Dave Ramsey Philosophy + Buy & Hold Strategy = ........Reality???

Buying & Selling Real Estate
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Dave Ramsey Philosophy + Buy & Hold Strategy = ........Reality???

Rj J.
Investor · CT · Member since 2015 · 10 posts · 2 votes

Hey BP'ers,

I'm a huge fan of Dave Ramsey and his philosophy of being debt free yet I also have goals of owning rental property and cashflowing $10,000/month from rentals.

I would love to create a strategy of buying rental unit(s) (2, 3, or 4 family homes) and using the cashflow to pay down the mortgage so that at some point in time the property is paid off. What do you think of this strategy? Is it realistic?

I would love to hear if anyone has incorporated the Dave Ramsey philosophy to their life while investing in real estate.

Thank you!!!

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Matt Motil
Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
10y

Dave Ramsey is awesome. Robert Kiyosaki is awesome! Everything is awesome! (sorry, I have kids and we watch lego movie a lot)

Dave Ramsey detests debt... but so do all the other investors when you compare apples to apples. Debt for your own personal life is bad. It makes you a slave to whatever it is that you're paying on. Debt for business is leverage and, additionally, asset protection. When it comes to debt, Robert Kiyosaki advises to make sure that personal debts are small and if you do take on debt, make sure someone is paying you to do so. There is risk in debt, but you are paid accordingly to manage that risk. 

Purchasing rental property in cash with no debt is doable for sure, but it completely eliminates the advantages that real estate provides as an investment and equity growth vehicle. 

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  • Julie Haveman
    Multi-family Investor · Allendale, MI · Member since 2015 · 121 posts · 51 votes
    10y
    We are huge Dave Ramsey fans. When it came to investing in real estate, we figured it both ways. By paying cash for rental properties we could have owned 2 in 7 years. By taking out mortgages we can own about 7 free and clear in 7-8 years. We both work full time, have 7 duplexes, and throw all the extra on the mortgages. The snowball works backwards too. The more you buy, the more income you have to throw at the debt. We just purchased 2 more duplexes which will only add 6 months to our payoff time, but will increase the income dramatically!
    8Reply
  • Rj J.
    OP
    Investor · CT · Member since 2015 · 10 posts · 2 votes
    10y

    WOW!!! Thank you so much for sharing Julie.

    This is truely the strategy/lifestyle my girlfriend and I want for our future.

    Can you explain a little more about how you manage 9 duplexes while both of you work full time jobs?

    Thank you again!

    0Reply
  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    Everyone has their own tolerance for risk.  The ideal scenario would be to live debt free on your personal balance sheet and creat debt on the business end. The businesses service the debt and anything left over is cash flow, profit.  It is difficult in this economy to create wealth without accumulating debt, the type that allows you to grow your business and expand.   Once we went off the gold standard, the rules changed

    The fed keeps printing money, devaluing currency and in effect inflating asset prices.

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    0Reply
  • Matt Motil
    Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
    10y

    Dave Ramsey is awesome. Robert Kiyosaki is awesome! Everything is awesome! (sorry, I have kids and we watch lego movie a lot)

    Dave Ramsey detests debt... but so do all the other investors when you compare apples to apples. Debt for your own personal life is bad. It makes you a slave to whatever it is that you're paying on. Debt for business is leverage and, additionally, asset protection. When it comes to debt, Robert Kiyosaki advises to make sure that personal debts are small and if you do take on debt, make sure someone is paying you to do so. There is risk in debt, but you are paid accordingly to manage that risk. 

    Purchasing rental property in cash with no debt is doable for sure, but it completely eliminates the advantages that real estate provides as an investment and equity growth vehicle. 

    10Reply
  • Rj J.
    OP
    Investor · CT · Member since 2015 · 10 posts · 2 votes
    10y

    Thanks for your comment Gino.

    I completely understand and respect your thoughts.

    I just want to see if anyone has had experience investing in real estate while focused on the Dave Ramsey strategy.

    Thanks for the input

    1Reply
  • Ricardo S.
    Flipper/Rehabber · Atlanta, GA · Member since 2014 · 166 posts · 88 votes
    10y
    I am also a big Dave Ramsey fam. I listen to his podcasts and hear about all these people in credit card debt, student loan debt, car loan debt and medical debt etc. Meanwhile they own 2-3 rental properties. Common sense will tell you that this will lead you to financial ruin. Debt that doesn't make you money is bad debt. Debt that do make you money is good debt aka have a property that cashflows after expenses are paid. Most of the people he talks to have bad debt. If you are going to be in real estate you should pay off bad debt first.
    1Reply
  • Julie Haveman
    Multi-family Investor · Allendale, MI · Member since 2015 · 121 posts · 51 votes
    10y
    Sure, first of all we actually only own 7! I work from home, so on my breaks and lunch, I can make calls, print leases, and do other paperwork. Most of our tenants communicate by text message. My husband does all the maintenance/repairs. We can usually get everything done on Saturday morning 4 hours or so. Anything that can wait until Saturday we put off. Small leaks can put a bucket under sink, etc. sometimes he needs to go after work for an hour or two and do something that can't wait. When we have a unit turn over, we do the weekend warrior plan to get it flipped fast. I do phone interviews, take apps, and meet tenants there at night! We try to buy units in fairly good condition, and tenants already in place. We have still got some good deals. If they need a lot of work like one needs Windows, siding and roof. We will hire that out while tenants are in place. It may not be every investors plan, but it works well for us. We are getting 1.2%-1.7%!
    1Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    IMO Dave Ramsey is written for lowest common denominator. If you have a good feel for real estate investing, and have funds to do so, you have probably already evolved past Dave Ramsey. Now if you say you're following DR because you have a bunch of credit card debt, car loans, etc, then you are probably not ready for REI anyway.

    Also: if you're going to go into business with your girlfriend be sure you have a good contract to govern the split of assets if/when you break up. *DO NOT* put an asset into her name as well as yours unless she has paid/is paying equally for it. 

    Podcast Guest on Show #243
    Skyline Properties
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    8Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    I'd be Ramsey and Kyosaki's evil step-child!  I carry no personal debt.  No car payments, student loan, CCs, personal loans, etc.  It's awesome not having to all my available money to everyone and not having to manage all those stupid payments!

    However, I have RE debt. Quite a bit.  Paying it down, but utilizing intelligent, managed leverage has put me way ahead of where I would be if I never used it.  I may have 2 paid-off houses vs 3 dozen doors.

    To answer your question of who has done it the Ramsey way specifically, I would like to invite my debt-free colleague @Julie Kern to the discussion.  Hi, Julie! :-)

    4Reply
  • Marcus Johnson
    Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    10y

    Remind you it's much easier to be a Kyosaki follower then a David Ramsey, because your allowed to leverage yourself to buy things you cannot afford.  Dave Ramsey's plan is a more disciplined format where you actually have to save money and buy properties with no debt, then watch the magic happen because once you acquire a certain amount of paid for properties, because of the large amount of cash flow your able to outright purchase properties at a faster rate.  The snowball effect.  

    Me personally, I use combinations of the two theories.  I try to keep my personal debt down to nothing, except my primary mortgage which I put 20% down on.  As for my investment portfolio I put down 25% on properties in good neighborhoods, with quality tenants that get the max rents which equals high cash flow due to the purchase price.   I am using the cash flow savings to bank and save up for my next duplex in the same area.   If I repeat this over and over again, I should be able to grow my portfolio and have a number of paid for properties that cash flow very large for retirement.  

    3Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    10y
    Originally posted by @Matt Motil:

    Dave Ramsey is awesome. Robert Kiyosaki is awesome! Everything is awesome! (sorry, I have kids and we watch lego movie a lot)

    Dave Ramsey detests debt... but so do all the other investors when you compare apples to apples. Debt for your own personal life is bad. It makes you a slave to whatever it is that you're paying on. Debt for business is leverage and, additionally, asset protection. When it comes to debt, Robert Kiyosaki advises to make sure that personal debts are small and if you do take on debt, make sure someone is paying you to do so. There is risk in debt, but you are paid accordingly to manage that risk. 

    Purchasing rental property in cash with no debt is doable for sure, but it completely eliminates the advantages that real estate provides as an investment and equity growth vehicle. 

     Can I vote for this 10 times????

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    10y
    Originally posted by @Marcus Johnson:

    Remind you it's much easier to be a Kyosaki follower then a David Ramsey, because your allowed to leverage yourself to buy things you cannot afford.  Dave Ramsey's plan is a more disciplined format where you actually have to save money and buy properties with no debt, then watch the magic happen because once you acquire a certain amount of paid for properties, because of the large amount of cash flow your able to outright purchase properties at a faster rate.  The snowball effect.  

    You have that backwards.  Ramsey is for the undisciplined.

    If you want to follow Dave, start investing when you're in your teens.

    3Reply
  • Mark Freeman
    Real Estate Investor · Clovis, CA · Member since 2014 · 195 posts · 194 votes
    10y

    I used to listen to Dave Ramsey every chance I got.  Then I listened to podcast 108 with Grant Cardone and realized that Ramsey is preaching: conserve, contract, lack, scarcity, fear, and make your world smaller.  Grant says CREATE, and I find it almost impossible to do both.  I don't think I ever listened to Ramsey's show after listening to Grant's podcast.

    4Reply
  • Julie Kern
    Investor · Taylorsville, GA · Member since 2014 · 352 posts · 540 votes
    10y

    Ha, you always pull me into these threads @Steve Vaughan. Ok, well, I have to confess that after a year of cash only investing, we've decided to do cash-out refi's on our 2 paid for properties. Sorry, Steve, I feel like I've let you (and Dave) down ;) AND we have a HELOC on our personal (free and clear) residence that we are currently using to help fund a flip with another BP investor.

    We'll always adhere to Dave's principle's in our personal finances (no consumer debt, 3-6 month emergency fund, etc.), but the RE bug has bitten us pretty hard and we would like to 10X our growth ( @Mark Freeman - I loved Grant's podcast and I'm about halfway through reading the 10X Rule right now).

    Personally, I love Dave's common sense approach, but when it comes to RE investing I finally had to come to grips with the fact that to really grow and expand to the point that we want to, we have to use leverage.  Our end game is to own all properties free and clear, though.  @Julie Haveman - we are planning to do something similar to what you and your husband are doing.  Hit our target # of properties, then reverse snowball to pay off the mortgages.  

    So Steve, I guess I'm the other Ramsey/Kyosaki evil step-child now - does that make us brother and sister??

    4Reply
  • Marcus Johnson
    Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    10y

    @Joe Villeneuve  Your wrong about your comment "You have that backwards. Ramsey is for the undisciplined."    You may want to reread my post.  I was saying that when Dave Ramsey recommends saving up and paying cash for rental or flips, that it takes discipline to do that, unlike Kyosaki's plan which allows one to not delay gratification and to borrow money one doesn't have for the purpose of buying real estate for investments.   The definition of disciplined is the following:

    control gained by enforcing obedience or orderb : orderly or prescribed conduct or pattern of behaviorc : self-control

    0Reply
  • Luke F.
    Littleton, CO · Member since 2015 · 59 posts · 14 votes
    10y

    Has anyone on this forum followed the Dave Ramsey advise and pay cash for all rentals?  Outside of landing a large sum of money, I think saving up in expensive markets will take forever.  

    1Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    10y
    Originally posted by @Marcus Johnson:

    @Joe Villeneuve  Your wrong about your comment "You have that backwards. Ramsey is for the undisciplined."    You may want to reread my post.  I was saying that when Dave Ramsey recommends saving up and paying cash for rental or flips, that it takes discipline to do that, unlike Kyosaki's plan which allows one to not delay gratification and to borrow money one doesn't have for the purpose of buying real estate for investments.   The definition of disciplined is the following:

    control gained by enforcing obedience or orderb : orderly or prescribed conduct or pattern of behaviorc : self-control

     "control gained by enforcing obedience or orderb : 

    orderly or prescribed conduct or pattern of behavior"

    It takes discipline and self control to use debt correctly.

    2Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y
    Originally posted by @Luke F.:

    Has anyone on this forum followed the Dave Ramsey advise and pay cash for all rentals?  Outside of landing a large sum of money, I think saving up in expensive markets will take forever.  

     Yes, I have. If you can buy cheap houses - less than $40k - it can be done without a whole lot of time, but there is no question leverage will get your portfolio going far faster than you could ever hope to by sitting around saving up money. One can be disciplined and still use debt - I don't know why anyone would think those concepts are mutually exclusive. 

    Podcast Guest on Show #243
    Skyline Properties
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    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    So even @Julie Kern has stepped over to the leveraged (dark?) side?  Well - welcome!  No, you haven't let me or anyone else down.  I have been leveraging rentals for years but still follow the principles of no consumer debt.  I'm too embarrassed to call into Dave's debt-free screams or millionaire theme hours, but then again, most of those folks are getting out of the land of stupid, not building a massive balance sheet or getting out of the rat race with tons of 'passive' cash-flow.  Glad to have you with us, Julie!

    2Reply
  • Darron Stewart
    Investor · Hattiesburg, MS · Member since 2014 · 280 posts · 98 votes
    10y

    @Rj J.

    Dave Ramsey can and does work!

    For simple terms, you can leverage 10 houses making $100 each or buy one making $1000...

    Now I prefer foreclosures or estates, I aim for 50 cents on the dollar, so at that it is much easier to sfford, oh and as he says, the houses I get had a MORTGAGE!  Can't lose a house when you just have a tax and insurance payment easily!

    3Reply
  • Brian Holt
    Mifflinburg, PA · Member since 2015 · 65 posts · 12 votes
    10y

    Great thread! I have been struggling with a situation that aligns with this discussion. I am closing on a duplex that will be leveraged, but I also own 3 single families free and clear. the debate for me was do I want to dilute the monthly cash flow by cash out refinancing, but with my goals for growth I think it's the only way to go. The thing that put it over the top for me to use the leverage was when I started thinking about it in a different manner. The way I see it I'm not diluting that income, but will be using that debt against another property that should increase my overall cash flow if that makes sense. At the end of the day I see it as a risk tolerance issue for each individual and it will be greatly influenced by your overall goals for the business. Best of luck!

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    Well said @Brian Holt. My conflict lies in the cheap long-term fixed rates we have access to. When rates were even in the mid-6's, it made the decision to use less debt much easier. When we can easily double or triple in CAP/return/ROI what we are paying in interest, it just makes too much sense for a finance/math nerd like me to pass on it! Make hay when the sun shines, right?

    If you are buying with cash at steep discounts like @Darron Stewart, the returns on your capital make sense.  If he grows to hate owning  his properties free and clear, he can always go and get a mortgage that makes sense.  It's not an end-all, be-all play. You can start with debt, then pay it off.  You can start with cash, then later leverage.  Another advantage of RE. Great discussion!

    1Reply
  • Andrew Meyer
    Investor · Bloomington, IN · Member since 2015 · 195 posts · 36 votes
    10y

    I've been following DR for a while and have paid off $100k in student loans in the 4 or so years since I've graduated. Now I am starting REI with multifamily with the extra income and love this thread! Anyone have a link Grant Cardone's podcasts?

    0Reply
  • Justin Ouchley
    Investor · West Monroe, LA · Member since 2015 · 15 posts · 9 votes
    10y
    Dave helps a huge number of people. His philosophy is great for that person who doesn't know where to start and have $20 in their checking account. Unfortunately that's where a majority of people in this country are at because we don't teach our kids how to make money, only how to get a job and help make someone else money (channelling Robert Kiyosaki here). Problem is, who can "save up and pay cash" for rental properties using their salary without taking a lifetime to acquire enough to make it worth your while and never being able to here enjoy the fruits of your labor. Like several have said, stay debt free in your personal life and use SMART leverage in your RE life. No risk, no reward.
    0Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    Nicely put; change but one word, makes it even clearer to me:- "The way I see it I'm not diluting that income, but will be using that INCOME against another property that should increase my overall cash flow if that makes sense"(?)

    Regarding Dave's preaching against both bad AND good debt (yes, I said good debt, which has been explained as debt that pays for itself and also creates new income ie. positive cash flow), I can't see how Dave can end up in his retirement years anywhere close to being as rich as those investors who have had the same income as Dave but routinely borrow against that income (and its subsequently increased cash flow) wisely throughout their career. Cheers...

    3Reply
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