So Dave Ramsey says.....
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesDave must have screened out anyone who had debt before he interviewed them because I don't believe his experience could logically be extrapolated to society at large.
79 Replies
- Member since 2022 · 241 posts · 62 votes2y10 to 20 cash flowing homes should be pretty good for most I would think
Quote from @Alan Asriants:
Quote from @Scott Trench:
Not many on BP will have gotten there with no debt.
But, conversely, many who are or have been retired choose to pay all debt off.
There’s an approach to get you going, and an approach to feel confident in early retirement.
Many investors who dont know what that inflection point is will continually leverage thirsting for more, and ultimately wish they’d listened to Dave.
Those who do know what “enough” is will find their journeys much faster because they levered the accumulation years.
Well said. As humans we are all greedy. When you make a million, you want to make 2. At some point you don't need more than what you already have, and paying off debt is a great way to remove those invisible chains and give you more control.
Getting to the million without debt can take a lot of time. Debt allows you to increase the velocity of your money.
Knowing when to stop taking risking positions is an important skill. When people make a lot, they also tend to risk a lot.
for the average person, 1 home every year for 10 years is a doable and strategy that can get you there - slow and steady but faster than the average person.
- Member since 2022 · 241 posts · 62 votes2yAppreciate your input, I think your spot on!
Quote from @Dan H.:
Quote from @Chris John:
Haha. I owe like 30x my annual salary.
For me I owe about 75 times my 2022 taxable income (2023 taxable income has not yet been determine, but I expect it to not be significantly higher than 2022 - San Diego receive tax extension due to flooding).
Many Americans have zero financial literacy and are irresponsible with debt. Dave Ramsey’s preachings are appropriate for these people.
His preachings are limiting for those that are building generational wealth.
I also find it hypocritical that anyone that has declared bankruptcy to get debt forgiven (screwing those that he owed money) is giving others financial advice..
- Member since 2022 · 241 posts · 62 votes2yRight in, good advice! Thanks so much
Quote from @Ray Hage:
Being scared of debt is like being scared of a hammer. With debt or a hammer...you can build something with it or you can break something. Just use the debt wisely and you'll be fine. 7% is high but if you get the right property that still makes money (or that you enjoy living in), you can always refinance.
Always have some cash reserves. One thing you can guarantee is there will be some kind of emergency in your life. Money solves that problem.
Dave Ramsey says some things that make sense, but it is rare.
- Member since 2022 · 241 posts · 62 votes2y
Quote from @Marcus Auerbach:
Debt is a powerful tool like a big chainsaw. Very useful if you have a forest to cut down, but can be dangerous to those who don't know what they are doing. Working with a hand saw is a lot safer..
I am financing 3 larger deals at 7.45% now with a 20 year amortization and a 3,2,1 pre-payment penalty, which is important, because we are going to pay down the principal a little faster and probably will refinance in a couple of years, depending on what rates we see.
You have to look at interest rates in the context of inflation, rents and home price appreciation. At currently 3.4% inflation (if you believe it) the real cost of money after inflation is about 4%. Milwaukee prices are steadily going up 7%-8% each year, rents about 5% (2nd hottest market after Miami, FL!!) and it does not look like this is about to change.
A few years ago all these numbers were lower, so in my book not that much of a difference.
Good stuff! Glad to hear what others are doing with high interest rates!
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Sam Booth:
So Dave Ramsey says that when he interviewed 10,000 millioniares close to none used debt or leverage to get there.
So how many of you out there have used leverage, maybe conservatively, to increase you net worth and cash flow with real estate? Or did you pay cash like Dave?
I feel like its not so bad to have a ton of debt if say you had a good pile of reserves for when you need it. What do you think?
Additionally are 7% mortgages worth it?all these millionaire using leverage and creating low debt for themselves.
All CEO issuing stock options, issuing corporate bond , stock buyback is all about creating low cost debts. - 2yAlan AsriantsBusiness MemberReal Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
Quote from @Sam Booth:
10 to 20 cash flowing homes should be pretty good for most I would thinkQuote from @Alan Asriants:
Quote from @Scott Trench:
Not many on BP will have gotten there with no debt.
But, conversely, many who are or have been retired choose to pay all debt off.
There’s an approach to get you going, and an approach to feel confident in early retirement.
Many investors who dont know what that inflection point is will continually leverage thirsting for more, and ultimately wish they’d listened to Dave.
Those who do know what “enough” is will find their journeys much faster because they levered the accumulation years.
Well said. As humans we are all greedy. When you make a million, you want to make 2. At some point you don't need more than what you already have, and paying off debt is a great way to remove those invisible chains and give you more control.
Getting to the million without debt can take a lot of time. Debt allows you to increase the velocity of your money.
Knowing when to stop taking risking positions is an important skill. When people make a lot, they also tend to risk a lot.
for the average person, 1 home every year for 10 years is a doable and strategy that can get you there - slow and steady but faster than the average person.
more than enough!
Alan Asriants - New Century Real Estate 590 Reviews - Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes2y
Dave Ramsey is all about no debt. His demographics are generally conservative. I do listen to some of his stuff and he does have good advice given the circumstances. Keep in mind the definition of a millionaire is based on net worth, not money in the bank. He found 10,000, I bet I could find 100,000 millionaires who did use debt if I looked hard enough.
Debt is only good if it gives you a return on your investment. For example, accumulating debt on a wedding is a bad idea. It is something that happened in the past. Having debt on your cash flowing property is considered good debt.
Regarding 7%, I would gladly pay 10% if the deal made sense. The interest rate is just another line item in your analysis, you buy and invest accordingly.
- 2yBradley BuxtonBusiness MemberReal Estate Agent · NV · Member since 2023 · 1k+ posts · 713 votes
Millionaire certainly use debt to their advantage. Many bought in cash and then refinanced the debt when interest rates were low. The statement is lacking some details. Many businesses take on debt to make money did these millionaires benefit from business debt but never personally took out debt. Also is he referring to consumer debt (credit cards, payday loans etc..). Real estate investing is another type of business.
Rates are what they are and will change. If you can make an investment work with 7% then the business plan works. We are also getting creative with rate buy downs and DSCR loans. Gone are the pre-2020 gold rush days of low rates and huge appreciation. Many success stories have come from that time. Now is a time to create your own success story.
- Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes2y
It's not hard to find a millionaire that has never used debt.
Someone that is 65 years old and has a net worth of $1m is not an extraordinary feat.
Live on less than you make and invest in tax deferred retirement savings. There are a LOT of people that have done that successfully with relative ease.
Now.....having a net worth of $10m+ at any age and never having used leverage is a different story.
The term "millionaire" is relative. You can have a net worth of $1m and 90m and be in the same category of "millionaire" So, it all depends on who you choose to interview
- Investor · Member since 2019 · 36 posts · 31 votes2y
@Sam Booth
If you think about it, Dave Ramsey is not actually advocating investing (becoming rich) in real estate. He's saying, "Go get rich elsewhere" (i.e. the practice of dermatology), then take your dermatology riches and place them in real estate as a "store of value". Nothing wrong with that. But, no one has everbecome rich doing it that way. They became rich doing whatever they did to accumulate the cash.
PS The natural law function of inflation is to cancel debt. If inflation is going to have its way with you at the grocery store and the gas pump, you'd better have your way with inflation on your balance sheet! - Member since 2020 · 671 posts · 937 votes2yExtremely well put, imo!
Quote from @Edward Condon:
PS The natural law function of inflation is to cancel debt. If inflation is going to have its way with you at the grocery store and the gas pump, you'd better have your way with inflation on your balance sheet! - 2yV.G JasonPro MemberInvestor · Member since 2022 · 3k+ posts · 3k+ votes
In my circle, very few have debt. And if they do, it's maybe 20-30% levered but not 75-80% levered. Most do not have any debt.
However, I don't believe a single one got to where they are without debt and copious amounts of it.
- 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
I find it hard to believe that they didn't use debt to get there....unless they all came from money already in which case, sure. I have bought with cash or mortgages, but most is mortgages. Would I have bought as many rentals as I did in the last 10 years with 7% interest rates, probably not; but as with most things timing is everything.
Everyone's comfort level will be different. I wouldn't put myself into so much debt that I'd never get out or if I had some vacancies I wouldn't be able to pay the bills. Also other than mortgages, I have no debt.
- Lender · 92703 · Member since 2022 · 326 posts · 538 votes2y
I would say if your using debt to help you grow your real estate portfolio why not. Thats one way to levergage debt. But if your using debt to buy stuff that does not make you money then that's a wrong way to use debt. Just make sure you do your due diligence when using debt to grow your real estate portfolio before jumping into any real estate investment.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes2y
Unless he was interviewing a very specific group of 10,000 millionaires, there's no way that's true. For consumer debt? Sure. For business/real estate debt, you would never get a representational group of millionaires to say they didn't use debt or leverage. The vast majority have.
- Member since 2024 · 107 posts · 55 votes2y
I think the 10,000 millionaires Dave Ramsey is talking to are the "Millionaire Next Door" types. There's a lot of them and they didn't leverage debt to get there. Sure, they may have taken on debt at some point for a mortgage, but it wasn't how they grew their assets. They had a career (possibly dual career family), lived below their means and invested. Engineer, accountant, teacher, management and attorney are the careers most likely to produce millionaires.
It's all in his study of millionaires: https://www.ramseysolutions.com/retirement/the-national-stud...
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes2y
Quote from @Sam Booth:
So Dave Ramsey says that when he interviewed 10,000 millioniares close to none used debt or leverage to get there.
So how many of you out there have used leverage, maybe conservatively, to increase you net worth and cash flow with real estate? Or did you pay cash like Dave?
I feel like its not so bad to have a ton of debt if say you had a good pile of reserves for when you need it. What do you think?
Additionally are 7% mortgages worth it?Dave Ramsey is for simple people and people who are in debt. Not for people who want to be real estate investors or developers.
- Member since 2022 · 241 posts · 62 votes2y
Quote from @Calvin Thomas:
Quote from @Sam Booth:
So Dave Ramsey says that when he interviewed 10,000 millioniares close to none used debt or leverage to get there.
So how many of you out there have used leverage, maybe conservatively, to increase you net worth and cash flow with real estate? Or did you pay cash like Dave?
I feel like its not so bad to have a ton of debt if say you had a good pile of reserves for when you need it. What do you think?
Additionally are 7% mortgages worth it?Dave Ramsey is for simple people and people who are in debt. Not for people who want to be real estate investors or developers.
Appreciate the input, I think your right!
- 2yDenis PonderPro MemberNew to Real Estate · Yuma, AZ · Member since 2023 · 280 posts · 246 votes
You can absolutely get there without debt, it will just take much longer. To each their own. Life is a series of risk/reward decisions. Everyone is at a different place on the spectrum.
- Realtor · Tampa, FL · Member since 2020 · 40 posts · 15 votes2y
I think this is why it's so important to know WHEN to transition from acquisition to actively pushing capital to debt pay down.
- Investor · Crown Point, IN · Member since 2014 · 177 posts · 84 votes2y
I can't think of anyone I know who falls into the millionaire category who has not used debt at some point in time. In their business and in real estate, leverage used responsibly will move you along much faster and open more opportunities than what you find if you don't.
The key to this would be using debt responsibly, though. Plenty of people have gone a bit too far with leverage and had disasters when the market changed and they could no longer make payments.
- Member since 2022 · 241 posts · 62 votes2yTotally agree. What do you think a proper leverage amount is? 40% equity 60% debt? Just trying to get a benchmark for being conservative about debt.
Quote from @David Hedges:
I can't think of anyone I know who falls into the millionaire category who has not used debt at some point in time. In their business and in real estate, leverage used responsibly will move you along much faster and open more opportunities than what you find if you don't.
The key to this would be using debt responsibly, though. Plenty of people have gone a bit too far with leverage and had disasters when the market changed and they could no longer make payments.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Calvin Thomas:
Quote from @Sam Booth:
So Dave Ramsey says that when he interviewed 10,000 millioniares close to none used debt or leverage to get there.
So how many of you out there have used leverage, maybe conservatively, to increase you net worth and cash flow with real estate? Or did you pay cash like Dave?
I feel like its not so bad to have a ton of debt if say you had a good pile of reserves for when you need it. What do you think?
Additionally are 7% mortgages worth it?Dave Ramsey is for simple people and people who are in debt. Not for people who want to be real estate investors or developers.
Straightforward answer
Ramsey is not our league - Investor · Crown Point, IN · Member since 2014 · 177 posts · 84 votes2yI don't know if there is a proper amount. Your reserves, income, and comfort level all play a role in this. some may be OK with 60-70% if income is good and there are good reserves to handle an emergency, others may be good at 30-40% leverage.
Quote from @Sam Booth:
Totally agree. What do you think a proper leverage amount is? 40% equity 60% debt? Just trying to get a benchmark for being conservative about debt.Quote from @David Hedges:
I can't think of anyone I know who falls into the millionaire category who has not used debt at some point in time. In their business and in real estate, leverage used responsibly will move you along much faster and open more opportunities than what you find if you don't.
The key to this would be using debt responsibly, though. Plenty of people have gone a bit too far with leverage and had disasters when the market changed and they could no longer make payments.
I wouldn't focus so much on the leverage aspect of things, as much as I would cashflow, and that I'm buying in a stable growing market with positive cashflow. If you have cashflow, there is some room to make mistakes.
Where leverage will likely get you is in situations where you are doing no money down or little money down deals, and have little or negative cashflow. These could even be in a market where values are appreciating quickly. if you get caught at the top of the market, have an event happen that eats into your reserves, get a bad tenant, or just about any other event could take you down. - Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes2y
@Sam Booth have heard it said by some players here on BP that 70% is the correct percentage of debt. It is not a bad idea to keep debt if it allows one to have lots of back up cash. Better to have debt with a strong cash position. Also if a property can support itself when leveraged at 100% then that is a good way to go and potentially a good property. For many getting their initial investment out is the winning strategy. If you hold a property long enough and it is a good one then getting all your money out and ending up paid off is a great thing but for some an asset to leverage.
At the end of the day it is all about personal choice. There is a lot to be said about living a simple life and no debt can allow that but for many lots of debt and action is the way to go. Had mentors that went both ways and were extremely successful. Most businesses need debt to be competitive. I am in an expensive area so paying cash was never possible during my days but in times past it was a more possible thing. I think with lower cost properties it would be fun to snowball cashflow into more free and clear properties. There was a time on here where some did that with super cheap properties but the tenant base could be a real challenge.
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