan debt who are about to walk into a nightmare.
Yeah, I mean, TikTok is pretty good for dance moves, maybe, but not great for financial advice.
Yeah, I'm just thinking, financial advice and TikTok. There's a lot of bad financial advice on TikTok, I will say that. That's like the youngsters' version of stupid. The other one that gets me is on the other end, the old-people version: if your financial products are advertised between Snuggies and walk-in bathtubs, they're probably not good. If washed-up Hollywood figures are selling you whole life insurance, that would be, um, long-term care, or not long-term care, what is it? Yeah, no, they're selling reverse mortgages. Oh, that's a horrible shout-out.
Yeah, you need to do a Fine Print on reverse mortgages. That would be a fun one, that would be good. We can play some TV timeshare in there. You could do timeshare on one. If you guys want the next step, the next season for Fine Print, you guys need to email and let George know what he's supposed to talk about. We've had lots of great ideas come through. It's the email, the Fine Print at ramseysolutions.com. If you've got an idea for an episode around a company that is scamming people, a product that's terrible for people, and there is no shortage, Dave, yeah, apparently there's not. The timeshare industry is one, reverse mortgages are another one that you could do.
Um, and I thought of one this morning when I was listening to the Fine Print on my walk, and it's actual scams. We had a lady calling, a guy calling about his mom who had gotten scammed. Not just, you know, semi-legal scams like we're talking about right here, like timeshares are legalized fraud. But getting your personal information. I'm talking about like the Spanish setup or the Nigerian prince. There are some basic setups with these scams, and if you learn how they work, expose them, and maybe interview somebody with the FBI or something on these scams, that would be good.
I mean, we've had some really interesting calls over there. I have fallen for one. I fell for one of them. Yes, I was really embarrassed to say it. I shipped some shoes to Nigeria off of Craigslist. I was selling some shoes on Craigslist, and the guy said, hey, send them to my cousin, I'll pay you extra for the shipping. I got the email and I said, wow, he's really willing to pay the extra 50 bucks to ship, and so I just went ahead and shipped him. And it turns out the email was not from PayPal. No. Once I shipped it, I never checked my actual bank account to see if the money was really there. I just saw an email from PayPal and I went, all right, he's good to go, and I shipped him. So that was my, uh, it was an eBay scam similar to that for a while. Yeah, they would actually cut and paste and put the PayPal logo on it, and get you to go ahead and pay the wrong account. And somehow they were hacking into the system. It was a real embarrassment. You can replicate emails and websites to look just like the actual company. IRS is one. They need your information. They're phishing scams: they need your information in order to get... phishing, by the way.
Oh yeah, yeah, you need to do an episode. I know that's good. I have a lot of stupid tactics with scams. That's very, and senior citizens are the most successful target. Tennis shoes, and you weren't suspicious?
I just thought, wow, what a nice guy. He wants to send these to his cousin in Nigeria. I was, you know, I was probably who happens to be a prince.
Yes. There was no prince involved. There was no red flag, no royalty here. No red flags, except I'm shipping tennis shoes to Nigeria, and that, and guys looking on Craigslist for these. Yeah, this is where we pick them up. That's generally where we buy our shoes, for not here.
Well, I just did a segment on Fox Media today helping senior citizens figure out cell phone plans, and there was one about how they wanted to know how to avoid scams. Exactly. Because that's the primary target of the scams is senior citizens: wire us money, buy us gift cards, give us some personal information. So I always say, when in doubt, hang up. If it seems suspicious, if it seems too good to be true, yeah. And that pretty much ends the whole thing when you do that.