The rentals are all paid for. It's all pure profit, minus taxes and maintenance. Keep the houses and keep them as rentals. His income of 200k can easily pay off his main house in 5 years.
@@marcenelj He's right though, there are too many costs associated with buying and selling real estate unnecessarily. If he hasn't lived in these houses for 2 of the last 5 years or 1031 exchange them, he's going to pay capital gains taxes. This guy makes a lot of money, just get aggressive on paying for his own house and then keep buying rentals again once he's got the cash afterwards. These 2 houses probably cashflow quite nicely without a mortgage.
Money is fungible, rentals being paid off but main house not, and having to use the rentals income to pay the mortgage each month is the same as not having a mortgage and not having the rental income. The question is, in some bad scenario, you prefer to fully own your dream house and lose your rentals, or lose your home and still own two rentals you cant or you dont like enough to go live into.
@@Gastyz your residence is not an asset. The rentals are. If anything he should downgrade his home. The likelyhood he will stay in that house at 31 is pretty slim.
Disagree with this advice. Pay off your current house on rice and beans. Do not bet on the market stabilizing or going down. You will never cash flow houses like the two you already own.
Yeah that's what I would do .. the market may never get better, its much riskier .. just keep paying off his house, he earns more than enough on a 500K mortgage. He can sell if he gets into trouble which is unlikely, he is young.
Yea fr. Cuz why would you wanna sell it when u can have cash flow? That's the problem w renters. They get 1 house under rental for only a couple or few years then they take em.out🤦. They stop renewing rental agreements.
Terrible advice Minute you sell you’ll getting hit with high tax Keep the rentals, you found them , rented them , you did the work already Just downsize your home with no capital gain tax as it’s your personal residence You’ll be happy you did Take step ahead not 2 steps back
@@pwells10 I'm holding on to my rental bc I have it and paid for. 1500 monthly is nice. I have about 3 years to 62. Houses will most likely increase in value as they have in the past. I been thinking of selling in this hot market but what to do w the cash and paying 50k plus in cgain and depcap . Maybe keeping it is also a good idea.
The reality is that you should still invest, up or above 15%, have no debt, but also start slowly accumulating assets outside of the control of any government. Hint hint.
Well this is another advice I wouldn't take from Dave. No way I'm selling two paid houses just to clear my 3rd one specially if I'm making 200k a year. 🤣
The hardest part of investing is getting the deals - especially today and into the future. You have great cash flowing deals. Why give them up in HOPES that you can get 2 more good deals again in the future? Especially just to pay down a home mortgage at 2.5%? Hold the rentals. Keep saving cash to buy more as deals present themselves.
Because keeping debt around is a risk factor. He might end up trying to pay a mortgage on a $490,000 house without his $200,000 income. If he pays off his house, then he doesn't have that risk.
@@MichaelJones-rn2pq I agree that most debt is bad. In this situation where the income generated from these assets well exceeds the debt used to own them, the risk is very small. If he happens to lose his 200K/year job and somehow no one wants to hire him ever again then he can sell the rentals at that time, but doing it pre-emptively just so you get your home paid off 5-6 years earlier as a 31 year old doesn't make much sense to me.
I thought I heard him say the rentals are paid off? I'm surprised they didn't actually ask more clarifying questions on his rental cashflow. hard to find a better deal than what you paid years ago especially w no mortgage. Sounded like his primary residence should be sold and downsized unless he's getting married. wish they had discussed rental numbers more. he gave advice on how to buy rentals cash to a guy that owns rentals w cash.
That is true cash flow was never considered but in Phoenix houses worth about 250k each get about 1k a month in rent if I remember the last time I looked. You are looking at about 8k a year cash flow. That is not a lot of profit off of 250k so I am thinking for the value of houses his cashflow is probably not very good. I had a house like that I am about to put on market and use its sale to pay off mortgage on my primary.
Lol. Such horrible advice. Sell your rentals that cash flow to pay off a 2.5% mortgage that is financed over 15-30 years? Inflation is eating this debt away. When Dave lost his rentals, interest rates were well above 10% ...18% in some cases. THIS is why he lost everything. Rates are lowest in history and we are reaching high inflation. This equals free money to purchase a cash flowing investment.
@@saulgoodman2018 using leverage is how 99.9% of successful business make money. Ramsey is the exception. But he makes money by selling to ppl that are horrible with money books and ads for "pros" that give kickbacks. His snowball method is brilliant. His investing advice has not evolved since the 1980's
The only time you sell the rentals are if the maintenance and taxes are more than your profit. If maintenance and taxes are 5k a year. And you bring in 1k a month. You shouldn't sell it.
Ask my friends that purchased a beautiful place in Phoenix a few years before the 2007 nightmare. They would sell those two paid off rentals in this market immediately.
@@braceyourselvesfortruth2492 I live in Vancouver and 3 years ago homes in my city (Surrey were priced at 850,000) today there’s no detached homes under 1.5 million real estates prices may fall 5 percent and level out but prices won’t go down
That does not matter. If he can sell 2 now for 500k and buy those back 2 years from now for 400k because he is paying under market price on a deal then he probably should.
The biggest drawback to selling is the capital gains tax. But there is a point where there is no point on having finance on 10 houses and manage the properties if you can pay off 5 and keep all the rent as profit with less property management.
Don’t sell if they’re cash flowing, raise rent to keep up with inflation. If you sell, Taxes will crush you especially if you’ve been writing off depreciation.
Why sell 2 sources of income when you can use those and your salary to pay the house your in now. You can prob knock it out out 10 years. Extremely conservative he's prob bringing in 1500 a rental house easily more. If anything sell the house your in now and move into a smaller house.
I only rent to active duty, single military personnel. I can just call a tenant's Commanding officer to get the rent, if they dont pay me. So I'd be nuts to sell my rentals. They clear me 70k per year, and I live on 20k per year. I could create more such boarding houses, but I just aint interested in doing so. I dont have to lift a finger and I"m piling up cash/gold.
You know that’s actually illegal though, you’re not allowed to discriminate on people based on their job. You’re only allowed to look at their income not their job title
I don't understand being a landlord as an investment. You tie-up a crazy amount of capital for minimal return each month. There's also the risk of bad renters that you can't evict or trash your place.
I am a landlord. It pays me an extra $1000 a month for very little work. Homes generally appreciate 2-3% a year. I would not be able to do that in the stock market untill I hit a significant ammount of money. Now scale that up, what happens at 10 rentals? Leveraged ~ $5000-6000 a month. Paid off $15000-18000 or so. Kind of a no brainer to me.
it's a long term play that does carry risk and has good reward. I do like that the asset is insured of course value isn't. it's also an appreciable asset that when purchased properly builds equity while providing cash flow w tax benefits does take a certain personality to deal w risk and periods when cash flow is low due to repairs etc.
I'm a landlord and yeah. I've had my place trashed and got to the point on almost evict tenants (they were a nightmare). My money is tied and I'm planning my wait out. It is too much work and stress, an extra job.
Honestly, I'd say this has a lot to do with the local market in Phoenix. If the market is going to nose dive or level off soon I'd agree with Dave the guy is better off to sell now and then look for deals in the coming years. Also, on a side note, capital gains tax rates are very likely going to go up in 2022 especially on this guy's 200k income. So he should sell now or hold these properties till retirement.
I'm surprised Dave didn't ask about Capitol Gains, if the guy sells his rentals. I don't think using that money to payoff an existing mortgage would NOT count for a 1031 exchange. Thus he may end up with less money than he thought.
I agree with dave on this one. If the market is hot you are making a ton on the properties. Get rid of all your risk (debt). I am about to do the same myself but I only have to sell 1 of 6 investment properties to pay off my mortgage that is how nuts real estate is.
I'm eliminating my mortgage too just to lighten the overhead. Sold my house in Massachusetts and buying outright in Texas. Can't wait. I have about 160k equity and I bought the house 3 years ago. Paid 205 I owe about 170 and I listed it for 335k. Which is on the lower end of the appraisal too. It's 325-360
@@edwardrhoads7283 i have 3 inv properties and one principal place so 4 all up. Is it a good idea to sell one and pay off my mortgage even though that inv prop in cash flow 200 per month. Others are all cash flow to but not by that much plus this is the only one i can sell to meet the mortgage and not be short. Im hesitant something cos i have this thing in my head .. il have one less inv property 😞 my home is worth 1.1 million. Mortgage 300k
@@Peter-zv4dx If your cash flow is only $200 then I am guessing you have mortgages on the properties. If not $200 is almost nothing you can do a lot better. The reality is it is a question of risk. How much risk do you want to have? If my cash flow on a property was only $200 and it was worth enough to pay off my mortgage I would sell it. In fact that is what I did. I found my properties that were the worst performing and sold them (I sold 4 in 2020 because I had a half mil in debt and almost blew my self up with it). I kept my best performing houses. At some point the value of the house is so much that the cash flow is not worth it I am better of investing the money I get from the house. So ask yourself, if you sold the house would you get a better return on the cash investing it elsewhere? If the answer is yes take advantage of this crazy market and sell. If the answer is no you might want to hold.
I have all sorts of cash and still can't get home. And who the heck knows when a "deal" will be coming. Is it 6 months, 12 months, 2 years, 4 years? It is super annoying and highly discouraging.
$490k owing on home at say 3% pa interest is $15k. If his 2 rentals are at least that in profit after tax he should hold them. If not sell them as he's worse off.
In 2010, in PHX $25K-$50K, My House now, ~$425K, by 2025 =~$1MM rents were $1000/mo now $2500/mo In 4 years sell all 3 for $1MM each, and retire to some where else. 26-30% YOY 109K increase in population in 2020
My wife and I are finally selling our rental that we have debt on. We’ll be making nearly $50,000 after fees and closing costs. It will be going towards our primary home.
It takes a year or two just to establish the ones you have by getting all the maintenance and stable tenants. Why jeopardize that only to buy future ones that will be more money, and then go through the break in process of new maintenance costs and finding a good stable tenant. The market is not accurately analyzed, the inflated values has more to do with corporate investing, and the product of real inflation, there are apartments and housing going up all over, yet there’s no flattening, and no projected flattening. Just be lucky to own a home in this time and if you have rentals than even better. If it ain’t broke don’t fix it.
I’m in the same situation right now. I owe $223k on my primary and $43k on my rental. My rental brings in $1295 per month rent and would sell for about $340k. After taxes and realtor fees I could walk away with about $290k. I’d be able to pay off my primary home and have about $67k left to go and finish renovations on my home…..decisions, decisions…
@@mikeb.2925 yeah it’s pretty crazy, I bought it for $140k 7 years ago and the value went up so quick the rent hasn’t caught up with it yet. The area it’s in has a lot of brand new townhomes that currently rent for $1350 so the competition is driving the price down.
I seldom disagree with Dave. But, I say hold onto them and pay off your house. The way things are going, home prices will only increase. The powers that be want real estate so unaffordable only a select few can afford it. Hang onto your property while you still can. This man can easily quickly pay off his primary house and still hang onto the rentals.
@@musicpro7278 I don't know where you live but near me home prices are still climbing. I was lucky enough to buy my house 8 years ago. I would not be able to afford my house today.
Great, so you sell your rental, take the tax hit, and pay off your mortgage on your house... so now you have more cash coming in! For what? Maybe another investment property! Wait, so then why did I pay so much in taxes just to lose my first rental only to repeat the process?! Dave, mortgages aren't like what they used to be. Fannie Mae loans on residential properties aren't called when they are sold to another bank. They are government insured.
I love listening to Ramsey, but while I understand the dangers of debt I don't agree with how risk averse he is even when speaking to people who seems to be doing quite well.
I presume the rental market is also pretty hot, if he's making $2K/month on each property, why not just put that on the mortgage (or as much as he can after expenses) and pay extra out of his regular income as well? He could probably knock out the mortgage in 5-7 years and not to have to wait until the market cools. Nobody knows obviously, but it could take a while before the cap rates on single family rentals turn positive again. Meanwhile he gets to continue to gradually increase rents and recognizing the tax benefits. Plus, he is probably going to take a BIG capital gains hit when he sells.
I'm eliminating my mortgage within the next few weeks. Selling, moving to Texas and buying outright. That frees up 1900 a month to reinvest somewhere else. Looking for safe slow and low mutual funds to park it for 5 years then I'll go from there
This is not good advice IMHO. I get Dave has been doing this for 30 years or whatever, but the markets have changed since he went bankrupt. Housing will not be cheaper than it was 5 yeara ago. Selling two houses that are PURE cashflow to payoff cheap money (a mortgage rate that you arguably will never be able to get again, 2.xx%), making 200k. Come on..really? Take the cashflow and your discretionary income and go ham on your mortgage. You will have that paid off in no time and be able to keep your investment properties. I do not think you should sell, pay selling fees, pay taxes, and cease your passive income to hope the housing market will depress and you can buy in again later? Why? Your income + your passive income is more than capable of paying your primary mortgage off. Use that. You don't need immediate relief.
Why would u sell ur rentals..Keep the rentals their paid for and has cash flow..sell and down size ur personal home..u dont need a 490k home..and keep investing.
Ramesh's advice here is actively stupid. He's telling him to pay off a mortgage that's likely in the 3-4% range by selling houses that are appreciating higher than that, and are spinning out cash. I'm sorry, but Ramsey's irrational hatred of all debt is pathological, and not based in mathematical reality. 3-4% mortgage debt is not the same a 14-17% credit card debt. With rates so low, I'd mortgage out the other two houses, as long as they're cash flow positive after the debt service, and invest that cash. This is especially true if he can get fixed rate mortgages, and inflation is rising.
"In 20 years you will be ahead of the person that leveraged into it". I'm pretty certain the data does not support that. There's almost zero big real estate tycoons that didn't at least start with leverage. And most are still leveraging. The ability to do this safely with Real estate is what makes it a good investment.
Disagree. The rentals are paid off and are assets putting money in his pocket. The liability is the house he is living in, since it has a loan. Get aggressive and live on rice and beans and get the house that has a loan on it paid off.
That's absolutely ridiculous you have too paid off rental properties that are currently rented that's giving you two extra paychecks each month ............. & You make 200k a year so DON'T SELL THE RENTALS. Throw everything you can from your job at your mortgage now along with the income from both properties. Dave's smart guy and most of the time I can't argue with him on advice he gives but you are clearly not struggling through life with heavy debt loads like most middle class folks .............. Which u are clearly not. DONT SELL !!!!!!
Rent them! Clean those spaces, and make minor fixture adjustments. List the property at the right price. If you want to sell, appraise your property and know the value of your land.
I'm sorry I respectfully disagree with Dave. He said paying off his rentals, pay off his mortgage, and save up to buy the next rental in cash, but the risk is there is absolutely no guaranteed he will be keeping that job. He can get into car accident, tragic accident, injury, his company can close down, and there is no guaranteed the real estate will cool down 10-20%. There will be less people owning homes going forward, more renters on the rise, and the rents will go up.... just live conservatively and focus to payoff all 3 properties. Also there is a capital gains tax if he hasn't owned the rentals for more than 2/5 years... i would just keep them and pay them off like a LION.
There's also no guarantee the tenants will keep paying rent consistently. Many landlords ran into that problem during the pandemic. Rental properties are all nice until the tenant becomes delinquent or destructive. If he pays off his mortgage, he can at least guarantee no more mortgage payments.
Honestly if I was in this guys shoes I’d just stay paying on the home I live in and keep the rentals as extra income, he makes good enough money to afford the current home and he has 2 forms of income he could always sell if needed for any major emergencies, I see no need to sell.
but what if interest rates go up or even spike like they did in the '80s. then house prices fall. Now is a time to sell high...it's also a nice feeling to be debt free and have liquidity
@@karlos99able no one will deny being debt free is a dream, goal or great feeling however “high interest rates” like the 80s, well it could happen but not likely and in his scenario it wouldn’t hurt him because he is already locked in on a mortgage, matter fact assuming interest rates sky rocket one day would benefit anyone who owns a home and plans to rent them out as there would be plenty of renters and empty homes to buy at a very low price
or keep the two rentals as they are cash flowing and paid off, refinance your primary to get a rate in the high 2's if you can (if it isnt there) and with a 200k salary just keep doing what you are doing..worse case you can move into one of the rentals. Daves advice is so bad sometimes
I don’t understand now, this guy makes 200k/ a year. So keep rentals properties and rent it out. With his income , he just needs to pay off the house he lives in about 5 years. I do not make significant like him, just like 50k/ a year. I have 2 rentals properties. It is hard for me to handle 2 rentals, but I still try to keep it. The real estate fee eat your assets after in and out.
I love how he ignores common in law partners if they not married, less and less people are getting married, it's what half the world is doing, so get with the program Dave and tell us how we can this sensibly. I will never get married again, but I will consider living with someone if I have a cohabitation agreement, I think we make it work and partner/work with a common in law partner so long as both are reasonable people willing to work together.
I would have suggested Re-finance the rentals to pay down the mortgage on his primary residence. Or why doesn't he re- finance the rentals buy a better deal for his primary residence CASH. And sell his home in the "HOT" market
Depends if re prices drop next yr He would be gd to sell now You always find a re deal Hence why investors are flipping You should never fall in love with your investment vehicles Even your personal home Cap gain are not taxable up to 250k Flipping is always going to be a great to make money even if you do a few ever other yr when his income he does need to worry about money any way And he can move that cash into other investment vehicles to maintain a balance portfolio Perhaps cryptocurrency and stocks and other re areas He may get into commercial re Or re management Selling two rentals is no big deal Don't need to make so much on two properties He may end up with fifty I'm his life time
I don't think that is a good idea since he already fully paid for the other two houses. I think he should keep them giving him cash flow, sell his his expensive +400k and buy something more affordable and he saves more money, or leave in one of his rental homes and save more money. I think it's stupid to sell a home that is already paid for and giving you money.
Don’t sell them good god. Just hold onto them and pay down the mortgage on the house you have now or sell the house you have now and downgrade in home.
I wouldn’t sell. Raise the rent. And put it all towards paying down the main house. Go on a tear to pay it off in 7 years on 15 yr mtg, like his usual advice on baby step 7. As long as he has the emergency fund set aside. I don’t see the need to sell any properties during peak or valley markets as long as you have enough buffers (moats) However if it’s a money pit you can foresee a long list of fixes needed. Yeah drop it to the next owner to deal with it and buy one that has less hassle. Good paid off house good cash flow good condition, I wouldn’t sell
Considering Dave doesn't see the market going down that means the longer this guy waits his houses will only go up in value. His income is so high and he has rental income he's probably good either way. Just have your gf move in a charge her rent. Live on little and hammer your house payments down.
@@edwardrhoads7283 yes, that's great as well. All the rental income and the house price doesn't decline. Only going down would cause a problem. Up is amazing, but flat with collecting rents is still good.
This advice is terrible. Two paid off assets producing income and tax savings and appreciating. Sell them and take a huge tax hit to pay off a 3% 30 year mortgage. Idiotic.
Why doesnt he sell the home he lives in and whatever he gets he can buy a residential home for cash and keep his 2 rentals. He's not married, he doesnt need a house he cant afford.
I will never sell my rental properties! I want them for 27.5 years then I’ll sell one by one and use a 1031 exchange to buy newer and better ones. What are you gonna do with the cash??? Inflation will eat it. Don’t be stupid.
Yeah you probably right, something doesn't add up unless he is has very low rent on the rentals, sounds like he may be in a cash crunch. Maybe sell one rental or something if they a money pit. Most people come on and don't tell the full story and we all have to guess.
very bad advice. it appears this person giving recommendations is a one dimensional thinker. why on earth would you recommend someone who has very low interest rates on their investment properties who have paid closing costs, and interest and will pay transaction costs to sell just to pay off a primary house? not creative at all. just fixated on one thing and only on one thing, to pay off a primary residence. yes, your advice was extreme and not a good one at that 🤦♀️
Id rent the house and sub let it to 3 or 4 more people for 500 a month under an assumed LLC. Id use their house to make extra income without the burden of taxes up keep and mortgages. If i want to maximize profit, i dont pay the rent until its time to go to court for eviction. Usually at that point i will come up with a sum that court agrees with to avoid the eviction. Moratoriums were a great way to sustain that strategy. Capitalism has taught me many things. I just use their own hustle against them.
Rentals sound like headaches. Sell them and invest into dividend growth stocks. You can build up a portfolio and eventually live off dividends which is the most passive form of income I know of without the stress.
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The rentals are all paid for. It's all pure profit, minus taxes and maintenance.
Keep the houses and keep them as rentals.
His income of 200k can easily pay off his main house in 5 years.
Yeah, I dont understand Dave's advice on this one. Just pay off your house.
Haha this guy is here to go against everything Dave says..
@@marcenelj He's right though, there are too many costs associated with buying and selling real estate unnecessarily. If he hasn't lived in these houses for 2 of the last 5 years or 1031 exchange them, he's going to pay capital gains taxes. This guy makes a lot of money, just get aggressive on paying for his own house and then keep buying rentals again once he's got the cash afterwards. These 2 houses probably cashflow quite nicely without a mortgage.
Money is fungible, rentals being paid off but main house not, and having to use the rentals income to pay the mortgage each month is the same as not having a mortgage and not having the rental income. The question is, in some bad scenario, you prefer to fully own your dream house and lose your rentals, or lose your home and still own two rentals you cant or you dont like enough to go live into.
@@Gastyz your residence is not an asset. The rentals are. If anything he should downgrade his home. The likelyhood he will stay in that house at 31 is pretty slim.
Disagree with this advice.
Pay off your current house on rice and beans. Do not bet on the market stabilizing or going down. You will never cash flow houses like the two you already own.
yup i mean with his income i dont even think he needs rice and beans to pay it off lol
I'm probably an idiot but I'd hold on to real estate forever
No you aren't
You’re not an idiot.. You are actually just thinking like a wealthy person. Dave is full of poop on this.
Yeah that's what I would do .. the market may never get better, its much riskier .. just keep paying off his house, he earns more than enough on a 500K mortgage. He can sell if he gets into trouble which is unlikely, he is young.
Yea fr. Cuz why would you wanna sell it when u can have cash flow? That's the problem w renters. They get 1 house under rental for only a couple or few years then they take em.out🤦. They stop renewing rental agreements.
Smart idea brother.
Terrible advice
Minute you sell you’ll getting hit with high tax
Keep the rentals, you found them , rented them , you did the work already
Just downsize your home with no capital gain tax as it’s your personal residence
You’ll be happy you did
Take step ahead not 2 steps back
I've only regretted selling homes.
Good advice
@@pwells10 I'm holding on to my rental bc I have it and paid for. 1500 monthly is nice. I have about 3 years to 62. Houses will most likely increase in value as they have in the past. I been thinking of selling in this hot market but what to do w the cash and paying 50k plus in cgain and depcap . Maybe keeping it is also a good idea.
He's right. Here's the axiom that has served me well: "You don't make money when you sell, you make your money when you buy right."
When they hinted at: "You'll own nothing and be happy" i took that as a challenge.
The reality is that you should still invest, up or above 15%, have no debt, but also start slowly accumulating assets outside of the control of any government. Hint hint.
Well this is another advice I wouldn't take from Dave. No way I'm selling two paid houses just to clear my 3rd one specially if I'm making 200k a year. 🤣
The hardest part of investing is getting the deals - especially today and into the future. You have great cash flowing deals. Why give them up in HOPES that you can get 2 more good deals again in the future? Especially just to pay down a home mortgage at 2.5%?
Hold the rentals. Keep saving cash to buy more as deals present themselves.
Because keeping debt around is a risk factor. He might end up trying to pay a mortgage on a $490,000 house without his $200,000 income. If he pays off his house, then he doesn't have that risk.
@@MichaelJones-rn2pq I agree that most debt is bad. In this situation where the income generated from these assets well exceeds the debt used to own them, the risk is very small. If he happens to lose his 200K/year job and somehow no one wants to hire him ever again then he can sell the rentals at that time, but doing it pre-emptively just so you get your home paid off 5-6 years earlier as a 31 year old doesn't make much sense to me.
I thought I heard him say the rentals are paid off? I'm surprised they didn't actually ask more clarifying questions on his rental cashflow.
hard to find a better deal than what you paid years ago especially w no mortgage.
Sounded like his primary residence should be sold and downsized unless he's getting married.
wish they had discussed rental numbers more. he gave advice on how to buy rentals cash to a guy that owns rentals w cash.
It was poor advice
That is true cash flow was never considered but in Phoenix houses worth about 250k each get about 1k a month in rent if I remember the last time I looked. You are looking at about 8k a year cash flow. That is not a lot of profit off of 250k so I am thinking for the value of houses his cashflow is probably not very good. I had a house like that I am about to put on market and use its sale to pay off mortgage on my primary.
Just bought my first rental property while the market is hot. Thankfully found new rents at a higher price. Feeling very blessed
Terrible time.
200k income why not just throw 100k into the mortgage each year
He isn’t thinking long term. He wants it NOW
@@Peter-zv4dx I agree , crazy imo
Lol. Such horrible advice. Sell your rentals that cash flow to pay off a 2.5% mortgage that is financed over 15-30 years? Inflation is eating this debt away. When Dave lost his rentals, interest rates were well above 10% ...18% in some cases. THIS is why he lost everything. Rates are lowest in history and we are reaching high inflation. This equals free money to purchase a cash flowing investment.
You're right. But all his cult followers would say that Dave is right.
Real estate is not gonna come down ANY time soon
@@saulgoodman2018 using leverage is how 99.9% of successful business make money. Ramsey is the exception. But he makes money by selling to ppl that are horrible with money books and ads for "pros" that give kickbacks. His snowball method is brilliant. His investing advice has not evolved since the 1980's
Yeah…you probably shouldn’t be watching videos about Dave Ramsey if this is what you think 😂 This is exactly what he teaches against 😂
@@ZacharyBuhler it's entertainment! How bad is the investment advice today!
The only time you sell the rentals are if the maintenance and taxes are more than your profit.
If maintenance and taxes are 5k a year. And you bring in 1k a month. You shouldn't sell it.
And or you are tired of being a landlord.
Ask my friends that purchased a beautiful place in Phoenix a few years before the 2007 nightmare. They would sell those two paid off rentals in this market immediately.
They'd be wrong. There's no crash coming.
@@braceyourselvesfortruth2492 It doesn't need to be a crash but an adjustment will hit that market and this guy would benefit to take his wins.
@@braceyourselvesfortruth2492 I live in Vancouver and 3 years ago homes in my city (Surrey were priced at 850,000) today there’s no detached homes under 1.5 million real estates prices may fall 5 percent and level out but prices won’t go down
@@JustinCase780 if he's a flipper, sure. But he sounds more like an investor, which is more in line with what Dave focuses on.
@@braceyourselvesfortruth2492 good point 👍
I'd say it depends on when he bought the rentals. There's a good chance those homes may never be as cheap as they were when he acquired them.
That does not matter. If he can sell 2 now for 500k and buy those back 2 years from now for 400k because he is paying under market price on a deal then he probably should.
The biggest drawback to selling is the capital gains tax. But there is a point where there is no point on having finance on 10 houses and manage the properties if you can pay off 5 and keep all the rent as profit with less property management.
Don’t sell if they’re cash flowing, raise rent to keep up with inflation. If you sell, Taxes will crush you especially if you’ve been writing off depreciation.
I sold mine in 2007. They have re-sold a few time since, but haven't sold for what I got in 2007.
Why sell 2 sources of income when you can use those and your salary to pay the house your in now. You can prob knock it out out 10 years. Extremely conservative he's prob bringing in 1500 a rental house easily more. If anything sell the house your in now and move into a smaller house.
I only rent to active duty, single military personnel. I can just call a tenant's Commanding officer to get the rent, if they dont pay me. So I'd be nuts to sell my rentals. They clear me 70k per year, and I live on 20k per year. I could create more such boarding houses, but I just aint interested in doing so. I dont have to lift a finger and I"m piling up cash/gold.
What base do you live around?
You know that’s actually illegal though, you’re not allowed to discriminate on people based on their job. You’re only allowed to look at their income not their job title
@@charlesg7926 please tell me in the law where it says u have to let anyone live in ur house just by looking at numbers
@@carterloveland6688 I said job, not rental housing lol. Learn to read…
I don't understand being a landlord as an investment. You tie-up a crazy amount of capital for minimal return each month. There's also the risk of bad renters that you can't evict or trash your place.
I am a landlord. It pays me an extra $1000 a month for very little work. Homes generally appreciate 2-3% a year. I would not be able to do that in the stock market untill I hit a significant ammount of money. Now scale that up, what happens at 10 rentals? Leveraged ~ $5000-6000 a month. Paid off $15000-18000 or so. Kind of a no brainer to me.
it's a long term play that does carry risk and has good reward. I do like that the asset is insured of course value isn't.
it's also an appreciable asset that when purchased properly builds equity while providing cash flow w tax benefits
does take a certain personality to deal w risk and periods when cash flow is low due to repairs etc.
@@betterhomesnc2437 I could easily get $1000 a month with dividend payments on a $200k investment in MLP's or REIT's or covered call options
@@tortoisehead30 reits are definitely a good play.
I'm a landlord and yeah. I've had my place trashed and got to the point on almost evict tenants (they were a nightmare).
My money is tied and I'm planning my wait out. It is too much work and stress, an extra job.
Thanks Dave for this videos. I’m in a similar situation. This is exactly what I needed to hear.
Hope you don't sell but you do you
Dave’s a smart guy , just not on this one
Honestly, I'd say this has a lot to do with the local market in Phoenix. If the market is going to nose dive or level off soon I'd agree with Dave the guy is better off to sell now and then look for deals in the coming years. Also, on a side note, capital gains tax rates are very likely going to go up in 2022 especially on this guy's 200k income. So he should sell now or hold these properties till retirement.
As long as you aren’t too upside down on your houses I must disagree with Dave!
But, I do agree with his Get a Bargain!
I'm surprised Dave didn't ask about Capitol Gains, if the guy sells his rentals. I don't think using that money to payoff an existing mortgage would NOT count for a 1031 exchange. Thus he may end up with less money than he thought.
You have made a very good point
You 1031 it into a larger building.
@@ralphy1989 doesn’t need larger. Just same type.
Cap gains in high income. Problem 1.
I agree with dave on this one. If the market is hot you are making a ton on the properties. Get rid of all your risk (debt). I am about to do the same myself but I only have to sell 1 of 6 investment properties to pay off my mortgage that is how nuts real estate is.
I'm eliminating my mortgage too just to lighten the overhead. Sold my house in Massachusetts and buying outright in Texas. Can't wait. I have about 160k equity and I bought the house 3 years ago. Paid 205 I owe about 170 and I listed it for 335k. Which is on the lower end of the appraisal too. It's 325-360
I have a question are u there?
@@Peter-zv4dx What is your question?
@@edwardrhoads7283 i have 3 inv properties and one principal place so 4 all up. Is it a good idea to sell one and pay off my mortgage even though that inv prop in cash flow 200 per month. Others are all cash flow to but not by that much plus this is the only one i can sell to meet the mortgage and not be short. Im hesitant something cos i have this thing in my head .. il have one less inv property 😞 my home is worth 1.1 million. Mortgage 300k
@@Peter-zv4dx If your cash flow is only $200 then I am guessing you have mortgages on the properties.
If not $200 is almost nothing you can do a lot better.
The reality is it is a question of risk. How much risk do you want to have? If my cash flow on a property was only $200 and it was worth enough to pay off my mortgage I would sell it.
In fact that is what I did. I found my properties that were the worst performing and sold them (I sold 4 in 2020 because I had a half mil in debt and almost blew my self up with it). I kept my best performing houses.
At some point the value of the house is so much that the cash flow is not worth it I am better of investing the money I get from the house. So ask yourself, if you sold the house would you get a better return on the cash investing it elsewhere? If the answer is yes take advantage of this crazy market and sell. If the answer is no you might want to hold.
Dave do you use a total market ETF to save money for your real estate?
I have all sorts of cash and still can't get home. And who the heck knows when a "deal" will be coming. Is it 6 months, 12 months, 2 years, 4 years? It is super annoying and highly discouraging.
Actually, dude should refinance and live in a paid off house so the rentals can have the interest expense counted against the income.
I agree. Always have the debt against the rentals.
I am in the same situation as the caller. I could pay off my primary if I sell my rentals, however I am going to hold on for now.
nobody's job is guaranteed. That 200k per year can disappear in a flash. Dont count upon it (much) or you'll end up being sorry.
$490k owing on home at say 3% pa interest is $15k. If his 2 rentals are at least that in profit after tax he should hold them. If not sell them as he's worse off.
Why sell anything 1031 exchange into more cash flow
In 2010, in PHX $25K-$50K,
My House now, ~$425K, by 2025 =~$1MM
rents were $1000/mo now $2500/mo
In 4 years sell all 3 for $1MM each, and retire to some where else.
26-30% YOY
109K increase in population in 2020
My wife and I are finally selling our rental that we have debt on. We’ll be making nearly $50,000 after fees and closing costs. It will be going towards our primary home.
You 1031 it and use that for 20% down on more doors
@@ralphy1989 Already put it on the primary. Not interested in being a landlord right now.
What rent if he sells? Just use what you make on rent as extra payments or your home
It takes a year or two just to establish the ones you have by getting all the maintenance and stable tenants. Why jeopardize that only to buy future ones that will be more money, and then go through the break in process of new maintenance costs and finding a good stable tenant. The market is not accurately analyzed, the inflated values has more to do with corporate investing, and the product of real inflation, there are apartments and housing going up all over, yet there’s no flattening, and no projected flattening. Just be lucky to own a home in this time and if you have rentals than even better. If it ain’t broke don’t fix it.
He should also be looking at the depreciation recapture the IRS will be coming after. Go back and add it up. No one wants a surprise large IRS bill.
how about the capital gains he needs to pay on the two houses ???
I’m in the same situation right now. I owe $223k on my primary and $43k on my rental. My rental brings in $1295 per month rent and would sell for about $340k. After taxes and realtor fees I could walk away with about $290k. I’d be able to pay off my primary home and have about $67k left to go and finish renovations on my home…..decisions, decisions…
It’s easier to get out than to get in to rentals.
Never sell a rental if it cash flows.
Keep it and if you are worried you are overleverged then just start paying them down. You will profit much more in the long term
Sounds like you don't charge enough for rent. $340k house and you're charging less than $1300?
@john Smith Utah, the values went way up and the rent hasn’t caught up with it yet
@@mikeb.2925 yeah it’s pretty crazy, I bought it for $140k 7 years ago and the value went up so quick the rent hasn’t caught up with it yet. The area it’s in has a lot of brand new townhomes that currently rent for $1350 so the competition is driving the price down.
I seldom disagree with Dave. But, I say hold onto them and pay off your house. The way things are going, home prices will only increase. The powers that be want real estate so unaffordable only a select few can afford it. Hang onto your property while you still can. This man can easily quickly pay off his primary house and still hang onto the rentals.
If you stop listening to the news you'll see house prices are starting to go down $10k go search for house and look
@@musicpro7278 yeah but down 10k on a house that cost 200k last yr down 10k from 300k is a drop in the bucket but i guess its a start lol
@@musicpro7278 I don't know where you live but near me home prices are still climbing. I was lucky enough to buy my house 8 years ago. I would not be able to afford my house today.
@@a.m.doesit9347 if u think houses are gonna drop 100k ur dumb. Be lucky if they even drop 30k max
@@Tyler-sq4lt I live in Florida
Great, so you sell your rental, take the tax hit, and pay off your mortgage on your house... so now you have more cash coming in! For what? Maybe another investment property! Wait, so then why did I pay so much in taxes just to lose my first rental only to repeat the process?!
Dave, mortgages aren't like what they used to be. Fannie Mae loans on residential properties aren't called when they are sold to another bank. They are government insured.
I love listening to Ramsey, but while I understand the dangers of debt I don't agree with how risk averse he is even when speaking to people who seems to be doing quite well.
What about capital gains with the sale of the 2 rental properties?
Yes I was thinking about this and depreciation recapture... he'll owe a ton of money
I presume the rental market is also pretty hot, if he's making $2K/month on each property, why not just put that on the mortgage (or as much as he can after expenses) and pay extra out of his regular income as well? He could probably knock out the mortgage in 5-7 years and not to have to wait until the market cools. Nobody knows obviously, but it could take a while before the cap rates on single family rentals turn positive again. Meanwhile he gets to continue to gradually increase rents and recognizing the tax benefits. Plus, he is probably going to take a BIG capital gains hit when he sells.
I'm eliminating my mortgage within the next few weeks. Selling, moving to Texas and buying outright. That frees up 1900 a month to reinvest somewhere else. Looking for safe slow and low mutual funds to park it for 5 years then I'll go from there
a guy I know sold all of his after 20+ years of ownership (he doesnt need the money) in october of 19. He made out like a bandit
This is not good advice IMHO. I get Dave has been doing this for 30 years or whatever, but the markets have changed since he went bankrupt. Housing will not be cheaper than it was 5 yeara ago.
Selling two houses that are PURE cashflow to payoff cheap money (a mortgage rate that you arguably will never be able to get again, 2.xx%), making 200k. Come on..really?
Take the cashflow and your discretionary income and go ham on your mortgage. You will have that paid off in no time and be able to keep your investment properties. I do not think you should sell, pay selling fees, pay taxes, and cease your passive income to hope the housing market will depress and you can buy in again later? Why?
Your income + your passive income is more than capable of paying your primary mortgage off. Use that. You don't need immediate relief.
Why would u sell ur rentals..Keep the rentals their paid for and has cash flow..sell and down size ur personal home..u dont need a 490k home..and keep investing.
Ramesh's advice here is actively stupid. He's telling him to pay off a mortgage that's likely in the 3-4% range by selling houses that are appreciating higher than that, and are spinning out cash. I'm sorry, but Ramsey's irrational hatred of all debt is pathological, and not based in mathematical reality. 3-4% mortgage debt is not the same a 14-17% credit card debt. With rates so low, I'd mortgage out the other two houses, as long as they're cash flow positive after the debt service, and invest that cash. This is especially true if he can get fixed rate mortgages, and inflation is rising.
"In 20 years you will be ahead of the person that leveraged into it". I'm pretty certain the data does not support that. There's almost zero big real estate tycoons that didn't at least start with leverage. And most are still leveraging. The ability to do this safely with Real estate is what makes it a good investment.
Disagree. The rentals are paid off and are assets putting money in his pocket. The liability is the house he is living in, since it has a loan. Get aggressive and live on rice and beans and get the house that has a loan on it paid off.
That's absolutely ridiculous you have too paid off rental properties that are currently rented that's giving you two extra paychecks each month ............. & You make 200k a year so DON'T SELL THE RENTALS. Throw everything you can from your job at your mortgage now along with the income from both properties. Dave's smart guy and most of the time I can't argue with him on advice he gives but you are clearly not struggling through life with heavy debt loads like most middle class folks .............. Which u are clearly not. DONT SELL !!!!!!
Rent them! Clean those spaces, and make minor fixture adjustments. List the property at the right price. If you want to sell, appraise your property and know the value of your land.
I'm sorry I respectfully disagree with Dave. He said paying off his rentals, pay off his mortgage, and save up to buy the next rental in cash, but the risk is there is absolutely no guaranteed he will be keeping that job.
He can get into car accident, tragic accident, injury, his company can close down, and there is no guaranteed the real estate will cool down 10-20%.
There will be less people owning homes going forward, more renters on the rise, and the rents will go up.... just live conservatively and focus to payoff all 3 properties.
Also there is a capital gains tax if he hasn't owned the rentals for more than 2/5 years... i would just keep them and pay them off like a LION.
There's also no guarantee the tenants will keep paying rent consistently. Many landlords ran into that problem during the pandemic. Rental properties are all nice until the tenant becomes delinquent or destructive. If he pays off his mortgage, he can at least guarantee no more mortgage payments.
Just here to watch people who follow Dave Just to contradict him,wasn't disappointed
Honestly if I was in this guys shoes I’d just stay paying on the home I live in and keep the rentals as extra income, he makes good enough money to afford the current home and he has 2 forms of income he could always sell if needed for any major emergencies, I see no need to sell.
Your idea is good too, he has a big shovel
but what if interest rates go up or even spike like they did in the '80s. then house prices fall. Now is a time to sell high...it's also a nice feeling to be debt free and have liquidity
@@karlos99able no one will deny being debt free is a dream, goal or great feeling however “high interest rates” like the 80s, well it could happen but not likely and in his scenario it wouldn’t hurt him because he is already locked in on a mortgage, matter fact assuming interest rates sky rocket one day would benefit anyone who owns a home and plans to rent them out as there would be plenty of renters and empty homes to buy at a very low price
or keep the two rentals as they are cash flowing and paid off, refinance your primary to get a rate in the high 2's if you can (if it isnt there) and with a 200k salary just keep doing what you are doing..worse case you can move into one of the rentals. Daves advice is so bad sometimes
If I had a penny for everytime someone asked this question in the past month...
I don’t understand now, this guy makes 200k/ a year. So keep rentals properties and rent it out. With his income , he just needs to pay off the house he lives in about 5 years.
I do not make significant like him, just like 50k/ a year. I have 2 rentals properties. It is hard for me to handle 2 rentals, but I still try to keep it. The real estate fee eat your assets after in and out.
Whatever you do, never marry. You’re better off with tenants… LOTS of tenants…
I love how he ignores common in law partners if they not married, less and less people are getting married, it's what half the world is doing, so get with the program Dave and tell us how we can this sensibly. I will never get married again, but I will consider living with someone if I have a cohabitation agreement, I think we make it work and partner/work with a common in law partner so long as both are reasonable people willing to work together.
I would have suggested Re-finance the rentals to pay down the mortgage on his primary residence. Or why doesn't he re- finance the rentals buy a better deal for his primary residence CASH. And sell his home in the "HOT" market
Why would someone sell with these low interest rates....and your at this age
Depends if re prices drop next yr
He would be gd to sell now
You always find a re deal
Hence why investors are flipping
You should never fall in love with your investment vehicles
Even your personal home
Cap gain are not taxable up to 250k
Flipping is always going to be a great to make money even if you do a few ever other yr when his income he does need to worry about money any way
And he can move that cash into other investment vehicles to maintain a balance portfolio
Perhaps cryptocurrency and stocks and other re areas
He may get into commercial re
Or re management
Selling two rentals is no big deal
Don't need to make so much on two properties
He may end up with fifty
I'm his life time
I don't think that is a good idea since he already fully paid for the other two houses. I think he should keep them giving him cash flow, sell his his expensive +400k and buy something more affordable and he saves more money, or leave in one of his rental homes and save more money. I think it's stupid to sell a home that is already paid for and giving you money.
All the property investors are buying the small starter homes I could afford. Because of zoning regulations, no more starter homes are being built.
Why sell the rentals , they’re already paid for and rented..just pay off personal home slowly.. probably less than 5 yrs
I respectfully disagree Dave. He should keep the rentals, payoff his mortgage in lieu of selling and then saving.
I have 25 rentals homes and I am not selling any of them. He should keep the 2 rental houses dont sell.
Don’t sell them good god. Just hold onto them and pay down the mortgage on the house you have now or sell the house you have now and downgrade in home.
what about the inflation on that 200k cash
I wouldn’t sell. Raise the rent. And put it all towards paying down the main house. Go on a tear to pay it off in 7 years on 15 yr mtg, like his usual advice on baby step 7. As long as he has the emergency fund set aside. I don’t see the need to sell any properties during peak or valley markets as long as you have enough buffers (moats)
However if it’s a money pit you can foresee a long list of fixes needed. Yeah drop it to the next owner to deal with it and buy one that has less hassle.
Good paid off house good cash flow good condition, I wouldn’t sell
Sell your rental houses. Sell your primary home. Buy a farm land. Grow rice and beans on it. Live off that rice and beans.
Stay single. Avoid the pitfalls of marriage. One of which is overpaying for real estate.
Yes, and over paying for a wive, babies and divorce.
speak for yourself. My wife and I paid off our mortgage in 7 years.
Considering Dave doesn't see the market going down that means the longer this guy waits his houses will only go up in value. His income is so high and he has rental income he's probably good either way. Just have your gf move in a charge her rent. Live on little and hammer your house payments down.
Just because a market does not go down does not mean it has to go up. He said at end he thinks it will go flat.
@@edwardrhoads7283 yes, that's great as well. All the rental income and the house price doesn't decline. Only going down would cause a problem. Up is amazing, but flat with collecting rents is still good.
“This market will have calmed down” ok psychic Ramsey….
This advice is terrible. Two paid off assets producing income and tax savings and appreciating. Sell them and take a huge tax hit to pay off a 3% 30 year mortgage. Idiotic.
Keep the rentals!!!
Why doesnt he sell the home he lives in and whatever he gets he can buy a residential home for cash and keep his 2 rentals. He's not married, he doesnt need a house he cant afford.
Maybe the home he is currently in is too much? A home worth $500K is a lot of home for a single person.
sounds like this guy paid too much for his primary home, he mentioned he bought too much home but he makes $200k- doesn't add up.
Warren buffet says rule number one never lose money rule number two go back to number one . Honestly speaking
31 and bought a $600k home or more?? Crazy.
So this can take so many years with the legal parts of it .
This young man may ends up paying 15 to 20 % capital gain tax on rental profit. I am surprised Dave did not talk about it.
I will never sell my rental properties! I want them for 27.5 years then I’ll sell one by one and use a 1031 exchange to buy newer and better ones. What are you gonna do with the cash??? Inflation will eat it. Don’t be stupid.
Yes. Yes and yes!
Don’t sell
Clearly the caller will be subject to capital gains on the rentals unless he meets Sec 121
BS he makes 200K a year.
Yeah you probably right, something doesn't add up unless he is has very low rent on the rentals, sounds like he may be in a cash crunch. Maybe sell one rental or something if they a money pit. Most people come on and don't tell the full story and we all have to guess.
I hope this guy didn’t sell his rentals…
Agree with his advice 💯
Yes, if nobody pays rent due to the moratorium….
very bad advice. it appears this person giving recommendations is a one dimensional thinker. why on earth would you recommend someone who has very low interest rates on their investment properties who have paid closing costs, and interest and will pay transaction costs to sell just to pay off a primary house? not creative at all. just fixated on one thing and only on one thing, to pay off a primary residence. yes, your advice was extreme and not a good one at that 🤦♀️
girlfriend doesn't make enough. get rid of her and find someone to marry who also makes near $200K
Fun fact folks: DAVE DOES NOT HAVE A CRYSTAL BALL.
Lol what 🤣. This market mar correct but its not going to go back to what it was Andy it wont be soon.
Id rent the house and sub let it to 3 or 4 more people for 500 a month under an assumed LLC.
Id use their house to make extra income without the burden of taxes up keep and mortgages. If i want to maximize profit, i dont pay the rent until its time to go to court for eviction. Usually at that point i will come up with a sum that court agrees with to avoid the eviction. Moratoriums were a great way to sustain that strategy.
Capitalism has taught me many things. I just use their own hustle against them.
Rentals sound like headaches. Sell them and invest into dividend growth stocks. You can build up a portfolio and eventually live off dividends which is the most passive form of income I know of without the stress.
Everyone's a financial genius in a bull market.