Dave Ramsey is a Genius now

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

6y

Originally posted by @Chris Piette:

I just can’t get behind DR’s approach to dropping all cash on deals. Not scalable for anyone other than silicone valley earners poaching homes up and down the Midwest. Just not realistic for 90% of us we’d be dead before we were able to scale to our goals.

However, this entire ordeal has re enforced my appreciation for the discipline to keep a solid 3 months PITI reserve (at a minimum) for each property. I do sleep much better at night knowing that even if legislation weren't to catch up, I'm self sufficient for at least 3 months.

Chri , I will have to disagree with you as far as being Silicone valley . I am just a blue jeans and Carhart wearing contractor , and I pay cash for my rentals . Average price is $150K a piece

Chris Piette

Green Bay, WI · Member since 2019 · 22 posts · 23 votes

6y

@Matthew Paul

You may be the exception and not the rule.. however I respect the hustle and that’s awesome to hear man, I hope to be there some day.

Out of curiosity

At any point did you use leverage to acquire properties?

And are you at the point now where your cash flow is compounding enough to be able to purchase new investments, or is it all strictly from your w2 contracting?

Rick Ortiz

Rental Property Investor · Philadelphia, PA (19148) · Member since 2020 · 38 posts · 39 votes

6y

@Marcus Johnson

I think your point on debt is correct however rental properties are good debt. This is such an extreme that there in no one who could predict it, not even Dave Ramsey.

You seem to have done well if your lake house has good equity so there is no issue. There is no reason to lose sleep at night if you have equity in your properties and have some reserves.

Debt is fine as long as debt service doesnt rise faster than income. Income shouldnt rise faster than productivity, cause thats not sustaunable. So if debt finances increased productivity than your good. Buying cash is a novel idea buf it slows productivity since it simply takes too long to scale.

All in all we are living a dooms day scenario and an extreme which no one could predict. Best of luck

2 Reply

Syed H.

Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes

6y

DR isn't a genius. He just gives good advice for the average person. Sorry but I don't want to be "average". I've had above average income and returns for the past 10 years because of the calculated risks I've taken.

You will never get into the higher income levels without either taking risks or being born into wealth.

3 Reply

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

6y

@Chris Piette Once I used leverage for 7 months , I bought a deal and another one fell in my lap 4 months later . It was a must buy , 4 acres right next to another 4 acre property I own . ( subdivision in the works ) . My cash flow moves quick enough that in 15 months I can buy another . BUT with all this going on with the virus I am sitting back waiting , knowing when things settle down there will be deals to be had . And I am not worrying about bills at all . I have 1 case of TP , 5 cases of beer , and a bottle of Jack . I am good to go

3 Reply

Richard Gonzales

Investor · Fort Wayne, IN · Member since 2017 · 21 posts · 9 votes

6y

Imagine if the U.S. had no debt and a $4 trillion emergency fund right now... Of course, I’m not smart enough to understand the intricacies of the national debt. I’m a huge Dave Ramsey fan, I paid off all of my debt before saving for a down payment on the duplex I live in now. That being said, I still plan on leveraging to obtain more properties in the future, but this pandemic has definitely made me re-think how leveraged I want to be and what my reserves should be

3 Reply

Josue Vargas

Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes

6y

@Marcus Johnson

Sorry to hear this happened to you. Running a single property is not easy. I can't imagine running a "rent-to-go" property is any easier.

Everything in life has its risks, for example, you wouldn't be taking the equity of your properties today if not for investing in them. And it's OK and actually I applaud you if you take that decision if you feel is too much stress or business is not going the way you wish.

I've listen to D. Ramsey, and I respect his opinion. Good luck.

Mo Karney

Investor · Member since 2019 · 11 posts · 4 votes

6y

@Marcus Johnson

Anyone taking advice from Dave Ramsey should not be on this site. Dave Ramsey caters to those living paycheck to paycheck and the bottom end of the bell curve. This is not a dig at them, it's a dig at Dave Ramsey.

He's an absolute idiot when it comes to investing whether it be securities or real estate and his track record shows that.

In regarding to leverage, those that went full tilt and hit 80-90% LTV on their properties are now facing difficulties, but those that stuck in the 50-75% range, are doing just fine.

I buy my building with 75% LTV BUT I make sure that the buildings can support all expenses and debt servicing at 80% occupancy. On top of that, look at the PPP and EIDL program. Those with debt and loans are doing far better off than those that own their properties outright...

2 Reply

Hector Alvarado

jacksonville, FL · Member since 2019 · 1 post · 1 vote

6y

Thank you @Anthony Gayden for the reply. I too find it quite gratifying to be able to say I'm blessed to have done the early teachings of DR. However, for the newbie's out there...It always comes back to WHY DO YOU WANT TO BE A REAL ESTATE INVESTOR? Everyone's answer and strategies will differ. Love @Joe Scaparra final comments.

Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

6y

Originally posted by @Jay Hinrichs:

@Steve Vaughan I dont know if Steve has checked in on this thread.

But I sure like his thought process on good debt bad debt what to do as you age and mature as an investor regarding debt.

Thank you, Jay. Means a lot bud.

DR to me is like the best college sophomore finance professor ever. Sound advice and proven system of common sense for Jack and Jill Public.

I had amassed quite a bit of debt writing credit card checks for down payments on my seller financed RE and used his debt snowball to get out and stay out.

Here’s a pic of me meeting Dave in Dec 2017. I was out of debt too long to do a debt-free scream and the millionaire theme hours weren’t doing live stuff so I just sent him a pic of me paying off a mortgage.

4 Reply

Tony Kim

Rental Property Investor · Los Angeles · Member since 2018 · 844 posts · 1k+ votes

6y

Originally posted by @Marcus Johnson:

I've been a hardcore follower of Dave Ramsey and have done his Debt Snowball in the past and it was very rewarding. The problem was that I started to veer in the past 4 years and take on more debt such as buying a Lake Property that I run as an airbnb. Although the Airbnb has been quite successful, I"ve noticed that I don't sleep as well as I used to because I'm leveraged. I know a lot of people have been struggling with Airbnb during Covid-19 because their properties rely on tourism and now that that's buried, I feel for those property owners that are taking losses right now. The reason mine is successful during this trying time is because it's on a private drive, in a rural area that is very desirable for people from the Twin Cities looking to get a way from the big crowds and bright lights. I get a lot of people from Wisconsin, Iowa and south Dakota for both work purposes and vacations. I was lucky and was able to get two workers that are staying for almost 3 months. All this being said, I'm no longer interested in this business, because it takes up a lot of time and the money isn't worth it, nor is the stress of having to deal with the business. I have a lot of equity in the property, but we have it listed and have a potential buyer that is making a decision hopefully today from what their agent said.

Anyways, what I"m trying to say is now I understand why Dave Ramsey is a genious. During these times, can you imagine that if you owned your properties free and clear, and had a large emergency fun for each property, you'd be sleeping at night quite well. Having zero debt is king. No one ever expected this would happen (Covid-19) and there are tons of renters who have been laid off that won't be making their rent payments and guess what? As an owner and landlord you still have to pay your mortgage, taxes, insurance and 50% maintenance fees. If you owned free and clear you wouldn' t have any mortgage payments. How lovely that would be.

So I'm really hoping that the lake property sells today or soon and my plan is to start paying off my primary home first and then start working on our duplex. Once those are free and clear, then I will start saving to buy another rental property with cash. I've been alive for the S&L in 87 debacle, the tech bust in 2001, the housing crash in 2008 and now this one. So this is my plan and thanks Dave for all that you do.

Ramsey IS a genius, but not for the reasons you state above. He's a genius because he found a message that resonates with the average American who lives paycheck to paycheck and is saddled with debt from unnecessary purchases. For the person who is incapable of putting their finances in order, his baby steps are a powerful message that provides a clear pathway and message for someone who wants to improve their financial situation. And in order to not contradict his baby step principals, he also advocates the very conservative acquisition of real estate. On the surface, his real estate investing principals may seem idiotic...but I'm pretty sure he's far from that. I'm sure he very much understands the power of leverage when investing in real estate. But his priority is to maintain the integrity of his brand....and in order to do so, he has to advocate things like flipping wth 100% cash, or not buying anything that exceeds 5% of your net worth...etc.

4 Reply

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

6y

Originally posted by @Mo Karney:

@Marcus Johnson

Anyone taking advice from Dave Ramsey should not be on this site. Dave Ramsey caters to those living paycheck to paycheck and the bottom end of the bell curve. This is not a dig at them, it's a dig at Dave Ramsey.

He's an absolute idiot when it comes to investing whether it be securities or real estate and his track record shows that.

In regarding to leverage, those that went full tilt and hit 80-90% LTV on their properties are now facing difficulties, but those that stuck in the 50-75% range, are doing just fine.

I buy my building with 75% LTV BUT I make sure that the buildings can support all expenses and debt servicing at 80% occupancy. On top of that, look at the PPP and EIDL program. Those with debt and loans are doing far better off than those that own their properties outright...

Well Mo , I believe you may be wrong that those that follow Ramseys advice shouldnt be on this site . I was a bit in debt in my late teens and very early 20"s . Living at home and had a credit card and a bit of money in the bank , but way less than my debt . I looked at how much I was paying in interest and told myself " This is BS" Now this was before his time and I didnt hear his advice till about 10 years ago , but I had already done what he was saying basically .

I knuckled down on spending and increased on working and was debt free in 1 year . I kept on the same path and within 2 years I saved $75K . (living at home) in 1982 . I LOVED looking at my bank balance . I hustled , still had cool cars , went out , but I always paid off my credit card in full or paid in cash . My first house had a 30 year note , I paid it off in 10 years ( I hate paying interest ) . Then put the same amount in the bank every month . Moved into 2nd house and kept first house , got a 15 year note , used the rent from 1 st house and paid that note in 5 years , and was making bank working . Stayed ther 10 years and bought the $500K house Put a chunk down and keep a small loan on that since I live there . After that I used the procedes from my rents to buy more rentals . ( class B in the maryland suburbs) . Now a customer of mine lives strictly off his rentals , has about 100 some C properties but mostly D properties , leveraged bretty good , he always ragged on me for not using the banks money to buy more . He said with that many he doesnt need much reserves due to scale . The odds of not getting rent from 70% were slim to none . He is 30% section 8 , the rest are regular pay tenants in Baltimore . The man is sweating bullets . he has been getting calls from tenants for the last week and a hslf saying they dont have the money or they think the government said FREE rent .

Mo Karney

Investor · Member since 2019 · 11 posts · 4 votes

6y

@Matthew Paul

The thing is Paul, you’re not actively taking his advice currently right? Dave Ramsey simply put caters to the average/below average American household.

Save money, don’t spend it. Pay off your CC debt and etc.

I assume if you’re on this forum and have multiple RE properties you’re not worried about CC debt. I also figure you have more than a few thousand dollars in the bank?

His advice made sense to you in 1982 when you were in your 20s. I’m in my 20s and his advice doesn’t mean jack squat to me because I don’t carry CC debt, I have multiple streams of income and I do spend money on flashy cars and jewelry and watches. But I make sure it’s within budget.

I’m in the Midwest and mainly cater to the class B and class C properties and we’ll see how rent collection goes this week. I’m not too worried with unemployment benefits, stimulus package and etc.

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

6y

@Mo Karney Never heard of the man when I was in my 20's . I just didnt like debt . And I do have a soft spot for cars , trucks , and jeeps . Jewelry , not so much . For the wife yes . Me ? no . I prefer old classic 1960's mussel and fun . Sitting on a 62 vette pushing 500hp and a 68 chevy van from the custom van era ( 1996 2nd place Eastern Van nationals early GM radical)

Marcus Johnson

OP

Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes

6y

@Syed H.

You seem to know what income level my family is at, please do tell since you know.

Marcus Johnson

OP

Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes

6y

@Mo Karney

Moderators, please ban me from this site because Mo said so. LOL Apparently you cannot have an opinion on this site.

Syed H.

Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes

6y

Originally posted by @Marcus Johnson:

@Syed H.

You seem to know what income level my family is at, please do tell since you know.

My comment wasn’t towards you, just DR’s methods in general. I actually agree most people should listen to him. It’s good advice. No need to be insecure.

While there are exceptions, if you don’t come from from money or have extremely high income, it is exceptionally hard and damn near impossible to pay for everything in cash.

Everyone I know who has amassed some sort of wealth ($5m+), has done it with the help of debt. Either for their business, investments, and education. I know I wouldn’t have been able to achieve what I have without debt.

Also didn’t you just say you used debt?

Cheryl Vargas

Rental Property Investor · Rohnert Park, CA · Member since 2014 · 306 posts · 160 votes

6y

@Joe Scaparra

Dave Ramsey advocates having zero debt, and the original post says he is going to pay off all his debts with the sale of his lake property.

That’s what DR has to with selling the Airbnb house.

Fred Cannon

Rental Property Investor · St Augustine, FL · Member since 2019 · 264 posts · 279 votes

6y

1 vote Who voted?

Originally posted by @Fred Cannon :

@Marcus Johnson

I have always tried to be mortgage free. I think having a couple of partners and each kicking in a third is better than a third down and being partner with the bank I have 8 properties and only one mortgage on my original home that is now a rental. I also have a partner on 3 of the rentals

Investigate one bedroom condos in an area with good demand. Less cost less maintenance and around 12-15% return after all the bills are paid .

Out of curiosity, why do you think having two equal, vocal partners is better than one silent partner who only expects to get paid and lets you make every other decision?

JD Martin

JD A lot of reasons to have a partner Or two over a mortgage.

1. Repairs and rehab cost are split Say I want to remodel a kitchen or replace flooring, it only cost me 2-3 thousand instead of maybe taking out another loan or depleting my reserves We can fix up the property and maintain it so much better Of course you need partners of like mind

2. Vacate cost is minimal and then is split With a loan ever month of vacancy cost is a major expense Without a mortgage it’s minimal plus it’s split with your partner

3, the bank takes a big chunk of your profit with principal and interest. You basically lose all your appreciation to the bank loan. property goes up 3% a year bank loan is 4-5% a year so you are losing or paying the bank you appreciation with a partner you split the appreciation

4. my business plan is to generate income with little expense because I am retired. Plus I like the partners I have. I can go to bed at night and not worry about bank loans or stock market crashes or vacancies. The two or three people I have to partner with are retired as well, gives us something to do and talk about. Real Estate investing for seniors is an untapped resource. Most Of us have our savings invested In low paying returns because of fear of the unknown. Exactly what’s going on today. The risk in real estate is a whole lot less when you don’t have Bank loans.

There you go. So tell me the advantages of having a mortgage over having a partner or two.

Jacob Villalobos

Whittier , CA · Member since 2013 · 176 posts · 96 votes

6y

DR lost his *** off in real estate.

He does not understand it and it's not really his thing.

He does have business savvy...he makes millions off being a condescending a-hole teaching people basic checkbook balancing and credit management (7th grade level)

This is an RE site with RE investors. Genius would be Kiyosaki, Norris, Cantu, the list goes on and on. I would never put money into the S&P or IRA, nor would I save up for my kids college via a 529. They get houses that solve that problem.

You will never save your way to bring rich, but if being debt free is your goal have at it!

Sean Ridlon

Contractor · Melrose, FL · Member since 2016 · 131 posts · 64 votes

6y

Ok, boomer.

Daniel SmythPro Member

Rental Property Investor · Rockford, IL · Member since 2019 · 471 posts · 342 votes

6y

As far as DR goes, He is in the business of being secure. I would not shut my office down because one employee was tested positive for the virus either. They just stay home. Perhaps they could work from home too! I bet they can use a check while being sick and in their home all alone!

I like DR. He makes sense. Using debit to create wealth while continuing to add more debit is not something I ever heard DR say was a good thing. However, Lots of people make lots of money doing so! That is a powerful elixir for sure, and it's why I am here!

I am too new to be too extended, but had things worked differently for me in February, I would be paying the rent on 2 SFRs by now, and renovating them for people in my area that are afraid to go into a Walmart to buy their own toilet paper. ( Had to say something about the TP!)

Now that this has happened, DR looks pretty good in his light. however, I love to dance with the devil in the dim moonlight, so I watch and learn, to pounce on things when the gates of life open again!

[email protected]

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JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes

6y

Originally posted by @Matthew Paul:

@Mo Karney Never heard of the man when I was in my 20's . I just didnt like debt . And I do have a soft spot for cars , trucks , and jeeps . Jewelry , not so much . For the wife yes . Me ? no . I prefer old classic 1960's mussel and fun . Sitting on a 62 vette pushing 500hp and a 68 chevy van from the custom van era ( 1996 2nd place Eastern Van nationals early GM radical)

That's me. Not to derail the topic at hand but if I had enough property I'd probably have 100 different cars. I love driving different cars and have owned all kinds of cool stuff. These days I stick to my 95 Miata, which just crossed into "antique" land and now has antique plates. I love convertibles and I love cars that can handle, and since I (can afford but don't want to) drop high 5 figures on my "dream" car (63-67 Vette, convertible or HT), it's the next best thing and makes me happy :)

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