Here’s an even bigger example. Let’s say they owned a home, and they’re behind on the mortgage or upside down on the house—meaning that they owed more on it than it’s worth. You can just hand it back to the mortgage company. You’re not legally or morally obligated to accept the house and the situation surrounding it because it was left to you in a will. Just because it’s family doesn’t make it jump over onto your plate!
Let me say it again, Matthew. You don’t inherit debt. Don’t let creditors, or anyone else, tell you differently.
The only problem with this kind of investment is that it doesn’t really create cash flow, unless it’s farmland. In the real estate world, we call raw land an alligator because it eats. You have to pay taxes on it every year, plus you have upkeep and maintenance of some form or fashion, and it doesn’t create an income. The only time it creates income is on the back end, when you sell the land.
It’s not a terrible investment, Tara. But it’s not a great one, either. I buy pieces of raw land here and there, every once in a while. But mainly I stick with income-producing investment properties.
Extended warranties are only about 12 percent actual, statistical risk. The other 12 to 13 percent goes to miscellaneous overhead and profit. On top of that, the company that wrote the warranty probably didn’t make as much on it as the dealership did. It’s weird, but that’s how a lot of those models work.
I don’t buy extended warranties, Tara. In my mind, they’re just a waste of money. Besides, if you buy something and can’t afford to fix it if something goes wrong, then you couldn’t really afford the purchase in the first place!
Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough,The Total Money Makeover andEntreLeadership. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
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