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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Shane H.
Member since 2018 · 433 posts · 208 votes
6y
@Marcus Johnson
So is Sandra Bullock's but is anyone asking her for advice on real estate investing?
0 Reply
Steve Morris
Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes
6y
I don't know man, I'll bet his net worth is much larger than yours.
I understand totally people not wanting debt and I go thru this with my wife all the time. There's a sleep factor there. Add in, probably 80% of people do not manage nor understand debt very well with credit cards, auto loans and student debt.
However, cutting spending increases your worth yet not as much as investing with other people's money. If you look at people with a lot greater net worth that didn't get it from dad/mom, odds are they borrowed and leveraged. I broker apartments and about 5% of the deals I run into are cash.
Again, if you can borrow $1 at x% and earn >>>x% on it, why wouldn't you assume that risk if you understand?
1 Reply
Marc Rose
Dallas, TX · Member since 2020 · 26 posts · 18 votes
6y
So I’ve counted 15 people in this thread out of the 128 replies who have invested with debt for over 10 years. Hardly scientific results, but interesting. My theory is that there are a lot of folks who have very strong opinions about this topic, but few who have the skins on the wall to back up their very strong positions. I don’t have the real estate investor skins in the wall yet, so I’ll be more measured in expressing my theories.
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Account Closed
Rental Property Investor · Twin Cities, MN · Member since 2019 · 122 posts · 150 votes
6y
@Wade Kulesa
Leverage = scalable business. Companies carry debt, period. It is a method for growth and expansion.
The idea is to avoid over-leverage, not to avoid growth and expansion.
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Shiva Bhaskar
Investor · Los Angeles, CA · Member since 2017 · 523 posts · 476 votes
6y
Wade, I love this question. I think Mr. Ramsey has some good advice for the average American consumer, given how many people in our country are drowning in debt. However, much of his advice for investors is way off, and he exaggerates way too much.
I guarantee that most of the successful investors in your local market, who have been around for a decade or longer, have purchased some or all of their properties using debt. What's more, you can Google the following folks, many of whom you might be familiar with: Stephen Ross, Donald Bren, Sam Zell, Richard LeFrak, Ed Roski Jr, Richard Caruso. These are some of the biggest investors and developers in the country (both multifamily or in other types of real estate), and most of them use debt.
The key is, using it smartly. I have just a few properties and have been doing this for only a few years, but I've always heard from mentors that debt can be good - if you use it wisely, and don't take on too much of it. I think if one wants to invest without debt, that is great, but just be aware that it's going to limit your growth. If you're buying good deals with strong fundamentals, some debt is not a bad thing.
1 Reply
Andrew McKinnon
Houston, TX · Member since 2017 · 38 posts · 19 votes
6y
@Corey Hawkinson do any out of state investing?
0 Reply
Corey Hawkinson
Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
6y
@Andrew McKinnon Not yet. Why do you ask?
0 Reply
Andrew McKinnon
Houston, TX · Member since 2017 · 38 posts · 19 votes
6y
@Corey Hawkinson Just caught my eye as someone who has been in the game long term as a side hustle since that is pretty much exactly what I want to do ha (as well as a lot of folks I imagine).
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CJ Chaney
Member since 2020 · 8 posts · 8 votes
6y
I work for and investor who has been leveraging everything with every chance he gets. He's been investing for more than 30 years and is doing pretty well. He started with small single-family homes and is now getting into Assisted livings and Storage Facilities. Seems like he's pretty well off, but he still lives off little income and just invests everything. Like Robert Kilowsoki says, if it's not producing cash flow it's a liability.
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Marcus Johnson
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
6y
Originally posted by @Marc Rose:
So I’ve counted 15 people in this thread out of the 128 replies who have invested with debt for over 10 years. Hardly scientific results, but interesting. My theory is that there are a lot of folks who have very strong opinions about this topic, but few who have the skins on the wall to back up their very strong positions. I don’t have the real estate investor skins in the wall yet, so I’ll be more measured in expressing my theories.
Yes, it seems people have very strong opinions towards Dave Ramsey on this forum. I used Dave Ramsey's plan to get out of debt in my early 30's. I hate debt, but I'll admit I've used leverage conservatively to acquire our wealth. The past two decades we have seen 3 major events happen, the technology bust of early 2000's, I was laid off twice and struggling, 2008 the Great Recession and now this last mini Recession. It makes me think Dave Ramsey is on to something, when people need the gov't to spend trillions on small business loans, unemployment, stimilus checks, etc.. It just shows that if you are leveraging, you better be damn sure you can ride out a wave of non-payment by your tenants should the gov't not be able to rescue everyone.
I'm in the midst myself of paying off our duplex in the next 3 years and then using the cash flow and my w-2 income to quickly save up another large down payment to buy more properties that aren't overpriced as they are now in my neck of the woods. I'd rather be fiscally sound, with a large net worth, then to not be able to sleep at night because I'm leveraged.

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Corey Hawkinson
Rental Property Investor · Bloomington, MN · Member since 2019 · 404 posts · 542 votes
6y
@Andrew McKinnon Makes sense. I thought you were going to try to sell me on Houston. As a side hustle I have gone much slower than other investors here, after 10 years I’m only at 7 “doors” but it has worked out well for me.
My retirement plan is split between 401ks for myself/wife, direct real estate investment, and passive investing. The passive investing side is the only one behind schedule for me. I’m looking into out of state investing now in relation to that, but I’m not sold yet on OOS investing.
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Andrea Blake
Ormond Beach, FL · Member since 2019 · 1 post · 1 vote
6y
We are also Dave Ramsey followers and live a debt free life. Our primary residence is paid off. We will be buying our first investment property in cash very soon. I like the power of cash and having the flexibility to buy any deal I want.
For us it is about the long term plan of financial freedom. I am comfortable buying properties at a slower rate knowing I can sleep at night and not stress about payments. We want to teach our daughter that if you don't have the money for it, you don't buy it. With what is going on in the world right now, I am so thankful that we don't owe anything to anyone. I am holding my cash waiting for the deals to roll in!
That being said, this is a very interesting discussion, but don't make a major life decision based on the responses on this forum! You have to take a hard look at how you want to live your life and take it from there. Best of luck!
1 Reply
Mike S.
Investor · Colonial Heights, VA · Member since 2014 · 115 posts · 68 votes
6y
Dave will call you an idiot and stupid on steroids if you leverage a rental. Lol
0 Reply
Gary Clark
Rental Property Investor · Montrose, CO · Member since 2013 · 9 posts · 0 votes
6y
Dave Ramsey is a guru. They all have their place and (for the most part) bring value to what they charge for their programs. Dave Ramsey's debt-payoff program is second to none and a technique that 99% of the population would do well to follow. I'd stick to his debt-payoff advice, but look elsewhere for investing advice.
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Tom Shepherd
Investor · Austin, TX · Member since 2016 · 9 posts · 2 votes
6y
I've been investing since 2010 and have multiple single family properties (with long term tenants). I always use bank loans with 25% cash down payment. Interest rates are just so cheap historically so it's best to take advantage of this if you can. The key is to make sure you have enough monthly cash flow to cover future monthly expenses (you must take into account vacancies, and make ready after a tenant moves out, and capital expenditures such as roof and AC). Many newbies forget to add those things into their initial underwriting. Always assume for the worst when I run my numbers. However, despite interest rates being very low for past couple of years, I haven't bought a property since 2017. This is mostly because I can't get the monthly cash flow numbers to match what I am used to and also the ROI is too low. Although I know appreciate and tax depreciation will help, I always based on my investment decision on the cash flow numbers (I am very conservative). Hope that helps.
1 Reply
Dell J.
Member since 2010 · 210 posts · 158 votes
6y
I bought my first investment property in 2011 and I used a mortgage. I am closing in on the 10 year mark and I dont have any signs of collapsing.
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Carlos M.
Investor · Lancaster, PA · Member since 2016 · 94 posts · 356 votes
6y
@Wade Kulesa we are in our 11th year. We used 100% financing the entire way through. We started out with a $60k home equity loan. We are settling on a project this month.... where are we 11 years in... I quit my W2, we will have 91 units at the end of this month with a market value of 8 million. We now gross a month what we did in an entire year of w2. Dave is great for the average person who just doesn’t want debt and a comfortable easy retirement. I’m total opposite! I’m more of a grant Cardone personality.
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Cody L.
Rental Property Investor · San Diego, CA · Member since 2013 · 3k+ posts · 4k+ 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.

Started 12 years ago. Borrowed $ to buy an 8 unit.

Today I have 1500 units and monthly free cash flow that far exceeds my previous annual salary. And my net worth is miles above where it would be if I had any other normal job.
Dave Ramsey has good advise for people that are financially illiterate. But for most serious investors, his advise is terrible.
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John KosterPro Member
Investor · Valley Village, CA · Member since 2012 · 147 posts · 142 votes
6y
Dave Ramsey's Total Money Makeover is a solid book and I recommend it to anybody heavily in consumer debt without a financial clue.
His financial teachings are solid, but there is a huge difference between high interest consumer debt on depreciating assets and low interest loans on income producing, appreciating assets.

His stance that all debt is bad seems to be an extreme reaction to a traumatic event that happened to him. People have dramatic responses to traumatic events all the time. Drug addicts go from being homeless street urchins to tee totaling Bible thumpers who scold people for having an occasional beer. Prostitutes become Nuns. Some people are unable eat peanut butter, because that is what they were eating the day Dad beat up Mom and left forever. There are many stories like this and I mean no offense to anyone with a similar story.
But Dave's stance on debt is just another example of this. Yes, being a debt free millionaire is way better than being bankrupt, and living a monastic lifestyle sure beats being a drug addict or a prostitute, but going bankrupt and losing everything because he got burned using high interest 90 day loans with no guarantee of renewal like Dave did, then declaring that all debt is bad because of this and saying that 30 year fixed rate loans should be avoided, is like someone who goes out with an ex-con member of a biker gang - gets sexually assaulted by the gang - and then declares that sex is bad and no one should have sex. Just because he got burned utilizing reckless and risky financing, doesn't mean all financing should be avoided.
Again, I get it. Mental health is important and there is nothing wrong with feeling safe. Live the lifestyle that makes you feel good about yourself. Invest in a way that makes you feel comfortable. But I'm going to continue to enjoy my monogamous relationship with my wife, have a few beers with my friends, occasionally enjoy a peanut butter sandwich and continue to use long term low interest loans that enable me to purchase cash flow producing real estate. Because so far, thanks to moderation and an appropriate amount of caution, I haven't had any traumatic experiences with any of these activities.
1 Reply
Marcus Johnson
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
6y
@Mike S.
That’s because he can pay for real estate in cash unlike most people.
0 Reply
Mike S.
Investor · Colonial Heights, VA · Member since 2014 · 115 posts · 68 votes
6y
@Marcus Johnson He's made a fortune doing what he does. He overleveraged back in the 80s and got his toes stepped on when his loans got called. He was wreckless but he did learn his lesson. If you have the discipline to leverage wisely and have plenty of reserves it's not an issue.
0 Reply
Marcus Johnson
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
6y
@Steve K.
Plus he does site multiple biblical verses that speak about the borrower is slave to the lender.
1 Reply
Account Closed
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
The idea is - can you weather a downturn or a Coronavirus? If the law changes so that it says you can't evict tenants and the economy tanks so that you can't rent your unit for a long period of time - who can weather that? The person leveraged to the hilt? Or the person who bought with cash and has savings?
BP is a platform for people who profit off of people who don't go for Ramsay's style of investing/saving/living. So, use your own brain and intuition. As they say, if it sounds too good to be true, it probably is. And, what are the odds of getting rich quick? How do casinos and state lotteries profit or fund everything they promise to fund? Because they know, with absolutely certainty, they will be the ones who profit vs those who buy lottery tickets, etc.
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Craig Jeppesen
Rental Property Investor · Chubbuck, ID · Member since 2018 · 532 posts · 466 votes
6y
If you want a perfect example of how well leverage works just look at every financial institution. They use their customers money to make a 1% return. But the 1% return is really a 20% return on their equity. The rest comes from other people’s money. I think there are a few that have been around 10 years. The key to leverage is understanding your risk, have reserves such as equity and cash,
0 Reply
Dillon Dale
Real Estate Agent · Owatonna, MN · Member since 2017 · 221 posts · 152 votes
6y
@Wade Kulesa a mentor of mine has 2000+ units and has been investing since the 70's. His advice to me was, "leverage as much as you can and buy the most units as you can."
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