Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode starts with testing out ChatGPT’s ability to give financial advice.
Then we pivot to this week’s money question from Daniel, who wrote us this email: “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 of 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.”
Check out this episode on any of these platforms:
Our take on using AI for financial advice
When ChatGPT, the chat bot from OpenAI, was released to the public in 2022, people scrambled to see what it could do. Turns out, quite a lot. ChatGPT can write a love story in the style of Shakespeare, offer rudimentary therapy and almost everything in between.
AI engines can also generate personal finance articles. The news and advice website CNET used its own AI tool to write content about basic financial concepts like compound interest and cashing checks — but it then had to issue corrections to some of those articles to address mistakes ranging from computation errors to plagiarism.
After testing out ChatGPT for themselves, a few of our Nerds offered this assessment: ChatGPT can give you general financial information, but it won’t always be accurate. And it cannot replace a real financial advisor who can understand the nuances of your unique financial situation, or a Nerd who knows what questions and additional info to surface to you.
Our take on investment properties
Rental properties can generate a steady stream of passive income, but as with most investments, they come with inherent risk and upfront costs. For example, you might want to hire a property manager or purchase umbrella insurance for coverage beyond your homeowner’s policy. These expenses are, of course, on top of the cost of the property itself.
There are plenty of ways to lose money on rental properties, too. Vacancies, tenants who don’t pay rent and home repairs can eat into your profits.
If you decide that you don’t have the resources to buy rental properties, consider investing in real estate in other ways, such as in a real estate investment trust or via an exchange-traded fund.
Our tips
- 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.
- Vacancies are expensive. Make sure you have cash reserves or a line of credit if your rental property is empty for a few months.
- 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.
Have a money question? Text or call us at 901-730-6373. Or you can email us at podcast@nerdwallet.com. To hear previous episodes, go to the podcast homepage.
The article Smart Money: ChatGPT vs. the Nerds, and Rental Properties originally appeared on NerdWallet.