I currently sit on 3 multi family homes I accumulated within 5 years. I paid 395K for the first one. If I’d waited to have 395k saved, I’d still wouldn’t have enough to buy it, because now a similar house sells for 650k
Dave made his first million doing this, and accumulated quite a lot of properties in his early 20s. The bank holding his loans got bought out, and the big bank didn't like that a kid had so many loans on different properties, and they called his loans. He ended up going bankrupt and rebuilt his life and fortune without debt. He's probably a little too hard headed on this topic, but thats where he is coming from. He doesn't "not understand" that real estate goes up, he doesn't believe in going into debt for anything.
@@ChefAndy972 i've heard that background story before, but I've never understood ONE element of it.....which is, how can the bank just "call the notes due"??! The last time I read a mortgage agreement...it had specific, agreed upon terms. I'm borrowing "x amount of $$$" at "x % rate" and I have "x many of years" to pay it back. I BELIEVE he had used non-traditional financing to accumulate a lot of properties quickly and didn't use traditional mortgages for them. I could be wrong...but would like to know the facts, because Banks can't just "call loans due" just because they got bought out. I've had my mortgage co get bought out by a bigger lender and guess what.....I just still keep on making the original p&i payment just like always.
@@gratefulRed69 yes I believe when Dave Ramsey was doing this he had 90 day loans or something, in which case the bank can probably call them whenever they want.
How can I make this happen? I already have 3 properties and the bank won't lend with no down payment. I live in a highly competitive market, there's no such thing as no money deals. I checked with three different real state agents who are also investors, they could not find ANY no money deals. Not even land.
Yeah, financial advisors could make a lot of difference, particularly in a market such as this. Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are a lot of wealth transfer in this downtime if you know where to look. I have been using an FA since 2019, and I return at least $30k ROI, and this does not include capital gain.
For me, Sonya Lee Mitchell turned out to be better and smarter than all the advisors I ever worked with till date, I’ve never met anyone with as much conviction.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
I understand and support 100% Dave's principles against debt, especially in a culture where people borrow their way of life. However, when it comes to real estate investment, if people waited to pay cash, less than 1% of people would end up owning anything.
I agree with these comments. You do not have to have your primary home paid off in order to buy a rental. And you don’t have to have cash to pay for the rental in full. My primary home has a mortgage rate of 2.5%. Why would I want to pay it off. I have plenty of cash to pay it off. But I choose to invest it in the S&P 500 and earn the difference between the mortgage rate and the stock market rate. A good time to buy a rental home is when you can immediately be cash flow positive from the very first rent check. As each year goes by, the cash flow increases as the mortgage is paid down.
I bought my first rental last year for 199k my mortgage is currently 146k @ 2.85% if I put the house on the market today I would at least get 300k. On the other hand if I would have waited till I had cash it would have taken me 10 years to save up enough to buy that property and I know that it's going to cost a lot more than 199k in 10 years
Yes, but you take on more risk that way, and are closer to being underwater, the more you leverage. We have a property that used to be a Bible camp, and we have currently 4 tenants on it, so I know the value of that rental income and appreciation, but the more leveraged you are, the riskier it is. I just think that Dave, who has lost it all in real estate before is very risk adverse. Also, if you don't have any debt, including a mortgage, and don't go through lifestyle inflation, piling up a lot of cash won't take that long. All that being said, I don't disagree with your math, or your strategy.
You can't say that was a good decision based on the first year. That's like running a marathon and basing your success on the first mile. I hope 🤞 everything works out for you but it does seem premature.
@@DiegoMejia86 show me where in a metropolitan city in the US you can buy a property cheaper now than 10 years ago. Or show me that in any decade, even when real estate does crash it's only a matter of time before it regains its previous peak. And regardless of a crash people still need a place to live. I can tell you 4 years ago you could have bought my rental and the four houses next to it for 500k now within the past year I've had three 650k houses pop up next door on lots the same size as mine. Yeah I think I'm going to be okay
I predict a housing crash due to people buying homes over asking price, lacking equity if prices decline further. Foreclosure becomes likely if they can't afford the house, and selling won't yield profits. With anticipated layoffs and rising living costs, many individuals may face this situation.
I suggest you offset your real estate and get into stocks, A recession as bad as it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too.
I would add, keep back most of the rental money to account for repairs/maintenance/insurance/taxes, at least at first. Maybe build an account up to $15k to keep up with maintenance.
Yup I would recommend 15k per rental property, because sometimes tenants don't pay and if you have a mortgage on the rental so you have extra money for like a year to pay for the property just in case.
I'm not rich by any means, but I was able to pay off the home I live in early by following Dave's advice. Every $1000 that 's paid early in the loan can save several thousand dollars in interest. The trick is to make the prepayments early in the loan. Prepay as much as can in the first and second year. Your extra dollars will have much more impact that way. So I'm grateful to Dave for his advice in that sense. However, there's no way I would ever be able to cash out a rental house, at least not in the community I live in (Seattle). Homes, including rental homes, start at around $700,000.00 I'm currently saving about $40,000 a year. So it would take 17 years to save enough to buy a home for cash! And by then it would have at least tripled in price.
Stay away from LEVERAGE! My late husband and I sold a commercial property. Financial advisors were telling us to use “leverage” to buy rental properties for twice the amount that we sold the original property for. We were afraid to do that and didn’t want to go into debt, so we paid cash for the rental houses and commercial properties we bought. Thank God we paid cash, because when covid hit, the restaurant we were landlords to didn’t pay us one penny in rent for more than two years and we probably would have lost it if we owed money on it. I also learned that I NEVER want to own property in Washington state or any other blue state again. After the covid debacle was over and Washington allowed restaurants to open again, we sold it and invested in Idaho.
@@cinepost North Idaho has a great real estate market. But we only have rental houses now. Boise has a great commercial market too., but we got out of the commercial market. We had a restaurant in Kennewick, Washington . We have had commercial in Colorado too. No more investing in blue states.
Please talk about reverse mortgages. I’m a real estate broker & it seems that everyone who does a reverse mortgage always ends up loosing their home to foreclose. Always older people…bad financial product!!!!!
I own many rentals (10+), MOST people aren’t prepared for the maintenance issues that come up regularly. Don’t add the rental income to your monthly budget, you’ll be upside down before you know it.
i wish they asked the callers what their household income is more often. i know there are situations like these where they don't need to ask that at all but from the viewers side its just a super interesting and entertaining thing to know
You don't need to pay of your mortgage to buy rental property. I own 9 properties including my own home, I owe nothing on 8 properties and the only mortgage I owe is my own home. It may not be the case today because of rising mortgage rates, but two years ago, I refinanced my own house, and bought rental property cash. I also cashed out my IRA, paid off the taxes on it, and bought another property cash. As long as you buy a good valuable income property, with decent schools, and in area with high employment, it's a great investment!
The problem is, the difference in prices depending on where you live. Here in Seattle, the cheapest houses (for fixers) are around $750,000. Nice houses start around $1,000,000. I've followed Dave's excellent advice on paying off my house early, and saved up enough for a down payment on a rental property. But I don't know anyone, anywhere, who has $1,000,000 lying around to buy a rental house. (I'm sure there are people, but not around these parts.)
my area is pretty cheap im lucky i guess. I can get a fixer upper depending on condition for 80-150k. A really nice home or duplex/fourplex 250-300k can get whole apartment buildings for 750-1 mil.
We own two rentals in Kent, WA. We bought in 2009 & 2014 for cheap. We are recently retired and the extra income is one the reason we could stop working early. We would never purchase another home in the Seattle Metro at the current prices. Also the cities of Seattle & Tacoma have recently instituted unfavourable rental regulations toward landlords.
When you have some reserves and can comfortably put down a hefty down payment. Then you can continue to leverage debt as the property appreciates and you can pull some equity.
Interesting I don’t know if I should get a mortgage for the rental or save for cash? But property prices are going up. Not sure what to do?? As I could rent the paid off main house to pay for the rental ( and live in that) what’s your advice ?
He needs to update.. he is giving same advice from decades.. why would I pay off my 2% mortgage when I can put that money in just a savings account and get 5% on it. Or better, I bought 2 rental properties in 2020 by not paying off mortgage and putting 30% down on them. Both properties are up 100k each.. By Dave's advice I would still be paying off my 2% mortgage
Ok that’s crazy Dave. I understand but 20-30% down is fine you don’t have to pay cash for a home to invest in a rental. If you have a paid for house, emergency fund , invested, in more than sure you can handle a small leverage rental property
@@mylapasaporte8594 I get it but if you have let’s say 500,000 home paid off. You have a 9-12 month Emergency fund. No Debt. Invested fully in retirement. Do you really think Another mortgage (which he “allows”) would hurt this person? It would barely even tickle his bank account.
It's not even possible for most people IMO. Where I live, the median house price is over 16x the median income. It could take a decade just to save up a deposit for a first home. It depends where you are of course, but here house prices have been outpacing the rate anyone could save even squirrelling away every penny
yer that’s was I thought…. I don’t know if I should get a mortgage for the rental or save for cash? But property prices are going up. Not sure what to do?? As I could rent the paid off main house to pay for the rental ( and live in that) it’s hard to know what to do
Took 5 yrs to save for our personal home. Paid cash. 7 yrs later and making a family on the way and I’m about to pay cash for a rental. In a very expensive market
Don't think i could ever save up in order to buy a house for rental all in cash. I currently have 9 houses, 8 of which are rental properties. How we did it? Just paid the 20% down. As of right now... I have about 5 houses with mortgage and 4 smaller homes paid in cash. Renting most of them and fixing up 2. Not sure what Dave would say about the way i went about it but the renters are paying my mortgage so to speak and making profits since the rent is higher than the mortgage and have equity on every single house. For us... it's the long run that we're in for.
If you don’t mind sharing, how much would you say you owe on all of properties combined? I guess if times get hard, you sell and since they all have equity, you won’t be losing right?
Why should I wait when I can buy today with 20% down? Then pay it off in 6 years with rental income plus about $20K per year of my money in lump sum. It would take me longer to accumulate the full amount without renter contributions.
This is silly thinking. If you didn’t have the discipline to save up and buy it cash, what makes you think you’ll be discipline to pay it down in 6 years? And renter contribution? You overly optimistic in how much you believe you’ll actually get by this “renter” to pay significantly into your house. After the house mortgage including interest, city expenses, then the calculation for variable expenses (cap ex, repair, maintenance and vacancy) good luck believing that’s going to leave much. The numbers will not align with you. I have 4 properties. Your wishful thinking is not reflective of reality.
@danielsingh9701 It's not silly thinking when I can earn 8% on my investments and pay 4.5% on a mortgage and have a renter pay most of that. You're throwing a lot of money away by dumping cash into a home purchase, and I see that as silly. I'm looking to buy a new place right now that's $85K more than I have available. With a 10-year mortgage, a renter in the basement suite, and about $7K yearly lump sum psyments, it's paid off in 4 years. Meanwhile, the $85K I left invested has earned $27K in interest.
I almost fell for a similar scam selling something where someone wanted to pay extra. Post office guy looked at the package and said, “nah, you’re not sending this. This is a scam.”
Residential investment properties for the casual investor (less than ten properties) have lost some of the luster during this past eighteen months of COVID, where the government has enacted eviction moratoriums and courts have shut down which made it impossible to evict. Then, if you are fortunate enough to build your investment portfolio, at ten properties, a lot of the federal and state regulations kick in, which impose yet another burden on the investor. If I had it to do over, I would concentrate on light commercial properties, such as a small retail shopping center. You don't have near the amount of headache as you do when dealing with residential tenants. .
Just drove through a large city in Michigan, the for lease signs are out on 90% of them. Lots of empty space., too many landlords looking for few renters.
I don't understand why pay off house before buying a rental property, would it not make sense to spend 30 - 50k on a rental and use the cashflow to put towards your home to snowball?
@@georgewagner7787 You have wonder how this happens, I get older people get scammed as they not as savvy, but the rest of us should always be questioning, a smaller thing like shoes, your safe guard is not you and that's reasonable to get scammed but when you start handing out 1000's of dollars, you have to think twice. I think for me if someone was trying to get $50 out of me I would be questioning it. That being said, I am always amazed how this guys are so creative with new scams, shameful but creative.
@@librosDeCrecimiento I guess you could say a reverse snowball lol. Struggled to pay cash for 1st couple properties then used the cash flow to save more quickly and it got easier and easier. Just closed on 3 more properties all cash. Cash also allowed me to close quicker, and get a discount for using cash
Noooo way !! 👏🏼👏🏼👏🏼👏🏼 that’s unbelievable discipline!! Did you buy all cheap rentals ? It’s there a trike to it? I don’t know if I should get a mortgage for the rental or save for cash as property prices are going up. Not sure what to do?? As I could rent the paid off main house to pay for the rental ( and live in that) what’s your advice ?
Very good idea. We have a long term rental and have a property management company. They take all the calls, they screen the tenants, they take care of evictions (they had to evict our first tenant, unfortunately). They will also send out tax forms. Our company charges 10% of collected rent, and 50% of the first month's rent to place a tenant.
If you are not handy and/or the property is not within a half hour drive or you simply don't have time, then that can definitely fit your goals. I have a property out of state that is managed by someone else and am about to move up in house and manage the old one as a rental, at least initially. You also have to make sure you find a good manager and sometimes there is trial and error involved.
@john Smith To each their own. Personally, I don't want the hassle of dealing with tenants/evictions/etc myself as I have a full-time job. But I get where you are coming from. And yes, you are at a much larger scale than I am - we only collect about $12k per year for our only long-term property. The company I use doesn't nickle and dime too badly, but you're right, repairs can add up.
I can't speak for everyone, but where I live there is a property manager that will charge a flat rate for either finding a good tenant, or for eviction, but you don't necessarily have to have them manage the property. Finding and evicting tenants is the hardest/most annoying part of being a landlord, so you can see if anyone in your area is willing to just do that. If not, I am sorry that I wasted your time. But otherwise yeah I wouldn't have a property manager unless I became unable to manage it. Small stuff, you can DIY and UA-cam it, big stuff get a professional. This should be in your budget, by setting aside at least 10% of the rent for maintenance.
@john Smith I'm tempted. I appreciate the encouragement, but I don't want the hassle. The home is only 1 mile away, so it's certainly doable from that perspective. Maybe when our kids are older though. One of my disappointments has been the things that the property management company misses, like checking out a tenant and several kitchen appliances are having issues or not working at all. At the end of the day, in my experience, even when you have a company, you still have to check behind them and check up on the place yourself.
Everybody keeps saying that if you can't afford to buy a house, instead of renting, buy a duplex. This way, there's somebody else helping you maintain the home. So, all those people from places like Bigger Pockets are wrong? Because renting is crazy risky. Landlords buy and sell. I've been thrown out THREE TIMES so they could sell. These all told us we could stay "forever."
Can't believe I'll have to wait so long to get to this step 😩 I'm 23, still have student debt and rent an apartment. Oh well. Guess that's one less distraction. I wonder what price houses will be by the time I can afford one. Could be a whole different world (hopefully).
Keep your head up I was in that same position at your age. By 26 I’d paid all my student loans off cars off and saved 20% down for a house bought one that same year. Now at 28 paid that house off and now at 29 I have one paid for rental about to have enough to buy another. So yes this is possible keep your head high!!! You can do this.
@john Smith I'm sure they're not laughing now awesome good job! I know the feeling I lived in a run down tiny camper for 7 years while I paid off my debt then saved all my money and bought a house on 34 acres with cash, but I got a pretty great deal too now it's worth 3 or 4 times what I paid.
I have the option to buy my grams house for 50k and i can pay cash. It needs prolly 20k in fixes. I’m considering moving into it and selling my 275k home just to live debt free. I don’t like the house so i can always rent it and build one but I’m unsure which route to go which is how i ended up here…
Is Dave changing is idea about using a good mutual fund and use instead an index fund? He recommends index funds a lot nowadays. Or is just for stashing cash while waiting for a big purchase, like a house?
You don't want funds that have high turnover in a taxable account like what you would use to save for real estate. Hence, index funds. An ETF version of the index, ideally, for minimal taxes while you're saving up.
This guy needs to learn the full scope of owning rentals. He doesnt sound very educated on it....like hes going to take this advice and just go and buy a rental without knowing the full scope.
Yeah I agree, although learning with just one isn't that difficult, especially if they decide to get a property manager. I have 4 and its not impossible to learn. It can be more hassle, than work or learning.
REITS are risky. Many are capital destroyers. some REITS dropped 40-50% during Covid. No homes dropped in price during Covid, nor did rents. Rents are now much higher than Covid. Many REITS are still their Covid lows.
What do u mean save the money to pay for a house in cash? In the area I live in the median house is $1,000,000 even 100,000 would be a lot to save. So I’m curious how u would do that in todays market working a regular job
My home is paid off and I have cash to purchase a rental property but I struggle at the current 5% savings level to use that money on a rental getting $2000 to $2,500 a month. $350,000 x 5% = $17,500 in savings account vs $2,000 x 12 = $24,000 minus (taxes,Insurance,utilities,) you would be lucky if you woul clear $17,500
I don't get it. Just get a fixed rate loooong term loan and buy a property to rent it out in case the differential between your loan and the cap rate is existent.
What about the interest you miss out on writing off against the income if you pay cash? I’m not sure what to do. If i sell stocks to buy a property then i have several thousand to pay in taxes as well🤔
I know this happens all the time but the sophistication of the bait and switch mortgage escrow wire fraud to criminal account is mind blowing. Additionally, when I was a Med student and then resident, I briefly hired a company to help navigate my student loan repayment strategies and PSLF. I paid this company. They got more and more difficult to reach until they disappeared. I know this happened to a lot of kids.
Pay cash for a rental then fix it up to increase the value whilst paying cash for everything. Then once the values gone up refinance it and pull all of your money out to go and buy another, keep doing this and you'll have a few rental properties, this is an example of good debt. For example, pay 100k for something, spend 50k on it, now it's worth 200k. Refinance at 75% and you get that 150k back.
This is what I do. Leverage but not too much leverage. its smart because somebody else is paying the mortgage. you just need to have enough in reserves if things go wrong which they will at some point
I fell for one once that I gave my address and I was suppose ship the books there only could bought in USA there arrived at door. When the books arive she said was making trip Canada so made trip in person. Some dude come to door. Then I get nasty email when get back home. I sell books for $160 to local book store. There were over $500 new.
what about being able to use the mortgage interest as a tax deduction? I see this as discounting the cost of the mortgage and investing the cash. Or does the rental being mortgage free outweigh that tax benefit?
how about renting in new york, buying a property in another state in cash using your 403b money.. pay it off.. would it outweigh all the taxes and penalty here.. need income.. looking for desperate measures
Do you need to pay off your home if you have such a low interest rate? I make more money putting it in the sp500 or is it like not just about building wealth, but paying off your house will lead to more stability??
Idk how Ramsey thinks it’s reasonable for people without generational wealth to pay off their own home and buy a rental property in cash. Sure you can save up and do it but you’re losing out on cash flow in the years you’re saving up. Leverage can be used in a responsible way
I'm not rich by any means, but was able to pay off my house decades early. Every $1000 that 's paid early in the loan can save several thousand dollars in interest. So the trick is to make the prepayments early in the loan.However, there's no way I would ever be able to cash out a rental house, at least not in the community I live in.
People, if you save up for buy your first rental in cash, then yes it will take longer (Just like Dave said), and yes the one particular property that you’re looking at now will be out of your range by the time you have the cash. But GUESS WHAT, once you have the cash just FIND another property that you can afford. Why would you get married to one property that you can’t even buy yet. Use common sense people. Dave is not “out of touch” with real estate reality.
How long will it take you to save for a 450K townhome? That is the best price in my metro area. After you have saved years and years for that home at 450K, what will be the going prices for homes in your area? They will no longer be selling for 450K, but some amount higher. Meanwhile, you are paying cash for a home more than 450K that could have appreciated in you favor if you had used bank financing.
For average people who makes 70k-120k, saving to buy rental with all cash? most likely will not catch up with rising property price and inflation. One may not ever buy a rental... what I did was learn to run the numbers right and conservatively just in case things happens... and things will always happen. then get a investment mortgage based on this numbers. Sorry but buy all cash just not reality for most people.
You asked for fine print ideas right? How about tiny homes? You know, houses that are about the same size as a mobile home, but have the aesthetics or cosmetic looks of a real home. But, the prices of those have skyrocketed like everything else. Are they still a value? Are they worth buying and living in? Would you recommend them for a family member that you love to live in? What are the maintenance costs for those tiny homes versus a regular sized home? Thank You.
Tiny homes are a glorified trailer. You still need a place to park it so you would be paying lot fee's, utilities, insurance and general maintenance. When it comes time to sell, like anything...it's only worth what someone else is willing to pay.
@@harrisonfurlong2820 Not all tiny homes are on wheels. You can stick-build a tiny house on a foundation like any other house. We cash-flowed a tiny house build on our paid-for property.
How much did it cost to build the tiny home on a foundation? That's what i was talking about when i wrote the original comment...on a foundation versus on wheels. Maybe I should have clarified that. What was the cost per acre for the land? How exigencies was it to put in electricity, water, and sewer?
I make $20 an hour and am $40,000 in debt total with student loans and a car. It would take me about 30+ years to pay off a house to rent out while renting my apartment. Is there no hope for me? Rental properties is how I want to build my wealth but I guess I need a job that makes $100,000 a year which kind of defeats the purpose
Real estate seems cool but just isn’t for me. The capital commitment, hassle and the like just doesn’t fit my goals or preferences. But people who are able to build a serious portfolio and build a huge cash flow is pretty cool.
Sure, Dave. I'll just pile up $750,000 real quick to pay cash for a fixer upper rental property. It'll only take 40 years since homes in my area have tripled in price over the past few years.
As usual Ramsey's advice is for those who will likely be middle class the rest of their life. Nothing wrong with middle class, but if anyone wants financial freedom they will not get it by working to pay all debt off first. The savvy real estate investors wisely use leverage and the bank's money to acquire properties and have them increasing value and cash flow.
I really respect and admire Dave, however, I have to disagree with this one. I went through a divorce. Made a significant amount of money when we sold out first Beachhouse. Bought my own Beachhouse with a healthy 30% down payment. Spent the first year getting it ready fixing it up and enjoying it. This year is the first year we rented it had a wonderful experience and the home is pretty much paid for for the entire year with seven renters. Is it work? I ask because I do all the cleaning myself. But I get to share a beautiful home with wonderful families. Most of them want to come back next year to vacation again. My plan is to pay it off as quickly as possible. However, if I would’ve waited until I had the full cash price, I never would’ve bought it. Gotta disagree w ya Dave, on this one? oh- and btw. The property value in 2 1/2 years has gone up $170,000. I have put a lot of work into it but that’s a hefty price increase that I could not get in the stock market.
Why would you pay off a house on a low interest rate. Needs context here and in high priced markets like Seattle and SF good luck throwing in money m/m to buy 1M properties that keep creeping up higher in price. You are better off using some leverage.
Bad advise. Unless the caller is making $1MM+ in a low cost housing market, he will never be able to create the economies of scale necessary to make residential rental real estate work without leverage. Dave knew nothing about the caller's financial situation other than that he had no debt and sent the caller off on a track fraught with peril in an industry he has no prior experience in. That was irresponsible on Dave's part.
May take people years to get their house paid for. In the mean time, they’re missing investment opportunities to gain passive income. If my debt is paying me for years, then I truly don’t see the downside. Using debt as leverage is what the majority of extremely wealthy people do. If I had the time to pay everything cash, of course I would. Just not the case for everyone.
I like this idea, but in contrast to Grant Cardone philosophy it is the complete opposite. Most people cannot save enough to buy their own home, never mind a second or third property. When you say put your money into Mutual funds, how much are you stashing each time?? 50 bucks, 200 bucks, 1000 bucks or what?? Cos from where I'm sitting it'll take you years to build enough for your second property. Just curious because people on these types of shows talk a lot with no real substance and all seems mind bowing.. Of course it could just be me.
Normal ppl arent able to save 3-400k cash like that. Lets say you're able to put away 2k a month towards it. Itll take you over 20 yrs to buy your 1st Real-estate property.
If your paying less than 3 percent on your mortgage why would you want to pay off your house? Would it be smarter to use that extra money towards the stock market or real estate? Don''t understand the old school logic of paying off your house.
As somebody who’s has a $400,000 net worth at age 29, and I own 3 rental properties, I can tell you every rental that you get, makes things MASSIVELY EASIER. The cash flow each month helps tremendously. Here are my tips:
1) make sure that all of your other debt is completely paid off, before you buy a rental. If you don’t have any other debt, a rental is very safe. But if you have other debt, it can become risky. Pay off all cars, loans, debt, medical, student loans, etc first
2) make sure that you put down 20% on the house. This really is the magic number for success. It allows you to buy a new rental property almost every single year, if you have a decent income, but it avoids PMI and gives you a GOOD interest rate, leading to amazing cash flow!
3) I also recommend renting out the basement and any spare rooms, of your current house. It really gets the ball rolling faster and helps you save up money faster. Make sure you screen them well, obviously
4) I recommend a mix of 3-level townhouses, and modest 3-level single family homes. I always rent out the top two floors, and the basement, as *2 SEPARATE UNITS* which helps cash flow the place really well. It’s surprisingly easy to find people ok with that arrangement, especially if you’re a good salesperson and the place looks decently good Basically the three level townhouse is cash flow better, but the single-family houses appreciate more because of the land. Ultimately, both of them are great, I recommend starting out with a couple 3-level townhouses, and then buying 1 of the 3-level single family homes for the land appreciation (which will still cash flow but not quite as good).
Follow Dave's advice and you'll be in "baby steps" until the grave. Investigate the term "leverage" and never pay all of your cash for a rental property.
How's someone going to save enough to pay hundreds of thousands on properties before they are like 50 years old? I love Ramsey's points but this I take with a grain of salt
Scams - I know two woman personally who have been catfished out of over half a million dollars combined! Older single women may be very vulnerable, need to speak to them.
Dave's advice on this topic isn't good anymore. It's outdated. And I have enough cash to drop on a rental property cash. It would take 16 years to make back my cash investment. Dave never talks about cash on cash
12% ROI when the stars align with good tenants, no vacancies, no evictions, no major maintenance, etc, or 10% ROI doing absolutely nothing with mutual funds? Yeah... it's NEVER okay buy a rental property
You can just put 20% down to get it. And property value & rent goes up every year, plus tax benefits. I am diversified & for me, my rental properties are giving me much better return than mutual funds
@@abhitejpaul It's bad enough that people only do 20% down with their primary residence. That kind of leverage on an investment is nuts. Plus there's a whole lot of hidden variables you're probably not accounting for. It sounds like you've gotten relatively lucky with your particular situation and it's validating your emotions. The numbers, on average, do not justify the headaches and the chronic dread ...imho
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I currently sit on 3 multi family homes I accumulated within 5 years. I paid 395K for the first one. If I’d waited to have 395k saved, I’d still wouldn’t have enough to buy it, because now a similar house sells for 650k
EXACTLY!!!! DAVE MISSES THIS POINT !!!!
Dave made his first million doing this, and accumulated quite a lot of properties in his early 20s. The bank holding his loans got bought out, and the big bank didn't like that a kid had so many loans on different properties, and they called his loans. He ended up going bankrupt and rebuilt his life and fortune without debt. He's probably a little too hard headed on this topic, but thats where he is coming from.
He doesn't "not understand" that real estate goes up, he doesn't believe in going into debt for anything.
@@ChefAndy972 cant you just sell the properties if the banks call back the loans?
@@ChefAndy972 i've heard that background story before, but I've never understood ONE element of it.....which is, how can the bank just "call the notes due"??! The last time I read a mortgage agreement...it had specific, agreed upon terms. I'm borrowing "x amount of $$$" at "x % rate" and I have "x many of years" to pay it back. I BELIEVE he had used non-traditional financing to accumulate a lot of properties quickly and didn't use traditional mortgages for them. I could be wrong...but would like to know the facts, because Banks can't just "call loans due" just because they got bought out. I've had my mortgage co get bought out by a bigger lender and guess what.....I just still keep on making the original p&i payment just like always.
@@gratefulRed69 yes I believe when Dave Ramsey was doing this he had 90 day loans or something, in which case the bank can probably call them whenever they want.
How can I make this happen? I already have 3 properties and the bank won't lend with no down payment. I live in a highly competitive market, there's no such thing as no money deals. I checked with three different real state agents who are also investors, they could not find ANY no money deals. Not even land.
Just try to diversify your portfolio to other market sectors, that way your investment is balanced and you don’t get to make so much losses.
Yeah, financial advisors could make a lot of difference, particularly in a market such as this. Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are a lot of wealth transfer in this downtime if you know where to look. I have been using an FA since 2019, and I return at least $30k ROI, and this does not include capital gain.
Would you mind telling me how to contact this specific coach using their service? You seem to have the solution, as opposed to the rest of us.
For me, Sonya Lee Mitchell turned out to be better and smarter than all the advisors I ever worked with till date, I’ve never met anyone with as much conviction.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
I understand and support 100% Dave's principles against debt, especially in a culture where people borrow their way of life. However, when it comes to real estate investment, if people waited to pay cash, less than 1% of people would end up owning anything.
I was thinking the same thing
Yes, it just doesn’t seem realistic to the majority of people.
I agree with these comments. You do not have to have your primary home paid off in order to buy a rental. And you don’t have to have cash to pay for the rental in full. My primary home has a mortgage rate of 2.5%. Why would I want to pay it off. I have plenty of cash to pay it off. But I choose to invest it in the S&P 500 and earn the difference between the mortgage rate and the stock market rate. A good time to buy a rental home is when you can immediately be cash flow positive from the very first rent check. As each year goes by, the cash flow increases as the mortgage is paid down.
Bingo.. I say it often , for some reason he says this stuff and I think If it were up to dave , we'd all be millionaires at the age 90
I bought my first rental last year for 199k my mortgage is currently 146k @ 2.85% if I put the house on the market today I would at least get 300k. On the other hand if I would have waited till I had cash it would have taken me 10 years to save up enough to buy that property and I know that it's going to cost a lot more than 199k in 10 years
And i bet it cash flows rigjt now also right? This is why Dave’s real estate advice for people with basic financial literacy is backwards.
Yes, but you take on more risk that way, and are closer to being underwater, the more you leverage. We have a property that used to be a Bible camp, and we have currently 4 tenants on it, so I know the value of that rental income and appreciation, but the more leveraged you are, the riskier it is. I just think that Dave, who has lost it all in real estate before is very risk adverse. Also, if you don't have any debt, including a mortgage, and don't go through lifestyle inflation, piling up a lot of cash won't take that long. All that being said, I don't disagree with your math, or your strategy.
I agree with this! Dave seems like he wants you rich when your hair's grey. House hacks are the way to go for any new investor
You can't say that was a good decision based on the first year. That's like running a marathon and basing your success on the first mile. I hope 🤞 everything works out for you but it does seem premature.
@@DiegoMejia86 show me where in a metropolitan city in the US you can buy a property cheaper now than 10 years ago. Or show me that in any decade, even when real estate does crash it's only a matter of time before it regains its previous peak. And regardless of a crash people still need a place to live.
I can tell you 4 years ago you could have bought my rental and the four houses next to it for 500k now within the past year I've had three 650k houses pop up next door on lots the same size as mine. Yeah I think I'm going to be okay
I predict a housing crash due to people buying homes over asking price, lacking equity if prices decline further. Foreclosure becomes likely if they can't afford the house, and selling won't yield profits. With anticipated layoffs and rising living costs, many individuals may face this situation.
I suggest you offset your real estate and get into stocks, A recession as bad as it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too.
Housing isn't gonna decline over the next 40 years. It might not be as good as the last 40, but it isn't going down. Just adjust your timescale
They've been saying that since 2015 lol
No it won't.
I would add, keep back most of the rental money to account for repairs/maintenance/insurance/taxes, at least at first. Maybe build an account up to $15k to keep up with maintenance.
Thank u
Yup I would recommend 15k per rental property, because sometimes tenants don't pay and if you have a mortgage on the rental so you have extra money for like a year to pay for the property just in case.
May not need quite as much if you've paid cash for the property or it is paid off. But we're on the same page here.
Thank you so much Josh. So once you get X amount set aside, then start putting it into an investment to grow?
@@Dad-979 I believe that was Dave's advice, yes.
I'm not rich by any means, but I was able to pay off the home I live in early by following Dave's advice. Every $1000 that 's paid early in the loan can save several thousand dollars in interest. The trick is to make the prepayments early in the loan. Prepay as much as can in the first and second year. Your extra dollars will have much more impact that way.
So I'm grateful to Dave for his advice in that sense. However, there's no way I would ever be able to cash out a rental house, at least not in the community I live in (Seattle). Homes, including rental homes, start at around $700,000.00 I'm currently saving about $40,000 a year. So it would take 17 years to save enough to buy a home for cash! And by then it would have at least tripled in price.
there is a way just find a good deal.
You realize you can buy rental property in places other than the one you live?
Foreclosures will be coming soon. Just keep saving and keep your eyes open
Stay away from LEVERAGE! My late husband and I sold a commercial property. Financial advisors were telling us to use “leverage” to buy rental properties for twice the amount that we sold the original property for. We were afraid to do that and didn’t want to go into debt, so we paid cash for the rental houses and commercial properties we bought. Thank God we paid cash, because when covid hit, the restaurant we were landlords to didn’t pay us one penny in rent for more than two years and we probably would have lost it if we owed money on it. I also learned that I NEVER want to own property in Washington state or any other blue state again. After the covid debacle was over and Washington allowed restaurants to open again, we sold it and invested in Idaho.
Idaho commercial real estate?
@@cinepost North Idaho has a great real estate market. But we only have rental houses now. Boise has a great commercial market too., but we got out of the commercial market. We had a restaurant in Kennewick, Washington . We have had commercial in Colorado too. No more investing in blue states.
Please talk about reverse mortgages. I’m a real estate broker & it seems that everyone who does a reverse mortgage always ends up loosing their home to foreclose. Always older people…bad financial product!!!!!
I own many rentals (10+), MOST people aren’t prepared for the maintenance issues that come up regularly. Don’t add the rental income to your monthly budget, you’ll be upside down before you know it.
i wish they asked the callers what their household income is more often. i know there are situations like these where they don't need to ask that at all but from the viewers side its just a super interesting and entertaining thing to know
You don't need to pay of your mortgage to buy rental property. I own 9 properties including my own home, I owe nothing on 8 properties and the only mortgage I owe is my own home. It may not be the case today because of rising mortgage rates, but two years ago, I refinanced my own house, and bought rental property cash. I also cashed out my IRA, paid off the taxes on it, and bought another property cash. As long as you buy a good valuable income property, with decent schools, and in area with high employment, it's a great investment!
The problem is, the difference in prices depending on where you live. Here in Seattle, the cheapest houses (for fixers) are around $750,000. Nice houses start around $1,000,000. I've followed Dave's excellent advice on paying off my house early, and saved up enough for a down payment on a rental property. But I don't know anyone, anywhere, who has $1,000,000 lying around to buy a rental house. (I'm sure there are people, but not around these parts.)
my area is pretty cheap im lucky i guess. I can get a fixer upper depending on condition for 80-150k. A really nice home or duplex/fourplex 250-300k can get whole apartment buildings for 750-1 mil.
@@65stang98whats your area?
You can try elsewhere. There are some nice homes in Texas and Oklahoma, high 2’s and medium 3’s.
We own two rentals in Kent, WA. We bought in 2009 & 2014 for cheap. We are recently retired and the extra income is one the reason we could stop working early. We would never purchase another home in the Seattle Metro at the current prices. Also the cities of Seattle & Tacoma have recently instituted unfavourable rental regulations toward landlords.
@@65stang98Damm thats nice bro , my house is 1 mil here in nyc property is mad out here!
When you have some reserves and can comfortably put down a hefty down payment. Then you can continue to leverage debt as the property appreciates and you can pull some equity.
I have seen a lot of people go broke/bankrupt with rental property. Be more careful than you think you should.
Interesting I don’t know if I should get a mortgage for the rental or save for cash? But property prices are going up. Not sure what to do?? As I could rent the paid off main house to pay for the rental ( and live in that) what’s your advice ?
He needs to update.. he is giving same advice from decades.. why would I pay off my 2% mortgage when I can put that money in just a savings account and get 5% on it. Or better, I bought 2 rental properties in 2020 by not paying off mortgage and putting 30% down on them. Both properties are up 100k each.. By Dave's advice I would still be paying off my 2% mortgage
Ok that’s crazy Dave. I understand but 20-30% down is fine you don’t have to pay cash for a home to invest in a rental. If you have a paid for house, emergency fund , invested, in more than sure you can handle a small leverage rental property
That's your plan. Dave Ramsey plan is to never be back in debt once you get out of debt.
@@mylapasaporte8594 I get it but if you have let’s say 500,000 home paid off. You have a 9-12 month Emergency fund. No Debt. Invested fully in retirement. Do you really think Another mortgage (which he “allows”) would hurt this person? It would barely even tickle his bank account.
It's not even possible for most people IMO. Where I live, the median house price is over 16x the median income. It could take a decade just to save up a deposit for a first home. It depends where you are of course, but here house prices have been outpacing the rate anyone could save even squirrelling away every penny
yer that’s was I thought…. I don’t know if I should get a mortgage for the rental or save for cash? But property prices are going up. Not sure what to do?? As I could rent the paid off main house to pay for the rental ( and live in that) it’s hard to know what to do
Yer good point* it’s very hard to know what to do ! But yep the base line is you’re not in debt! I hear that 👏🏼
Took 5 yrs to save for our personal home. Paid cash. 7 yrs later and making a family on the way and I’m about to pay cash for a rental. In a very expensive market
Don't think i could ever save up in order to buy a house for rental all in cash. I currently have 9 houses, 8 of which are rental properties. How we did it? Just paid the 20% down. As of right now... I have about 5 houses with mortgage and 4 smaller homes paid in cash. Renting most of them and fixing up 2. Not sure what Dave would say about the way i went about it but the renters are paying my mortgage so to speak and making profits since the rent is higher than the mortgage and have equity on every single house. For us... it's the long run that we're in for.
If you don’t mind sharing, how much would you say you owe on all of properties combined?
I guess if times get hard, you sell and since they all have equity, you won’t be losing right?
Get better deals and can buy foreclosures if you pay in cash..plus more income due to no debt
It’s not simply a matter of $. You have to want to be a landlord.
You don’t need to be a landlord. You pay a company 3% to do it for you.
If you want something done right, do it yourself.
@john Smith it depends on the market. My brother manages in CA and they charge 7.5%, in NC it is around 9-10%.
Why should I wait when I can buy today with 20% down? Then pay it off in 6 years with rental income plus about $20K per year of my money in lump sum. It would take me longer to accumulate the full amount without renter contributions.
wait a minute that makes too much sense!
Exactly…
This is silly thinking. If you didn’t have the discipline to save up and buy it cash, what makes you think you’ll be discipline to pay it down in 6 years? And renter contribution? You overly optimistic in how much you believe you’ll actually get by this “renter” to pay significantly into your house. After the house mortgage including interest, city expenses, then the calculation for variable expenses (cap ex, repair, maintenance and vacancy) good luck believing that’s going to leave much. The numbers will not align with you. I have 4 properties. Your wishful thinking is not reflective of reality.
@danielsingh9701 It's not silly thinking when I can earn 8% on my investments and pay 4.5% on a mortgage and have a renter pay most of that. You're throwing a lot of money away by dumping cash into a home purchase, and I see that as silly. I'm looking to buy a new place right now that's $85K more than I have available. With a 10-year mortgage, a renter in the basement suite, and about $7K yearly lump sum psyments, it's paid off in 4 years. Meanwhile, the $85K I left invested has earned $27K in interest.
@@austin2842 you do your own investments? Stocks or mutual funds?
I almost fell for a similar scam selling something where someone wanted to pay extra. Post office guy looked at the package and said, “nah, you’re not sending this. This is a scam.”
Residential investment properties for the casual investor (less than ten properties) have lost some of the luster during this past eighteen months of COVID, where the government has enacted eviction moratoriums and courts have shut down which made it impossible to evict. Then, if you are fortunate enough to build your investment portfolio, at ten properties, a lot of the federal and state regulations kick in, which impose yet another burden on the investor.
If I had it to do over, I would concentrate on light commercial properties, such as a small retail shopping center. You don't have near the amount of headache as you do when dealing with residential tenants.
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➕➊➏➌➊➌➐➊⓪➋➊➒✅wasp & Thanks for commenting/< for a benefitable advice in something real big and new..
Just drove through a large city in Michigan, the for lease signs are out on 90% of them. Lots of empty space., too many landlords looking for few renters.
I don't understand why pay off house before buying a rental property, would it not make sense to spend 30 - 50k on a rental and use the cashflow to put towards your home to snowball?
No. It’s not worth the squeeze this way. You pay your consumer debts first (everything except home) then your home.
Kudos to George for admitting been scammed, that takes guts... these scammers .. I am sure he was a lot younger and naive.
He only got scammed out of a pair of shoes. Watch kitboga, people lose a lot
@@georgewagner7787 You have wonder how this happens, I get older people get scammed as they not as savvy, but the rest of us should always be questioning, a smaller thing like shoes, your safe guard is not you and that's reasonable to get scammed but when you start handing out 1000's of dollars, you have to think twice. I think for me if someone was trying to get $50 out of me I would be questioning it. That being said, I am always amazed how this guys are so creative with new scams, shameful but creative.
Before I hear him; when you have the cash to buy it
Been Debt Free 12 years doing the Ramsey Program . In 12 years I've bought 56 properties both Residential and Commercial with No Debt. It can be done.
Stellar!
How?
@@librosDeCrecimiento I guess you could say a reverse snowball lol. Struggled to pay cash for 1st couple properties then used the cash flow to save more quickly and it got easier and easier. Just closed on 3 more properties all cash. Cash also allowed me to close quicker, and get a discount for using cash
Noooo way !! 👏🏼👏🏼👏🏼👏🏼 that’s unbelievable discipline!! Did you buy all cheap rentals ? It’s there a trike to it? I don’t know if I should get a mortgage for the rental or save for cash as property prices are going up. Not sure what to do?? As I could rent the paid off main house to pay for the rental ( and live in that) what’s your advice ?
Fabulous!! Just read this ! Super super helpful ! 👏🏼👏🏼👏🏼🙏🏽 thank you for sharing your experience & advice
Another fantastic video, can’t wait for the next one!
My answer before watching the video: pay with cash and don't let real-estate be more than 20% of your net worth. Let's see what dave thinks
People keep clang asking the same questions.. guess he’s only answering the questions
How do you feel about having a company manage rentals for a percentage of the income?
Very good idea. We have a long term rental and have a property management company. They take all the calls, they screen the tenants, they take care of evictions (they had to evict our first tenant, unfortunately). They will also send out tax forms. Our company charges 10% of collected rent, and 50% of the first month's rent to place a tenant.
If you are not handy and/or the property is not within a half hour drive or you simply don't have time, then that can definitely fit your goals.
I have a property out of state that is managed by someone else and am about to move up in house and manage the old one as a rental, at least initially. You also have to make sure you find a good manager and sometimes there is trial and error involved.
@john Smith To each their own. Personally, I don't want the hassle of dealing with tenants/evictions/etc myself as I have a full-time job. But I get where you are coming from. And yes, you are at a much larger scale than I am - we only collect about $12k per year for our only long-term property. The company I use doesn't nickle and dime too badly, but you're right, repairs can add up.
I can't speak for everyone, but where I live there is a property manager that will charge a flat rate for either finding a good tenant, or for eviction, but you don't necessarily have to have them manage the property. Finding and evicting tenants is the hardest/most annoying part of being a landlord, so you can see if anyone in your area is willing to just do that. If not, I am sorry that I wasted your time. But otherwise yeah I wouldn't have a property manager unless I became unable to manage it. Small stuff, you can DIY and UA-cam it, big stuff get a professional. This should be in your budget, by setting aside at least 10% of the rent for maintenance.
@john Smith I'm tempted. I appreciate the encouragement, but I don't want the hassle. The home is only 1 mile away, so it's certainly doable from that perspective. Maybe when our kids are older though. One of my disappointments has been the things that the property management company misses, like checking out a tenant and several kitchen appliances are having issues or not working at all. At the end of the day, in my experience, even when you have a company, you still have to check behind them and check up on the place yourself.
Everybody keeps saying that if you can't afford to buy a house, instead of renting, buy a duplex. This way, there's somebody else helping you maintain the home.
So, all those people from places like Bigger Pockets are wrong? Because renting is crazy risky. Landlords buy and sell. I've been thrown out THREE TIMES so they could sell. These all told us we could stay "forever."
Can't believe I'll have to wait so long to get to this step 😩 I'm 23, still have student debt and rent an apartment. Oh well. Guess that's one less distraction. I wonder what price houses will be by the time I can afford one. Could be a whole different world (hopefully).
Keep your head up I was in that same position at your age. By 26 I’d paid all my student loans off cars off and saved 20% down for a house bought one that same year. Now at 28 paid that house off and now at 29 I have one paid for rental about to have enough to buy another. So yes this is possible keep your head high!!! You can do this.
@john Smith you're 4 million in debt?? Lol
@john Smith I'm sure they're not laughing now awesome good job! I know the feeling I lived in a run down tiny camper for 7 years while I paid off my debt then saved all my money and bought a house on 34 acres with cash, but I got a pretty great deal too now it's worth 3 or 4 times what I paid.
Stop listening to Dave Ramsey and follow Dell Walmsley instead. (Lifestyles Unlimited) No house flipping, buy and hold rental properties.
Hitme mama i can guide u
I have the option to buy my grams house for 50k and i can pay cash. It needs prolly 20k in fixes. I’m considering moving into it and selling my 275k home just to live debt free. I don’t like the house so i can always rent it and build one but I’m unsure which route to go which is how i ended up here…
Why not just buy the rental property and use it as a saving account and throw all you extra money in to it ?
That is not a good idea at all
Is Dave changing is idea about using a good mutual fund and use instead an index fund? He recommends index funds a lot nowadays. Or is just for stashing cash while waiting for a big purchase, like a house?
You don't want funds that have high turnover in a taxable account like what you would use to save for real estate. Hence, index funds. An ETF version of the index, ideally, for minimal taxes while you're saving up.
Should I pay all cash when it's my first time, for my first rental? To learn kind of with no risk in terms of a loan?
i would honestly take a loan
This guy needs to learn the full scope of owning rentals. He doesnt sound very educated on it....like hes going to take this advice and just go and buy a rental without knowing the full scope.
He has no debt so he’s obviously got some cents
Yeah I agree, although learning with just one isn't that difficult, especially if they decide to get a property manager. I have 4 and its not impossible to learn. It can be more hassle, than work or learning.
Sometimes you just got to go for it
Investor pro is a scam. You don't need them. Rental property is a headache and risky. Buy a REIT index and start with as little as $1.
@john Smith Add VNQ to a index position to add more real estate
REITS are risky. Many are capital destroyers. some REITS dropped 40-50% during Covid. No homes dropped in price during Covid, nor did rents. Rents are now much higher than Covid. Many REITS are still their Covid lows.
What do u mean save the money to pay for a house in cash? In the area I live in the median house is $1,000,000 even 100,000 would be a lot to save. So I’m curious how u would do that in todays market working a regular job
Yeah its actually silly
My home is paid off and I have cash to purchase a rental property but I struggle at the current 5% savings level to use that money on a rental getting $2000 to $2,500 a month. $350,000 x 5% = $17,500 in savings account vs $2,000 x 12 = $24,000 minus (taxes,Insurance,utilities,) you would be lucky if you woul clear $17,500
I don't get it. Just get a fixed rate loooong term loan and buy a property to rent it out in case the differential between your loan and the cap rate is existent.
What about the interest you miss out on writing off against the income if you pay cash? I’m not sure what to do. If i sell stocks to buy a property then i have several thousand to pay in taxes as well🤔
I know this happens all the time but the sophistication of the bait and switch mortgage escrow wire fraud to criminal account is mind blowing.
Additionally, when I was a Med student and then resident, I briefly hired a company to help navigate my student loan repayment strategies and PSLF. I paid this company. They got more and more difficult to reach until they disappeared. I know this happened to a lot of kids.
Pay cash for a rental then fix it up to increase the value whilst paying cash for everything. Then once the values gone up refinance it and pull all of your money out to go and buy another, keep doing this and you'll have a few rental properties, this is an example of good debt. For example, pay 100k for something, spend 50k on it, now it's worth 200k. Refinance at 75% and you get that 150k back.
This is what I do. Leverage but not too much leverage. its smart because somebody else is paying the mortgage. you just need to have enough in reserves if things go wrong which they will at some point
➕➊➏➌➊➌➐➊⓪➋➊➒✅wasp & Thanks for commenting/< for a benefitable advice in something real big and new..
I fell for one once that I gave my address and I was suppose ship the books there only could bought in USA there arrived at door. When the books arive she said was making trip Canada so made trip in person. Some dude come to door. Then I get nasty email when get back home. I sell books for $160 to local book store. There were over $500 new.
what about being able to use the mortgage interest as a tax deduction? I see this as discounting the cost of the mortgage and investing the cash. Or does the rental being mortgage free outweigh that tax benefit?
how about renting in new york, buying a property in another state in cash using your 403b money.. pay it off.. would it outweigh all the taxes and penalty here.. need income.. looking for desperate measures
Do you need to pay off your home if you have such a low interest rate? I make more money putting it in the sp500
or is it like not just about building wealth, but paying off your house will lead to more stability??
I don't get it. How is utilizing leverage with a low rate on an asset that grows with inflation a bad idea?
Idk how Ramsey thinks it’s reasonable for people without generational wealth to pay off their own home and buy a rental property in cash. Sure you can save up and do it but you’re losing out on cash flow in the years you’re saving up. Leverage can be used in a responsible way
I'm not rich by any means, but was able to pay off my house decades early. Every $1000 that 's paid early in the loan can save several thousand dollars in interest. So the trick is to make the prepayments early in the loan.However, there's no way I would ever be able to cash out a rental house, at least not in the community I live in.
I’ve been able to do it
I have a 3 flat that’s rent out by section 8 tenants on got it by a fha. Loan 3.5% down. Was it a bad idea not paying cash for it? It was 375k
People, if you save up for buy your first rental in cash, then yes it will take longer (Just like Dave said), and yes the one particular property that you’re looking at now will be out of your range by the time you have the cash. But GUESS WHAT, once you have the cash just FIND another property that you can afford. Why would you get married to one property that you can’t even buy yet. Use common sense people. Dave is not “out of touch” with real estate reality.
Well said !
How long will it take you to save for a 450K townhome? That is the best price in my metro area. After you have saved years and years for that home at 450K, what will be the going prices for homes in your area? They will no longer be selling for 450K, but some amount higher. Meanwhile, you are paying cash for a home more than 450K that could have appreciated in you favor if you had used bank financing.
Dave came from a time where you could buy a rental property for 12 grapes
Having 0 debt in boise is crazy. I live here and its expensive. Good stuff
For average people who makes 70k-120k, saving to buy rental with all cash? most likely will not catch up with rising property price and inflation. One may not ever buy a rental... what I did was learn to run the numbers right and conservatively just in case things happens... and things will always happen. then get a investment mortgage based on this numbers. Sorry but buy all cash just not reality for most people.
Good advice Dave.
You asked for fine print ideas right? How about tiny homes? You know, houses that are about the same size as a mobile home, but have the aesthetics or cosmetic looks of a real home. But, the prices of those have skyrocketed like everything else. Are they still a value? Are they worth buying and living in? Would you recommend them for a family member that you love to live in? What are the maintenance costs for those tiny homes versus a regular sized home? Thank You.
I have heard that tiny homes do not appreciate long term, the way a traditional home does.
Tiny homes are a glorified trailer. You still need a place to park it so you would be paying lot fee's, utilities, insurance and general maintenance. When it comes time to sell, like anything...it's only worth what someone else is willing to pay.
@@harrisonfurlong2820 Not all tiny homes are on wheels. You can stick-build a tiny house on a foundation like any other house. We cash-flowed a tiny house build on our paid-for property.
Some of those "tiny" homes are $500 per sq ft! You can buy a home in Beverly Hills for $350 sq ft.
How much did it cost to build the tiny home on a foundation? That's what i was talking about when i wrote the original comment...on a foundation versus on wheels. Maybe I should have clarified that. What was the cost per acre for the land? How exigencies was it to put in electricity, water, and sewer?
I make $20 an hour and am $40,000 in debt total with student loans and a car. It would take me about 30+ years to pay off a house to rent out while renting my apartment. Is there no hope for me? Rental properties is how I want to build my wealth but I guess I need a job that makes $100,000 a year which kind of defeats the purpose
Real estate seems cool but just isn’t for me. The capital commitment, hassle and the like just doesn’t fit my goals or preferences. But people who are able to build a serious portfolio and build a huge cash flow is pretty cool.
I'm considering possibly selling 20 acres to buy a rental house with cash
Sure, Dave. I'll just pile up $750,000 real quick to pay cash for a fixer upper rental property. It'll only take 40 years since homes in my area have tripled in price over the past few years.
As usual Ramsey's advice is for those who will likely be middle class the rest of their life. Nothing wrong with middle class, but if anyone wants financial freedom they will not get it by working to pay all debt off first. The savvy real estate investors wisely use leverage and the bank's money to acquire properties and have them increasing value and cash flow.
I get all my financial advice from TikTok 🚀🚀🚀🚀
To the Nkomo
I really respect and admire Dave, however, I have to disagree with this one. I went through a divorce. Made a significant amount of money when we sold out first Beachhouse. Bought my own Beachhouse with a healthy 30% down payment. Spent the first year getting it ready fixing it up and enjoying it. This year is the first year we rented it had a wonderful experience and the home is pretty much paid for for the entire year with seven renters. Is it work? I ask because I do all the cleaning myself. But I get to share a beautiful home with wonderful families. Most of them want to come back next year to vacation again. My plan is to pay it off as quickly as possible. However, if I would’ve waited until I had the full cash price, I never would’ve bought it. Gotta disagree w ya Dave, on this one? oh- and btw. The property value in 2 1/2 years has gone up $170,000. I have put a lot of work into it but that’s a hefty price increase that I could not get in the stock market.
I don’t like this advice. People living on the west coast can’t buy rental properties for 75k. Takes a long time to save up 400k for a second house.
Personally I prefer Robert kiyasakis rules for using other people’s money to buy real estate
When your saving money for your first investment property your on the right path.
Love this call.
Why would you pay off a house on a low interest rate. Needs context here and in high priced markets like Seattle and SF good luck throwing in money m/m to buy 1M properties that keep creeping up higher in price. You are better off using some leverage.
Bad advise. Unless the caller is making $1MM+ in a low cost housing market, he will never be able to create the economies of scale necessary to make residential rental real estate work without leverage. Dave knew nothing about the caller's financial situation other than that he had no debt and sent the caller off on a track fraught with peril in an industry he has no prior experience in. That was irresponsible on Dave's part.
May take people years to get their house paid for. In the mean time, they’re missing investment opportunities to gain passive income. If my debt is paying me for years, then I truly don’t see the downside. Using debt as leverage is what the majority of extremely wealthy people do. If I had the time to pay everything cash, of course I would. Just not the case for everyone.
How long would it take for a person with regular income (50k to 70k) to pay off a house and then rent it💀
If you do a segment on scamming you should try and sync with jim browning. He has a great channel on how he fights scammers
YUP TO ALL OF THIS AND IM THERE NOW !!!! LOL !!!! THANKS DAVE !!!! Im in the SPEED OF CASH MODE NOW !!!! 6 PAID OFF HOUSES SOOOOOO FAR !!!!!
Man Idaho is like people scrambling to get up there because the housing market is hot
This is quite literally the WORST way to get into real estate...
I like this idea, but in contrast to Grant Cardone philosophy it is the complete opposite. Most people cannot save enough to buy their own home, never mind a second or third property. When you say put your money into Mutual funds, how much are you stashing each time?? 50 bucks, 200 bucks, 1000 bucks or what?? Cos from where I'm sitting it'll take you years to build enough for your second property. Just curious because people on these types of shows talk a lot with no real substance and all seems mind bowing.. Of course it could just be me.
Woah Dave finally recommending an index fund 😂
Always does when saving up for real estate, lol. I wonder if he’ll ever just give up on the active mutual fund suggestion though.
➕➊➏➌➊➌➐➊⓪➋➊➒✅wasp & Thanks for commenting/< for a benefitable advice in something real big and new...
@@loljk9443 he’s making money off of it. So never.
I got rid of my eBay because of all the scammers
Normal ppl arent able to save 3-400k cash like that. Lets say you're able to put away 2k a month towards it. Itll take you over 20 yrs to buy your 1st Real-estate property.
Fha loan only 3% down. Va loan 0% down. Paying cash for something you can get for free is silly.
If your paying less than 3 percent on your mortgage why would you want to pay off your house? Would it be smarter to use that extra money towards the stock market or real estate? Don''t understand the old school logic of paying off your house.
The best time to plant a tree was 20 years ago. The next best time is today. - Chinese Proverb
Awesome awesome awesome show
These guys are great
As somebody who’s has a $400,000 net worth at age 29, and I own 3 rental properties, I can tell you every rental that you get, makes things MASSIVELY EASIER. The cash flow each month helps tremendously. Here are my tips:
1) make sure that all of your other debt is completely paid off, before you buy a rental. If you don’t have any other debt, a rental is very safe. But if you have other debt, it can become risky. Pay off all cars, loans, debt, medical, student loans, etc first
2) make sure that you put down 20% on the house. This really is the magic number for success. It allows you to buy a new rental property almost every single year, if you have a decent income, but it avoids PMI and gives you a GOOD interest rate, leading to amazing cash flow!
3) I also recommend renting out the basement and any spare rooms, of your current house. It really gets the ball rolling faster and helps you save up money faster. Make sure you screen them well, obviously
4) I recommend a mix of 3-level townhouses, and modest 3-level single family homes. I always rent out the top two floors, and the basement, as *2 SEPARATE UNITS* which helps cash flow the place really well. It’s surprisingly easy to find people ok with that arrangement, especially if you’re a good salesperson and the place looks decently good
Basically the three level townhouse is cash flow better, but the single-family houses appreciate more because of the land. Ultimately, both of them are great, I recommend starting out with a couple 3-level townhouses, and then buying 1 of the 3-level single family homes for the land appreciation (which will still cash flow but not quite as good).
I'm not going to watch yet...paused at 1 second in. Going to take a guess that Dave is going to say you must buy it with cash and no mortgage
Follow Dave's advice and you'll be in "baby steps" until the grave. Investigate the term "leverage" and never pay all of your cash for a rental property.
exactly ramsey is an elitest dolt!
Dave must be sponsored by the IRS.
This is sound advice but not reasonable. Debt can be a good thing if you leverage it correctly. Who can save up enough to pay all cash on rentals!????
How's someone going to save enough to pay hundreds of thousands on properties before they are like 50 years old? I love Ramsey's points but this I take with a grain of salt
I know someone in Idaho who bought a 3br 2 bathroom house for under $300k. I told her $300k barely gets you a parking space in Northern NJ!
Can always move in with Saul Goodman
Dave thinks I need his approval to buy a rental property? Uh, should I sell what I have now, and wait for his email?
Scams - I know two woman personally who have been catfished out of over half a million dollars combined! Older single women may be very vulnerable, need to speak to them.
Is too much to save up 200,000 to buy a rental property. I’ll take 30 years
Title lock is a scam. I would like a report on that.
In California you can’t buy a house cash, you need loans
First house should be a rental and he lives in one off apartments.
Dave's advice on this topic isn't good anymore. It's outdated. And I have enough cash to drop on a rental property cash. It would take 16 years to make back my cash investment. Dave never talks about cash on cash
Ryan Pineda joins the chat
12% ROI when the stars align with good tenants, no vacancies, no evictions, no major maintenance, etc, or 10% ROI doing absolutely nothing with mutual funds? Yeah... it's NEVER okay buy a rental property
You can just put 20% down to get it. And property value & rent goes up every year, plus tax benefits. I am diversified & for me, my rental properties are giving me much better return than mutual funds
@@abhitejpaul It's bad enough that people only do 20% down with their primary residence. That kind of leverage on an investment is nuts. Plus there's a whole lot of hidden variables you're probably not accounting for. It sounds like you've gotten relatively lucky with your particular situation and it's validating your emotions. The numbers, on average, do not justify the headaches and the chronic dread ...imho