Is Dave Ramsey correct? Anyone still around after 10 years?
Member since 2020 · 22 posts · 82 votes
Is Dave Ramsey correct? Anyone still around after 10 years?
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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votesThat'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.
177 Replies
- Rental Property Investor · Erie, PA · Member since 2018 · 84 posts · 462 votes6y
Very untrue. If you are looking to expand as quickly as you can, you need to leverage as much as you can. Now having said that you should also keep a large reserve of cash to help weather any storms that may come to pass in the next 10 years. There is absolutely no way I could have gotten to 116 doors by paying cash. They are all very leveraged but cashflow, and I don't take any money from them so that they pay their own debt down quicker and go to repairs. By the time i'm 45 they will all be paid off from tenants' money.
- Rental Property Investor · Memphis, TN · Member since 2014 · 57 posts · 33 votes6y
@Wade Kulesa I’m a Certified Financial Planner and not a Dave fan. Generic blanketed advice is good for no one. Also a real estate investor for the past 15 years and my dad is for 30+ years now. Leverage is the way to go but have some reserves.
- Member since 2019 · 14 posts · 2 votes6y
I would like to know where he got this statistic about 10 years and out of the industry. It doesn't seem plausible. If you look at bigger pockets members, there are countless numbers of people on here that have been members for a long time with lots of deals under their belt. That being said, you aren't going to get many people that got out of the business comment on here because I would imagine if you get out of the business you would not come to this web site to comment. I am just starting out and I would love to hear case studies of these people that got out of the RE business to possibly avoid their pitfalls but have not seen any.
Originally posted by @Brian Van Pelt:
Cash is King
(Example of
. Purchased a 50,000 Condo
. Rents for 1,200 per month
. 5,000 in renovations (mainly paint and minor fixes
. Expenses (Condo Fees $175/month
. 0% vacancy 3 plus years). 23% Annual ROI aprox (12,600/65,000)
. No external Maintenance
. Low rent means no vacancy/Low turnover
Sure I could leverage properties to have a massive portfolio and would take 4-5 properties to equal the RIO of 1 Cash property, but who needs or wants the headaches of that ?
CASH will always be KINGPurchases 5 condos at 50k each with 50k down instead of one cash.
Collects 6k/ month instead of 1,200
Makes payment of $1,400/ month on debt.
Monthly cash flow $4,800 instead of 1,200.
-875 = 3925ROI 94%
- Rental Property Investor · Ashland, OH · Member since 2019 · 6 posts · 6 votes6y
Eric McCully I completely agree. As a fellow CFP the question people always ask is 'should I payoff my loans'? Answer for most people is that it is personal preference. If they feel better going to sleep at night knowing they have no debt then go for it. However, if they have the cash reserves to survive a pull back in the market I can almost always show the numbers on paper it's best to keep the debt. By the way I am a 25 year RE investor I am looking to refinance again.
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 Ramsey is a man that developed a business around making people think he understands finance more than you - it is ALL about BASIC math - I think he has preyed on people - but that's my opinion.
You have CC debt at 10% interest, house debt at 3%, student loan debt at 6% -- and you always spend more than you earn - it doesnt take a rocket scientist to tell you to cut back on your spending - then attack the debts with the highest interest first. BASIC MATH!!!!! Dave Ramsey is not special - I learned though that he doesn't always preach paying off the highest interest rate in the early steps - say the student loan debt was smallest at $5k and CC debt was $40k - he'd preach paying off the student loan debt first even though it's a lower interest rate than the CC debt for mental/accomplishment reasons - I get it - but I think that does people a disservice.
Does Dave Ramsey think the vast majority of investors buy big time apartments, industrial buildings, senior housing etc with all cash? Very very very very rare. Ramsey is crazy preaching that.
Dave Ramsey has some good points - but he's not the end all be all and for God Sakes - he's not that intelligent - basic fricking math people.
I love a couple of my friends to DEATH - they got on his bandwagon and I'm glad they did absolutely - We all went on a road trip to a friends wedding last fall (19 hrs driving one way) -- we listened to a lot of Ramsey podcasts on the way. Ha - We had our discussions and I respect people if they want to pay all cash - but like the old country cliche goes - there's more than one way to skin a cat - and as a common person who wants bigger and better things - good luck saving up $1 million or more for a bigger deal in your lifetime if you want those big deals before you reach retirement age.
***PS - I hope I'm not jinxing myself - I dont consider myself slam dunk successful but am proud of where I'm at now - but have had debt on properties since I started in 2006 with my first one. Going forward since I'm a little older I want to balance the debt a bit more -- at one time I also made the mistake of not treating things as business like as I should - but I learned and think I've implemented the knowledge going forward. So no - 10 yrs and flaming out - that's bs like a lot of what Ramsey sells.
Originally posted by @Shane H.:
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 Ramsey is a man that developed a business around making people think he understands finance more than you - it is ALL about BASIC math - I think he has preyed on people - but that's my opinion.
You have CC debt at 10% interest, house debt at 3%, student loan debt at 6% -- and you always spend more than you earn - it doesnt take a rocket scientist to tell you to cut back on your spending - then attack the debts with the highest interest first. BASIC MATH!!!!! Dave Ramsey is not special - I learned though that he doesn't always preach paying off the highest interest rate in the early steps - say the student loan debt was smallest at $5k and CC debt was $40k - he'd preach paying off the student loan debt first even though it's a lower interest rate than the CC debt for mental/accomplishment reasons - I get it - but I think that does people a disservice.
Does Dave Ramsey think the vast majority of investors buy big time apartments, industrial buildings, senior housing etc with all cash? Very very very very rare. Ramsey is crazy preaching that.
Dave Ramsey has some good points - but he's not the end all be all and for God Sakes - he's not that intelligent - basic fricking math people.
I love a couple of my friends to DEATH - they got on his bandwagon and I'm glad they did absolutely - We all went on a road trip to a friends wedding last fall (19 hrs driving one way) -- we listened to a lot of Ramsey podcasts on the way. Ha - We had our discussions and I respect people if they want to pay all cash - but like the old country cliche goes - there's more than one way to skin a cat - and as a common person who wants bigger and better things - good luck saving up $1 million or more for a bigger deal in your lifetime if you want those big deals before you reach retirement age.
***PS - I hope I'm not jinxing myself - I dont consider myself slam dunk successful but am proud of where I'm at now - but have had debt on properties since I started in 2006 with my first one. Going forward since I'm a little older I want to balance the debt a bit more -- at one time I also made the mistake of not treating things as business like as I should - but I learned and think I've implemented the knowledge going forward. So no - 10 yrs and flaming out - that's bs like a lot of what Ramsey sells.
Paying the smallest loan first is not a unique Dave strategy. Using your scenario, very few people would actually pay off that credit card. That's an overwhelming number to chip away at while paying all of your debts. 5k is much more manageable than 40k. And 500 more manageable yet. Would not pay off the 500 and get it out of the way instead of going after the 40k? He does say when they're close it's okay to take interest rate into consideration. He would not recomend you attack a 38k 6% loan if you have a 40k 18%. But its about focus and intensity, and taking the small wins to encourage you. To each their own though.
- Port Richey, FL · Member since 2016 · 129 posts · 48 votes6y
@Wade Kulesa this is a hot debate. Seems like there isn’t much middle ground from either stance. I also like Dave’s Philosophy. He preaches that “the best way for the average American to get wealthy is through mutual funds.” I agree with that statement. It works 100% of the time. I’ve been investing, as a side hustle, for the last 8 years. I always first used my cash on hand as that was most comfortable for me. I currently have one property financed with owner financing that was too good to pass up. Also one property paid in cash. Dave Ramsey sells a recipe for “most people” it is a good recipe and works. I’m a little more aggressive and risk tolerant with my investing because I earn a high salary, have a lot of cash on hand, live beneath my means, and am conservative. So I have index funds, rentals, and my primary. I owe very little. Basically investing is very unique to each individual that requires you to do the calculations, determine what you’re investing for, and when is your end date. Then it becomes a lot clearer as to if you use leverage, cash, or just stick with mutual funds. There is really no right/wrong way to it. IMO if I could afford too I’d hold all, income producing, properties as cash with zero leverage. To me that feels better. Good luck!!
- Member since 2020 · 32 posts · 9 votes6y
I’ve been to Dave Ramsey’s leadership seminar in Nashville. He offers a lot of good advice and occasionally offers some bad advice.
It’s good to get rid of credit card debt and auto loans, but you shouldn’t consider mortgage debt to be as terrible as Dave makes it out to be.
Watch Graham Stephan’s YouTube video on Dave Ramsey. He explains how Ramsey got burned in the ‘80s by taking out 90-day loans to flip houses. No wonder he’s debt-averse... he was using debt in a way which was MUCH riskier than a 30yr fixed mortgage.
Originally posted by @Joe Splitrock:
Originally posted by @Marc Rose:
@Wade Kulesa
So far, I count 6 people out of 78 replies who say they have personally done this in this thread. So less than 10% of those responding thus far. Lots of stories and theories - but 6 out of 78. That’s interesting to me
Interesting point, but let's keep it in perspective. Less than 10% of people who respond to BP threads actually have experience doing what they suggest. Everyone is an expert in the world today.
Personally, I have multiple loans that were taken out for real estate over ten years ago. I guess you could say I survived having debt, but I never considered another option. To be fair, I also know many investors who got out of real estate in under ten years. I wouldn't say the loans destroyed them, but more the business itself. There is a low survival rate in this business. Keep in mind those who fail or get out are not on BP telling their story. There is survivor bias big time here. Everyone here is either an investor or wants to be an investor (or they want to make money off investors).
I totally agree Joe. The responses in this thread are hardly scientific. I just think it is interesting how few members there are that have contributed to this thread that have actually been doing this for 10 years plus. I’m not sure that I would make any kind of conclusion from that. But I do find it interesting. Most of the comments are around whether or not people like Dave Ramsey and his methods, rather than answering the question of whether they themselves have been using debt to invest for over 10 years.@Wade Kulesa Dave Ramsey is correct in that if you never use debt, you will never be in debt. Using cash is the safest route. There is a lot of wisdom in that and I would take on debt very carefully, especially nowadays, being ok with the worst case scenario and maybe having some assets that other people can't take or sue you for (precious metals?). I would advise people to use the Dave Ramsey method to get themselves in a good enough position to where they have no debt and then have enough money to put down at least 20% on a nice cashflowing property, and then rinse and repeat. I think people should learn how to make money in various ways and have multiple streams of income. People tend to be more careful with money they have earned and saved. Also moving into a double or 4 plex makes sense, but to get to that point you would already need to have some decent money management skills and/or be a high income earner. I'm going on 9 years on one of my loans and am ready to sell things so I can relocate so Dave Ramsey was right in my case lol. But I only owe 67K on that property and purchased for 130k, and now is worth 200K+. I don't like debt so I initially did a 15 year mortgage, but my other loans are 30 years at low interest rartes.
- Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes6y
Originally posted by @Terrell Garren:
I keep a file of good quotes, anecdotes, phrases, etc. Mostly from famous people. I just added a new one.
"Debt is 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." @Sylvia B.What do you know? I'm famous! :-D
- Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes6y
@Account Closed I am curious how you are so successful with subject 2 deals. I cannot find anyone willing to keep their name on a mortgage after they sell. Could you perhaps share some of your experiences or readings I could look into?
- Specialist · Indianapolis, IN · Member since 2020 · 29 posts · 9 votes6y
Dave Ramsey is extremely conservative and he hates debt. His theory on real estate is just that, extremely conservative and avoiding debt. When purchased at a good value real estate debt is "good debt" because it makes you more money than you have to pay each month.
Yes, investors who use leverage make it past ten years. How many people have been on the Biggerpockets podcast who talk about making it through the 08/09 crash. We're ten years past that now.
Ultimately you need to decide where your risk tolerance and desire for returns meet. Maybe that doesn't mean using as much leverage as possible, but it doesn't have to mean 100% cash either.
- Real Estate Broker · Oklahoma City, OK · Member since 2016 · 39 posts · 58 votes6y
I've been prudently using bank debt for my rentals for 17 years and counting.
@Marc Rose
A man who goes on the radio every night and calls everyone stupid and says things like it's basic freaking math, then gives advice contrary to the math is going to spark debate. Lol mathematically much of his advice sucks. Spiritually it's sound. Maybe he should start saying "it's basic freaking spirituality."
I'd venture a guess that the bulk of long time investors are not on bigger pockets. I know half a dozen personally who have used financing for decades. That's not what Dave says though is it? He carefully constructs that statement in a way that's borderline manipulative. He says not to use debt at all. Then says all the guys he knows who did 100% financing have failed. Well that's quite a narrow group of people. He has to know them. They have to use 100% financing. How big do you think that group is? And then he's gone on to say well one or two are still around! Put of what? 3 or 4? Lol
The math is solidly in favor of financing. The tax laws are too. And saying cash is more secure, (which I'm guilty of myself...) Is a matter of perspective. What's riskier, guaranteeing a lower return or risking a loss of properties you don't have a ton of money wrapped up in? That's a matter of opinion...
- Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes6y
Originally posted by @Rich Hupper:
@Account Closed I am curious how you are so successful with subject 2 deals. I cannot find anyone willing to keep their name on a mortgage after they sell. Could you perhaps share some of your experiences or readings I could look into?
First I do what is called "Solution selling". They have a problem of some sort. They are under some kind of time constraint, or they are in foreclosure or they just got divorced and need to sell or they got a job out of state or it's a rental and they are tired of the hassles or they lost their job or they tried to sell through the MLS but they should have done some repairs first so nobody makes an offer and on and on. About 7% of homeowners need to sell fast at any given time. I don't spend my time on the other 93% who think selling on the MLS is the solution for them.
Once I meet with them and I can see that I can solve their problem (I don't buy every house I have the opportunity to buy, some are just too much work to repair, others are too small, too large, under a high tension power line etc) I explain to them that I won't be charging the 6% fee real estate agents charge because I'm not a real estate agent. On a $250,000 property that saves the seller about $15,000. They like that. Then I am also flexible when they have to move. Sometimes they need 3 or 4 months to move. That's fine by me. They are still making the mortgage payment during that time but we've already taken care of the paperwork and openly recorded the Warranty Deed (changed title). I'm using that time to find a tenant buyer will puts 10% down ($25,000) that I get to keep as a lease option. We coordinate move in with move out of the seller. When the seller is ready they move out.
That's pretty much how I explain it to the seller. I tell them all of that and they sign disclosures that they know all of that.
I tell the seller that I will give them their equity in cash at closing/move out and that the loan will be staying in their name, I will be making the payments for them, which in many cases will actually improve their credit and at some point my tenant buyer or I will refinance the loan and pay it off. I make no promises of when that will be. It varies all over the place depending on what I plan on doing with the property. Some properties I flip, some I turn into lease options.
And then I say "if you are happy with the amount of cash you are getting here is the paperwork so we can get that money to you, I just need your approval here and here on the paperwork and my attorney will take care of the rest of the details."
I have one I'm sitting on in N. Phoenix right now. All she wants is $2,000 to walk away. 3 bed 2 bath 1500 sq ft, nice neighborhood. Not an exciting deal for me (for a couple of reasons) but I might go forward with it to see where it takes me.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes6y
Boiled down to it's simplest form using financed funds (mortgage) is purchasing TIME.
Option A) all cash, a person saves for 10 years to buy a property, that costs more due to inflation/ appreciation etc. OR B) a person saves for 2yrs and purchases via mortgage, 2 more years saving buys another and so on. 10 yr mark they are now purchasing property 5 and have various degrees of equity and appreciation accrued.
If "Cash Is King", and "Time Is Money", doesn't that mean time is King of all..... Well, as a mortgage buys time, mortgage is gain, all cash is nothing at best. Gain or nothing, I will take gain.
- Broker / Investor · Tewksbury, MA · Member since 2008 · 1k+ posts · 351 votes6y
@Account Closed
And then I say "if you are happy with the amount of cash you are getting here is the paperwork so we can get that money to you, I just need your approval here and here on the paperwork and my attorney will take care of the rest of the details."I like the way you present this to them.
Do you ever have an issue where you cannot find a tenant buyer because the current owner has the home in disarray, or the home needs too much work to make it attractive to a tenant buyer?
- Developer · SLC, UT · Member since 2013 · 50 posts · 35 votes6y
@Wade Kulesa
Not all debt is bad and real estate based debt at reasonable LTV's isn't the bad kind. Over the years as I've created more wealth (that I don't want to loose) I've worked to lower my portfolios LTV's.
My perspective is that it’s about balance. You need to have enough staying power to weather the coming storm but you want to be in the game earning cash flow and forcing appreciation.
Leverage is a beautiful thing when your growing your nest egg. The key is learning to use it wisely.
If you’re super conservative put 40% down on your first deal but i wouldn’t wait until you had it all to get started.
Last thought here, get a good banker. Find someone who really understands real estate finance and have them help you underwrite the deal. You will be able to leverage their experience in your local market to make sure everything is lining up.
Good luck
- Specialist · OverTheRainbow · Member since 2020 · 607 posts · 909 votes6y
Originally posted by @Rich Hupper:
@Account Closed
And then I say "if you are happy with the amount of cash you are getting here is the paperwork so we can get that money to you, I just need your approval here and here on the paperwork and my attorney will take care of the rest of the details."I like the way you present this to them.
Do you ever have an issue where you cannot find a tenant buyer because the current owner has the home in disarray, or the home needs too much work to make it attractive to a tenant buyer?
If the property needs too much work and doesn't have enough equity in it and won't cash flow, then that would be one I wouldn't be inclined to buy. I would tell the seller the 5 or 6 other options I know of for them, though to see if I could help them out..
However, if there is a lot of equity (for instance one I bought in Phoenix had a mortgage of $169,000 - I gave the seller $5,000 cash for their equity - took over their mortgage and I flipped it. I just sold it for $325,000 using Craigslist. The buyer's agent found me and had a pre-approved buyer so I paid her 3%. Happy to do it. It was sold half way through the flip and I didn't have to worry about finding a buyer.
I always have my team clean up and repair any hazards before letting a tenant buyer move in. I provide "Clean & Safe" properties. That doesn't mean they are "updated" but it's in everybody's interest to provide a safe and healthy environment for the tenant buyer.
One property I bought in Mesa is a 4 bed 2 bath that I had my guy cleaning and on the second day of filling the dumpster, someone in the neighborhood was walking by, saw the house and two days later was putting $25,000 down and the first month's rent, he chased my guy out of there ;-) and he finished filling the dumpster himself. Oh well, sometimes messy houses go faster.
- Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes6y
@Steve Morris
I don’t know man, I’ll bet his net worth is much larger than yours. 
- Member since 2020 · 1 post · 1 vote6y
Not sure what Mr. Ramsey is talking about, however, as a former commercial real estate banker, I can assure you that I have financed 100's of deals by very successful real estate investors, most of which started with nothing, purchased a single building using debt, and have been doing so ever since.
C. Gordon Moose
- Rental Property Investor · Cambridge, UK · Member since 2020 · 123 posts · 64 votes6y
@Wade Kulesa I have enjoyed using Dave's content for getting me out of debt and helping me realize how debt can take control of my life. With that, I just use his lessons to make myself aware of the financial decisions I am making day to day. If leveraging debt works for you and makes you feel comfortable do it. If it's difficult for you to image yourself having that kind of debt, it's not worth it.
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