Is Dave Ramsey correct? Anyone still around after 10 years?

Member since 2020 · 22 posts · 82 votes

I've been on the Dave Ramsey bandwagon for the last several years. His advice definitely worked to get us out of debt and allow us to save a pile of cash. But as I look to get more into real estate investing, there's basically 2 schools of thought; use debt and finance everything or pay cash. While I feel I'd be fairly comfortable financing (assuming the numbers work), one thing from Ramsey is still ringing in my head. He says there are no real estate investors that borrow money to do so that are still around 10 years after they begin their journey. My plan is to do this for at least the next 10 years, so the main question is this: is dave ramsey correct? How many investors on here would disagree with his assumption and if so, why? Open to all views. Thanks in advance for your input.

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Joseph CacciapagliaBusiness Member

Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes

That's a completely untrue statement. I know plenty of investors that have been in this business several decades, and the vast majority use debt. I've been investing since 2005 and always use a mortgage. The ability to obtain very attractive financing is one of the main benefits of real estate investing. If you are leveraged to the hilt and have no cash reserves, that's another story.

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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
That's a completely untrue statement. I know plenty of investors that have been in this business several decades, and the vast majority use debt. I've been investing since 2005 and always use a mortgage. The ability to obtain very attractive financing is one of the main benefits of real estate investing. If you are leveraged to the hilt and have no cash reserves, that's another story.
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Mark H. Porter
Investor · SC NC, VA · Member since 2020 · 1k+ posts · 756 votes
6y
Ummmm, no. 23 years (I know I just invited all the “mine is bigger than yours folks) and leveraged everything. Improvements + revenue increases = appreciation on someone else’s dime. Do a quick google on “should I borrow for my investment property” and you’ll see that just the appreciation on the much-higher valued leveraged property puts money in your pocket.
17 Reply
Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
6y
Returns are so low on cash purchases of RE they really aren't worth it. To make decent returns you need to use financing, but be careful about being stretched too thin and not be able to survive a downturn.
36 Reply
Account Closed
Investor · Leander, TX · Member since 2016 · 299 posts · 402 votes
6y
My uncle has been in real estate since the 1980s and has over 20 properties all through financing. He paid them all off too Over the years by putting the rent right back in them.

I’ve been in over 5 years myself with 5 properties all financed.

I buy about 90% of what Ramsey says.
22 Reply
Corey Hawkinson
Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
6y
@Wade Kulesa Dave Ramsey is tremendous at helping people get out of debt! I’m happy to hear that his path worked so well for you.
However, his advice on real estate investing doesn’t work in the real world. I guess I’ve only been a real estate investor for 10 years, but it has been great to me. Keep in mind that it is my “side hustle” and not my main job. I use leverage and will continue to do so. I remain conservative though.
21 Reply
Account Closed
Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes
6y
Originally posted by @Wade Kulesa:
I've been on the Dave Ramsey bandwagon for the last several years. His advice definitely worked to get us out of debt and allow us to save a pile of cash. But as I look to get more into real estate investing, there's basically 2 schools of thought; use debt and finance everything or pay cash. While I feel I'd be fairly comfortable financing (assuming the numbers work), one thing from Ramsey is still ringing in my head. He says there are no real estate investors that borrow money to do so that are still around 10 years after they begin their journey. My plan is to do this for at least the next 10 years, so the main question is this: is dave ramsey correct? How many investors on here would disagree with his assumption and if so, why? Open to all views. Thanks in advance for your input.

Dave is using hyperbole to make a point. I've been using Subject To and owner financing only, for over 25 years. I never use a bank to buy a property. I don't pay cash. But, I am well situated for a down turn. Dave's problem is that he didn't have enough reserves when the market changed. I'm very conservative in my underwriting and I assume the world is going to hell in a hand basket. It probably is. So, I buy with that in mind. The real trouble is when you believe that property values only go Up (they don't) and that tomorrow's economy and tomorrow's politics will be like today's (they won't). Investing today is totally different than when I started out. It's much, much easier and some people still do bone headed things.

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Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
6y
@Wade Kulesa
There are plenty of examples on both sides. Dave of course leans to one side to prove his point. Dave does a great job getting people out of debt. His extreme teaching about debt is bad is to protect people from themselves. There are plenty of examples of REI failures, but plenty of success as well. Take Dave with a grain of salt. Investment financing is not bad If done correctly and with systems.
7 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@Joseph Cacciapaglia. Thanks for your input Joe!
0 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@Mark H. Porter. Thanks for your input, Mark. Much appreciated!
1 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@Eric James Thanks for your input, James. Much appreciated!
1 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@Cory S. Thanks for your input, Cory. Much appreciated!
0 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@Corey Hawkinson Thanks for your input, Corey. Much appreciated!
0 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@John Farady. Thanks for your input, John. Much appreciated!
0 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
@Kenneth Garrett. Thanks for your input, Kenneth. Much appreciated!
0 Reply
Mike Dymski
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
6y
There is a 3rd school of thought...modest/prudent leverage. Most investors are not max debt or no debt...they fall somewhere in between.
29 Reply
Account Closed
Member since 2019 · 1k+ posts · 1k+ votes
6y
@Wade Kulesa
Keep in mind, he makes a living selling by inspiring the exact type of responses you’ve received here. Polarizing figures are a lot easier to remember than the luke warm porridge that is your average human.
13 Reply
Arsen Atanasovski
Investor · Rochester, MI · Member since 2017 · 1k+ posts · 584 votes
6y
@Wade Kulesa same here Ramsey can teach you to get out of debt, different from investing. I would love to talk to Dave face to face. He teaches people that buying a Harley or a boat doesn’t help you it helps the lenders make money. My father one day sat down and told me about a family member we both know and he told me all the cool toys this family member had every toy was a few bucks here and a few bucks there before you know it that family member lost it all and the house he lived in. My father was teaching me assets and liabilities, Dave teaches you to not have debt yes that’s great no debt and your still working for the man! Doesn’t make since to me, I will go into debt if that debt makes me money, always have that in your head and you will be very successful, a lot of people do not use this thought process at all, you get a raise at work what do you do sell your car and get a more expensive car. The bank approves you for $300k house (primarily) what do you do you purchase a house for $350k. My father has been in real estate for over 50 years he still drives around and calls every dealership to get the best price on a Chevy equinox, if you knew my father he owns over 4 million dollars worth of real estate and is not paying more then $225 a month in a car lease, might be funny but this is one reason he is a millionaire. And btw he uses debt, another thing my dad says about our generation borrowing money is so cheap these days that if you were not using OPM your dum, he would Tell me in the 1970’s the interest rates were 17% no people complain about 6-7%. So I would say use debt for assets all day. Keep your cash for yourself and for the rainy days.
23 Reply
Wade Kulesa
OP
Member since 2020 · 22 posts · 82 votes
6y
Thanks for your input Mike, Kris, and Arsen. Seems like most people are on the same page around here.
1 Reply
Sylvia B.
Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes
6y
Hubby and I have been completely debt free, personal and business, for over 10 years. We choose to buy SFRs with cash because that is what fits our investment plan and our stage of life.
Debt is a tool, like a chain saw. No need to fear it, but you don't use it unless you need to. It can be helpful or harmful, depending on how it is used.
26 Reply
Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
6y
@Wade Kulesa that is an absurd statement. I wonder if he gets rewarded for touting mutual funds.
I had almost no cash and very little income so was creative in getting started. I still own places that I totally leveraged 30 years ago. So no, his statement is false.
1 Reply
Account Closed
Contractor · San Diego, CA · Member since 2018 · 432 posts · 221 votes
6y
@Wade Kulesa I think Dave’s main kick is helping people out of bondage and keeping the vulnerable out of financial prison. For those who have effective escape routs aka exit strategies and connections with the wardens and inmates, they can afford to go to prison, in and out. It takes a special person to use mad leverage and come out unscathed. The last 10 we’ve had a ton of those who started investing in 09, and snowballed the heck out of the market. Those who are going to rewrite their story starting now (?) with max lev, probably not so much. Gotta know when to hold em and when to foldem. As most things in life, there’s obviously no one way for all, and some find themselves only at home in prison, but most think prison sucks and would like out. I write this from Riker’s Island.
2 Reply
Geoff Husa
Rental Property Investor · Tempe, AZ · Member since 2020 · 75 posts · 39 votes
6y
@Wade Kulesa I have had the same question, and a bit of nervousness about the prospect of leveraging debt after following Dave Ramsey's advice for many years. However I've come to disagree with some of his stances. His general wisdom is still greatly appreciated, but I think there are some exceptions to his strict black and white take on debt. I hope it's OK to post a link to a video here. But Graham Stephen did a video explaining why Dave's real estate ventures failed. There's a big difference between what Dave was doing and what I read many of you all doing. Check it out. Graham's video here

2 Reply
Pat L.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
6y
I borrowed to the hilt when I dove in head first & rates were 18-19%. I was literally drowning in debt with payments, $$$ rehabs & having to wait for my rents to come in. If it wasn't for o/time meals, o/time pay, paid lunches & auto mileage payouts of $300-$400/month I might have been struggling.

I worked from 85-98 then retired, (regretfully) sold some of those that appreciated nicely, sold partnerships in others to pay down debt & then accumulate more & have not had a mortgage or any debt since.

I heard about Ramsey when my eldest daughter took his course with a friend of hers who needed to understand the debilitating effects of consumer debt. However, my daughter, @ 19, had already bought her first home with the cash her grandfather bequeathed her. She rented all the rooms to fellow college students & then grad students. Paid down her mortgage & graduated without loans.

10 years later she still uses THE envelopes for expenses & is the most frugal, financially independent of all our kids. I think sitting through the course with others struggling with self-inflicted debt had a significant impact.

Of the Ramsay course I remember her telling her mother, "He just said everything you have been telling us for years."
9 Reply
Mitch Paumen
Rental Property Investor · Minneapolis, MN · Member since 2016 · 2 posts · 2 votes
6y
I listen to a lot of Dave’s content too and generally like his message. To what you said - it’s especially important for people overleveraged in debt on credit cards, vehicles, student loans etc. He’s too conservative for my liking on real estate though. If you put 25% down on properties and have solid cash reserves, you’ll build your portfolio significantly faster than paying with cash and with relatively minimal risk...and be around a lot more than 10 years.
2 Reply
John MorganPro Member
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
6y
I used to be a Ramsey guy. I finally realized he’s mainly good for people who cannot control their money. I’ve always been disciplined with $ and felt responsible to make some big financial decisions. So five years ago I decided to go into real estate and use the power of leverage by buying SFRs. I’ve acquired 10 and have a lot of debt associated with them. But they are cash flowing 4k/month, and they are on 15 year loans. Once paid off they will net me 12k/month which will help me in retirement quote a bit along with my 401k and our Roth IRAs. I’m ok with this good debt. Dave Ramsey wouldn’t recommend it. But it’s a risk I’m willing to take. Most multimillionaires have some real estate in their portfolio. And most didn’t go around and pay cash for all their properties. So I’m ok using other people’s money to help me retire with a lot of passive income to help supplement my other retirement funds.
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