NerdWallet's Smart Money Podcast - ChatGPT vs. the Nerds, and Rental Properties

Episode Date: February 6, 2023

Artificial intelligence tools like ChatGPT are making headlines — but can they be trusted to give personal finance advice? To kick off this episode, Sean Pyles and Liz Weston have ChatGPT answer some common money questions.  Then Liz and regular Smart Money host Sara Rathner answer a listener’s question about how to make money from investment properties. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Also, we are running a book sweepstakes ahead of our next Book Club episode! In February, we're talking with Axton Betz-Hamilton, author of "The Less People Know About Us: A Mystery of Betrayal, Family Secrets and Stolen Identity,” a book about what happens when the person who steals your identity is a family member.  To enter for a chance to win our book giveaway, send an email to [e-mail] with the subject: "Book Sweepstakes" during the sweepstakes period. Entries must be received by 11:59 p.m. PST on Feb. 16, 2023. Include the following information: your first and last name, email address, ZIP code and phone number. For more information, please visit our official sweepstakes rules page. Timestamps: This Week in Your Money segment: 0:00 - 10:30  Money Question segment: 10:31 - 36:31  Like what you hear? Please leave us a review and tell a friend.

As artificial intelligence takes over the world, where do the nerds and financial planners fit in? We start the conversation with our robot overlords in this episode. Welcome to the NerdWallet Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Liz Weston. This episode, regular smart money host Sarah Rathner and I answer a listener's money question about how to make money from investment properties, including whether this

is really a way to earn passive income. But first, Liz and I are joined by other smart money regular, Anna Helhosky, to see if we are all out of jobs as AI, specifically one called ChatGPT, consumes the world. Welcome back to the pod, Anna. Thanks for having me, Sean and Liz. And yeah, let's hope not. Yeah, well, time will tell. So Anna, AI and ChatGPT have been in the news a lot lately, especially when it comes to giving personal finance advice. So for those who may not be as familiar, can you explain what ChatGPT is and why people should care about it?

ChatGPT is an artificial intelligence chatbot search from the company OpenAI. The company has other AI tools like DALI2, which creates incredible and very disturbing bizarre images based on your inputs. It has a tendency to add extra fingers and teeth when making images of people. Yeah, very long, frightening faces all around. Very scary stuff, but fun to play with. But ChatGPT launched for the public in November 2022 and has been making waves ever since. It's an interactive chatbot programmed by

machine learning. That means it scours the internet and pulls from language patterns and information to produce all sorts of things. It's incredibly versatile. It can chat, explain basic concepts, compose letters and emails, write everything from scripts to jokes to computer code, poetry, song lyrics, and college essays. And it all appears to be practically human. It can even modify answers based on follow-up questions and hints. Are there concerns about how this technology is being used or misused? It's fascinating technology, but there are concerns about the implications it and other

AI could have for workers, writers, and creators, as well as its use in schools. Recently, ChatGPT even passed an MBA exam at the Wharton Business School, which would frighten a lot of people and might say some things about MBA programs. And it's also going to be used by BuzzFeed to create content and quizzes. The news ended up sending BuzzFeed stock soaring. So people are pretty excited about the potential here. Well, my main question on that is, can an AI sort me into the right house in Hogwarts? I'm just not confident that I can do that. And part of it is because AI software isn't infallible.

Recently, the website CNET got into some pretty hot water when it came out that some of their personal finance content was written by an AI, and their articles had some pretty glaring inaccuracies. That's right, Sean. And that's true of all AI software platforms. They do have their limitations. For example, ChatGPT's knowledge base is limited. It'll also refuse any inappropriate requests as a safety feature to avoid offensive outputs. Right now, ChatGPT is free, but it's not always available. So sometimes you go on the website, you're trying to load it up, and it says it's busy. Too many people are on

it. The company is planning to offer a paid version in the future, and there's already a waitlist for it. Wow. Okay, well, let's see how good this chat GPT really is. I believe you have the platform pulled up. So how about we ask it some common questions that we get at NerdWallet and see what it says. And just to note that chat GPT doesn't actually talk. Sean used some text to speech software to give it that wonderful robot voice. Okay, I'm typing into chat, GPT, am I able to buy a house? Buying a house is a significant financial decision and one that should be made with care and consideration. To determine if you are able to buy a house, there are several factors to consider, including your credit score, income, debt-to-income ratio, and savings. Your credit

score is an important factor in determining your ability to secure a mortgage loan. A good credit score can help you qualify for a better interest rate, which can save you thousands of dollars over the life of the loan. You will need to demonstrate that you have a stable and sufficient income to make your mortgage payments. Lenders will typically look at your income and debts to determine your debt to income ratio. All right, that is a pretty decent answer. And thinking of this software as a service that essentially scrapes and synthesizes content across the internet, I think that we can say it does a pretty decent job at doing that. There aren't any huge inaccuracies, but it doesn't really give the full picture, right? Yeah, it seems really general. And it almost seems like it raises more questions than it

actually answers. Yeah. But for a starting off point to figure out whether you can buy a house, it's not totally wrong. So that's something at least. Okay, well, Ana, let's throw another question at it and maybe do it in the voice of NerdWallet and see what it spits out. All right. So I'm typing right financial advice for the question. What's the best way to get out of debt in the style of NerdWallet? NerdWallet suggests taking the following steps to get out of debt. One, create a budget understand your income and expenses to identify areas where you can cut back on spending such as dining out or

Subscriptions and redirect that money towards paying off debt to Prioritize high interest debt focus on paying off high interest debt such as credit card balances First as they accrue interest faster and cost more in the long run three consider debt consolidation if you have multiple high interest debts consider consolidating them into one loan with a lower interest rate this can simplify your payments and save you money on interest four make more than the minimum payment pay more than the minimum payment each month to reduce the principal faster and pay off the debt quicker. 5. Seek professional help. If you are struggling to get out of debt, consider seeking the help of a financial advisor or credit counselor.

They can help you develop a plan to get out of debt and provide guidance on budgeting and managing your finances. Again, this answer is pretty clear and efficient, but I find it lacking a human quality. For example, the emphasis on paying off high interest debt versus paying off the smallest balance. That's what we often talk about as the debt avalanche versus debt snowball methods. I think focusing on absolute efficiency versus building on positive reinforcement is something that we talk a lot about and figuring out what's the best way for you personally to pay off debt. And this answer doesn't really get into that. Well, I like that it recommends a credit counselor, but we would

also recommend talking to a bankruptcy attorney because credit counselors try to keep you out of bankruptcy. Bankruptcy attorneys know the advantages. You really need to have both perspectives to understand what to do when you're overwhelmed by your debt. And again, you know, this is very general. It's not a bad start, but people need more information. Yeah. One thing that strikes me as I heard this answer is that I feel like I can see the articles that it scraped this information from. And that feels a little bit creepy, especially because I wrote some of these. So I feel like I'm being plagiarized from in real time. But also, they kind of remind me of those summary boxes that you get at the top of Google occasionally, where they hit the high points, but maybe don't go too into depth.

Yeah, right. It feels like one long featured snippet without any kind of human quality behind it. Because that was definitely what struck me about these answers is they seem technically correct. That seems like a fine starting point. They're really lacking nuance. And it just is lacking some kind of a human quality to it. And one thing in general around these answers that I think is lacking is that these chat GPT pots aren't really going to be able to surface things that you don't know that you don't know. And that's one of the main benefits of talking with a trusted financial advisor or a knowledgeable nerd. You will be able to get insights from someone who can show you different things that you hadn't even thought of yet. Actually, what it reminded me of more than anything was reading an

intern's work, like somebody that's new to journalism, their first pass through a story tends to be very simple, very general. So I have hopes that it's going to get better. Obviously, that's what machine learning is all about. It's getting better and better and more specific. So already, it's better than the chat bots we have to deal with when we're trying to get through to customer service. So that's good. Yes, that's for sure. At some point, I think we'll get to where artificial intelligence can actually have a conversation with you.

In other words, it can ask you questions like in terms of the, am I ready to buy a house question? They can ask, well, what are your other goals? Are you saving enough for retirement? Do you really want to be a homeowner? Are you prepared to stay put for five years? Things like that. And eventually, I think we may get to a point where this can

supplement the work that we do in trying to help people make smart financial decisions. But maybe it's just my own bias here, but I don't think that we're fully out of a job. I agree. I think especially editors definitely won't be out of a job because that's something that's going to definitely be needed. I also see chat GPT and other AI like this becoming part of how we work rather than completely replacing the work that we're doing. But I, again, might be a little biased. We'll see. Okay. Well, Ana, thank you so much for talking with us about chat GPT. Absolutely. Thanks for having me. Before we move on to this episode's money question segment, I have a quick call out Absolutely. Thanks for having me. us or leave us a voicemail there. You can also write us or send us a voice memo at podcast

at nerdwallet.com. All right, now let's get into this episode's money question. This episode's question comes from Daniel who wrote us an email and who uses he him pronouns. Here it is. Hey guys, first, I love the podcast. Thanks for all the great insights into better ways to work with my money. I'm a white collar professional in my mid-30s and trying to think of ways to increase my income outside my job. I'm thinking about getting a second property and using it for rental income, whether for long-term or short-term rentals. My question is, what are some factors I should consider before going down this path? I know I need to consider mortgage, down payment, insurance, and upkeep costs, but what else should I know or think about?

Would I be better off just sticking with the stock market or other forms of investing? Thanks, Daniel. To help us answer Daniel's question, on this episode of the podcast, we are joined by Lisa Green, a content nerd who has many rental properties of her own. Welcome to Smart Money, Lisa. Thank you, Sarah and Liz, and thank you for having me on this podcast today. This is a topic that I love to talk about. Awesome. So rental real estate can really offer some decent returns over the long run, depending on where you are and how you invest.

But being a landlord isn't for everyone. Obviously, it's been a good fit for you, Lisa. Absolutely. Right now, we have 27 rental homes. These are all single family that we use for long-term rentals. We're still interested in acquiring more, currently looking at a potential 28. And we got started in this 20 years ago, believe it or not, by buying a couple of foreclosed properties right off of the multiple listing service. People who aren't familiar with real estate, that's where most properties are listed, right?

Yes. So here's the number one question for me and probably a lot of people who are listening, including Daniel. How did you get the money to get started? We were fortunate to already live in a home that we owned and we had some equity in that home. And we had already set up a home equity line of credit so that we were able to borrow against that equity. And that gave us the funds to get started by using the home equity line of credit to fund a new purchase. That's not the only way to get started. I know of other folks who've gotten started through what's commonly known as house hacking. This means renting out

part of the property that you live in. This could be anything from a room in your house to buying a duplex or quadplex and living in one unit while you rent out the others and essentially letting the tenants in the rest of the property pay your mortgage for owning the property. Interesting. Okay. And what are some other ways? Well, another common way is to keep your first house as a rental when you move to a new house. Some people do this kind of like by accident because they can't really sell the property because of the market conditions. And so they end up an accidental landlord. But some people become a deliberate landlord this way. And we've

done this too. When we moved to a new property, we simply held on onto the property that we already had. The mortgage is already in place and you're already familiar with the home. You just keep it and turn it into a rental. Actually, I was one of the accidental landlords. That's something that happened to me. So I have a tiny bit of experience with this. Yeah. A lot of people I know keep their starter home or condo. And then once they graduate to a bigger house or they relocate because of work or other reasons, it's just a matter of holding on to the original house and renting it out. Lisa, have you only used HELOCs or have you gotten other types of loans? Oh, we've definitely gotten other types of loans. The HELOC helped us get started, but we could quickly see that we were going to need a better source of funding. And I was very nervous. We're like, okay, we're going to

have to ask a bank for a loan. But actually getting a local banker to give us loans was a lot easier than I thought it would be. We were just starting out. But we tried really hard. We made a business plan and explained what we were going to do. And we took all this to the bank and the banker looked at it and said, well, okay. And I know that at least once he actually came to see one of the properties while we were there working on it because he wanted to make really sure that we were on the up and up, saw it with his own eyes. And after that, our banker was all in. And pretty soon we could just fund our next acquisition with just little more than a phone call.

Hey, we found another property we want. Okay. Oh, nice. That's great. So Lisa, what's your approach to investing in rentals? Well, the method that we use is commonly called BRRRR. And it stands for buy, rehab, rent, refinance, and then repeat. So I can kind of walk you through each one of those steps. First, you try to buy a property at below market value. You

want to get a good deal as much as possible. So here's where you can use funds such as a HELOC or a short-term loan from the bank. I've even known of people to use credit card advances to just get your hands on the property. Oh, that sounds risky. Yes. I have never, ever, ever tried that. But I have heard of people doing that. That comes with a whole lot of potential downside. So I would caution against that particular remote versus a HELOC, which would be a significantly lower interest rate, most likely. I agree. I agree.

Wow. But the second step is now that you have the property, you rehab it to bring it up to market value. In our case, we typically gained more value from this rehab than we spent on doing the work. And it sounds like you two do the work yourselves, you and your husband? We did a lot of the work ourselves. Yes, we did. So once you have the property rehabbed, you rent it to a tenant to establish an income stream on that property. Now that you've got a fully functioning rental, now you go back to your lender or perhaps a different lender and you refinance the property as a fully functioning rental property that has been rehabbed and brought up to market value. When we did this, we almost always got back

more money than we had spent on buying and rehabbing. So our out-of-pocket investment was zero. Nice. You can't even calculate the return on investment when your out-of-pocket investment is zero. That's a good point. And then the final R is repeating the process. Right. You've refinanced. You have the money back in your pocket. Now you can go buy another one and do the same thing over and over and you build your portfolio this way. Now people can think of rental properties as passive income, but I have a feeling that they are anything but. How much work goes into this? A lot of that, Liz, is up to you. Rental properties can be very hands on, as they were in my case, or they can be mostly passive. It's your

choice. You can buy fixer-uppers where you have a lot of opportunity to increase the market value with the work that you put in, or you can choose turnkey properties that are already rehabbed, fixed up, ready to go. You just put a tenant in it and move forward. If you're handy and if you have time, you can do a lot of work yourself. But if you don't want to do that, you can hire property managers, you can hire renovation crews, you can hire bookkeepers to do a lot of this work for you. I mean, a key factor for me is whether your income will continue if you personally stop doing all the work. I mean, that's the goal, right? We all would like to retire someday and stop doing all the work.

So to me, this is a key difference between working a job, even if you're self-employed versus owning an investment. And I tend to compare the type of rental investing that we do against what you hear so much about on a lot of the television programs about real estate is flipping. People are flipping houses to make a profit, right? And you can do that. You can flip a house and you can make a quick profit. But once you sell that flip, you've got all the income you're going to get from that house. The income stops. And now you need to find another house to flip again a heck of a lot more work than having a fixed up property that you currently own and just taking an income from a tenant and then maintaining the property over time, but not doing anything major to it. That's what it sounds like.

Exactly. What I favor is more buy and hold. This gives you an income stream for a lifetime. Over the course of our investing, I probably sold a half a dozen properties. And I wish I had every one of them back. Wow. Here's an example. We saw all the hype about flipping. So we thought, okay, we can try that. And so in 2015, we did a flip, and we made about $22,000 in profit on that flip. That sounds nice. It wasn't too bad. I mean, it wasn't a huge amount of work and we had $22,000 in profit. Okay. Then we had to pay short-term capital gains tax on this amount because we had not held the property for more than a year. Today, that house is worth $120,000 to $140,000 more than we sold it for. If we had still owned it, we probably could have had some small positive cash flow over the past seven years.

Plus, we would still own the house and we could borrow against it or sell it at this much higher value. So to me, this is an illustration of why buy and hold has more value to me than flipping. So something you mentioned the cost of hiring professionals versus doing things yourself. But I think something that needs to be pointed out is when you do things yourself, you're using your time and time has value too. So when you hire somebody else to handle something, you're buying back your time in exchange for your money. But when you do things yourself, you're not exactly saving money 100% because you're giving up time that you could spend in other ways. I feel like that's something that

kind of scares me. What time do I have available to dedicate to this? So that's something I think everybody should think about. Oh, I'll just paint the house myself. I'll just put in new floors myself. I'll just tile the bathroom myself. Okay. But that takes hours, if not days and sometimes weeks. So always something to think about if you're going to do the DIY route. Absolutely agree. When we were starting out, we did do a lot of the work ourselves because we had more time than money. And partway through, we switched to having a property management company that now does that work for us and binds subcontractors to do the fix up and handles all of that for us, which is much more pleasant in terms of your day to day life. Yeah, once you get to the point where you can afford to do that. So our listener is wondering what he should consider before getting into the rental property

game. So what would you tell him? Well, I think that Daniel has already nailed a lot of the factors to consider. Your mortgage, your down payment, the insurance, and the cost of upkeep of the property. So here are a few more things to be aware of. First of all, vacancies are very expensive. When a tenant moves out, the income stops and the expenses soar at the same time because you have to rehab the property to get it ready for the next tenant. You may have to go in and paint. You may have to go in and paint. You definitely have to go in and clean. You may have to replace flooring or appliances or other elements. You need cash reserves for this or access to funds through a line of credit. Now this actually gets

easier as you acquire more and more properties because they aren't all likely to be vacant at the same time. If you only own one rental and there's a vacancy, now you have zero income coming in. If you own 10 rentals and you have one vacancy, nine of them are still bringing in an income to you. And so it's not as much of a blow. Now, I live in California, which is considered a pretty litigious state. And it feels like being a landlord would kind of make you a lawsuit target. So how do you deal with that? Well, you will want an umbrella liability insurance policy. And let me explain a little bit of what that is. Let's say someone is injured at your rental property and they file a lawsuit against you. You might be held liable for the damage to that person.

This has not happened to me, but if it did, my umbrella liability insurance policy could help pay a legal judgment against me. It's called umbrella insurance because it goes over and above the liability coverage that's already included in your typical homeowner's insurance policy. It just adds more liability coverage. And this coverage is typically not very expensive and can give you a lot of peace of mind. So we mentioned a couple of times hiring different professionals who can help you as a property owner. And one of those professionals is a property manager. So what can a property manager do for you and how much do they cost? Yeah, we were very grateful to finally decide to put our properties under a property manager. The property manager will screen

potential tenants and find someone to rent your property for you. They will answer the urgent calls about clogged toilets in the middle of the night so that we don't have to. There you go. And they will track down tenants who are late on the rent to get them to pay, which was actually There you go. for you. But then it becomes much more of a hands-off operation where you simply sit back and wait for the check to come in. Yeah. Somebody who doesn't want to unclog somebody else's toilet at three o'clock in the morning, that sounds pretty nice. That's just not the kind of investment I want to make. And Lisa, I mentioned that I live in California, which has a very different attitude towards landlords and debtors. So the landlord

tenant law and the creditor debtor law are very different from the way that they are in the South. So could you talk a little bit about what you need to know in terms of your state and local laws? Absolutely. And you are so right, Liz, that some areas are more favorable to landlords and others to tenants. This can be true on a state by state basis. It can also vary from one city to the next. Some cities will have lots of restrictions, particularly on short term rentals. And lending practices can also vary by location. You may have heard that it's better to hold title to your properties, for example, in a business entity like an LLC, but in other places, it may be fine to hold properties in your own name. In fact, that's what we are able to do

where I live. So I think that the important thing to know here is that you just have to investigate what the state and local laws are in the area where you live and in the area where you plan to invest. Joining a local real estate investors association can be a great way to learn from other people who are already in this business. And Lisa, you and I talked before we started recording about some of the differences in getting a bad tenant out if you have a problem with a tenant and need to do an eviction. Here in California, even an uncontested eviction, in other words, when they're not fighting back, can cost thousands of dollars and it can add up really quickly. And I think the attitude in your area is a little bit different. It is. We have found that most tenants don't want to be evicted any more than we want to evict them.

And so a lot of times if you can work with them to help them make up the rent that they are falling behind on, you can help them work their way out of a tough situation. But we did have one family over 20 years that stopped paying rent and just refused to leave. And we did end up in front of a judge with an eviction case. Now, before this particular judge, the case was pretty cut and dried. The judge says, do you owe these people money?

Can you pay it? Nope. Then get out of their house. That's a lot. But that judge did order us to put the tenant's belongings into a storage unit and pay the storage bill for a month out of our pocket. We also had about $1,000 in legal expenses and several months of lost rent that we couldn't recover because the tenants just didn't have the money. They left the house in bad repair and we had a lot of fix-up costs before we could rent it again. So I think we ended up with a loss of about $8,000 on that house for that year.

And this is in a state that's considered fairly landlord friendly. That's absolutely something to think about. I mean, you mentioned one bad tenant in 20 years where it got to this point. So really, if you think about over 20 years, the loss kind of gets spread out. But definitely something to think about. What if your really bad nightmare tenant is your first tenant? So you're pretty new to this. You don't have as much money saved up to handle these unexpected emergencies. But yeah, I mean, that's why it's

really important to screen tenants well and have a lawyer on your side. Yes, absolutely. Know what your rights are as the landlord and what their rights are as the tenant and what you might be able to do if you're faced with a tenant who is not paying their rent. Absolutely, Sarah. I think that the importance of screening your tenants cannot be overemphasized. You're looking for three different things in a tenant. You want someone who, number one, will take great care of your property. Number two, will pay the rent in full, on time, every month. And number three, will keep living there for a long time because turnover is expensive. And it can be hard to find applicants who meet all three of these criteria. Meanwhile, your house is sitting

there vacant. There's no rent coming in and you're really eager to get someone into it. For us, the temptation was always to compromise on our standards so we could get someone into the house quickly. This is a mistake that can lead to the eviction issue that we just previously discussed. But I imagine on the other side, sometimes you get a really, really good tenant. Yes, you do. Sometimes you get a superstar tenant. We had one family that took great care of the property, always paid the rent on time, stayed in that house for eight years, and then bought the house from us. Wow. It was a win-win. We used the proceeds from the sale of that one property to purchase two others

and they got the property that they really loved. So it wouldn't be a conversation about real estate without conversation about taxes because they really touch everything in our lives, don't they? So what are some of the tax advantages to investing in rental homes? I think there are some awesome tax advantages to investing in rental homes. I think there are some awesome tax advantages to investing

in rental homes, starting out with something known as depreciation. This allows you to deduct the cost of your property from your taxes over time. And that can be a nice tax break, although you might have to pay those taxes back if you sell the property. Yeah, that's something known as depreciation recapture. And it can be kind of a surprise when people don't know that it's coming. Yes. So if you are in that situation, as I saw the possibility of that when we were selling a house to our superstar tenant, you can put off the tax bill indefinitely by using something called a 1031 exchange. This allows you to defer the taxes

by selling the property and investing in similar rental properties. So in our case, we sold one house, reinvested all that money into two other houses, and were able to defer the taxes. So we did not have tax consequences from that sale. Okay. And if you hold on to those properties until you die and then bequeath them to your heirs,

then essentially nobody ever pays those taxes. Your property gets a new value for tax purposes and all the appreciation that happened over that time essentially never gets taxed. Exactly. That's known as a step up in basis. And it applies to anything you own, including stocks, bonds, your home and other real estate. But it's a really great tax advantage. Have you ever had a loss on a property? Yes, we showed a paper loss on our taxes for about the first 10 years of investing. You can end up with a loss on paper and you might be able to write that off against your regular income, even though your cash flow is positive, putting money in your pocket

every month. This happened to us for about 10 years. We had losses on paper, even though we had spendable cash coming in, and we were able to write it off against our regular income. So basically the rent you were receiving was more than your expenses. It was the depreciation that was creating that paper loss, essentially. Exactly. Exactly. Okay. And you mentioned taxes, but there's one tax you don't have to pay

on rental income or passive income. Yes, this is passive income. It's not income from a job. So you do not have to pay Social Security, Medicare, or self-employment tax on it. And the great thing for Daniel, who says that he is in his 30s, the great thing about investing now is that he has time to set up these rental properties as a great source of income in retirement. You'll pay off the mortgage over 30 years. And now just as you're reaching retirement age, you have something that is going to generate more income than ever because you no longer have a mortgage payment to make. So rather than spending down a lifetime of savings in your 401k or other accounts and watching those dwindle and worrying whether you're going to outlive your money, you can live off the income from your rental properties, and you'll still own the assets to pass down to your heirs. Now, Lisa, I mentioned I had a brief experience as a landlord, and it was so bad that it just

basically scared me off the whole process. So if you don't want to be a landlord, there are other ways to invest in real estate, including real estate investment trusts and mutual funds and exchange-traded funds that invest in rental and commercial real estate. And we will include links so that you can get more information about those in our show notes. With that, Lisa, thank you so much for taking the time to talk with us. Thank you. This has been a lot of fun. And I wish Daniel the best of luck. Great. And now let's get to our takeaway tips. Sarah, do you want to kick us off? Sure. First, know what you're getting into. Rental real estate can be a good investment, but the returns depend on many factors and how hands-on you want to be.

Next, vacancies are expensive. Make sure you have cash reserves or a line of credit if your rental property is empty for a few months. Finally, consider alternatives. If you decide being a landlord isn't for you, there are other ways to invest in rental real estate, including real estate investment trusts. And that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Also visit nerdwallet.com slash podcast for more information on this episode. And remember to follow, rate, and review us wherever you're getting this podcast. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes

and may not apply to your specific circumstances. This episode was produced by Sean Piles and myself with help from Anna Hilhoski. Audio wizard Kaylee Monaghan mixed our audio, Jay Bratton wrote our show notes, and a big thank you to the folks on the NerdWallet coffee desk for all their help. And with that said, until next time, turn to the nerds.