Dave Ramsey on paying cash for real estate preferably with no debt

Member since 2020 · 146 posts · 39 votes

What's your opinion on Dave Ramsey method for success, he mentions a lot its best to buy real estate property cash with no debt or as last resort 15yr mortgage, for most that are just starting out its almost impossible to have over a couple$ 100k to invest in real estate cash.

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

many real estate investors will not agree with his methodology or teachings .

if you are someone who has financial acumen and is good with managing money then many would not follow what he teaches. unfortunately many americans are not financially savvy and significantly struggle with managing debt and understanding how increased debt can put a lot of pressure and stress on someone. in those instances what he preaches is correct.

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Aristotle Kumpis
Specialist · Long Beach, CA · Member since 2011 · 873 posts · 393 votes
5d
He's wrong. Having a mortgage and using leverage for buying real estate is much better. However, given the higher interest rates and what your purchase price is, paying cash could be better for the next 2-3 years until rates come down a little. Then cash out refi and pull most of it back out
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Garrett KeithPro Member
New to Real Estate · Dubuque, Dubuque Iowa · Member since 2026 · 33 posts · 18 votes
22h
Dave Ramsey's approach makes sense for his audience, but not everyone is his target audience. You're going to have people tell you never to buy a property with cash, and people like Ramsey tell you to pay cash, or worst case a 15-year mortgage. People tend to push whatever route worked for them or whatever they're comfortable with. But everyone's comfortable with different things, and it comes down to understanding the trade offs. Buy a property in cash and you give up leverage, but your cash flow is going to be a lot better than if you put 20% down. Don't let people sway you one way or the other. You have to think about what you're comfortable with and what you actually want in the end.
The problem with Ramsey's method for most people starting out is access to capital, it's almost impossible to have a couple hundred thousand dollars sitting around to buy real estate in cash. So realistically, most people are working with leverage whether they want to or not.
I work as a Financial Planning Advisor, and two terms I use a lot in that role are risk tolerance and risk capacity. Risk tolerance is what you're comfortable with. Risk capacity is what your finances can actually handle, or what you need to take on to hit your goals. Say a conservative investor is 60 and wants to retire at 65, but his portfolio is too conservative to get him there. That's where risk capacity comes in: what risk level does he need to take on to earn the returns that get him to retirement at 65? Maybe the answer is he pushes retirement to 67 instead of getting more aggressive. It's the same idea with real estate, it's about knowing yourself and knowing what you actually want, then working backwards to figure out the path: full leverage, all cash, or somewhere in between.
Habit 2 of The 7 Habits of Highly Effective People is "begin with the end in mind" figure out your end goal, then work backwards. My current goal is to pay off my primary residence, then put 20% down on investment properties going forward. I'm conservative by nature, and I don't want to risk losing my own home over something going wrong. I could house hack, but that leaves my cash flow razor-thin with no room for error.
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