The Dave Ramsey Dilemma: Should Real Estate Investors Really Avoid Using Debt?


Dave Ramsey has become a very visible media pundit, author, and speaker. Some of his events are so expensive to attend that you have to go through a phone sales pitch in order to be able to get the pricing (you just can’t book or buy tickets online). There is no question that he has commissioned some solid research and has written some great tips on getting out of bad debt. But many find it almost impossible to find a way to mesh his approach to money with what really works when it comes to investing in real estate.

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Dave Ramsey 101

Dave Ramsey went broke in real estate. That has given him a lot of good experience, but has also made him extremely cautious. Some might argue this is like the market over-correcting.

The main philosophy of Dave Ramsey is that ALL debt is bad and that you must get out of borrowing ASAP and use only all cash going forward.

This can make great sense for getting out of “bad debt” such as credit cards, student loans, car loans, etc. His systems can certainly help those who struggle with these issues.

Related: How Debt & Taxes Make the Rich Richer and the Poor Poorer

However, this overall approach isn’t always very effective for investing in real estate. First, it is worth noting that many overlook the fact that Dave Ramsey actually does say it is OK to use mortgage loans to buy real estate. He even promotes for a mortgage company. Still, this particular piece of advice is geared towards buying the property as a home versus a investment. 


The Dave Ramsey Dilemma

Aspiring real estate investors can find this all confusing and stressful, as witnessed in this recent debate on the BiggerPockets Forums.

This is because what makes real estate so powerful is the use of leverage (which is “good debt” that is paid by others). Done right, this can actually be the fast track to getting out of all other debt faster, while getting a head start on building up wealth and passive income for retirement.

Yes, even good debt can be a gift and a curse depending on whether used correctly or incorrectly. But used wisely, it does wonders. I mean, I can go buy a multifamily property for $1M cash, or I can put down $250,000 and leverage the rest, then use the $750,000 to go buy 3 more similar properties.

Related: Used Wisely, Debt Can Absolutely Produce Wealth: Here’s How

Would you rather earn appreciation and income on a single $1M worth of property or $4M worth of property in a portfolio? Having all cash in a deal for a single investor is also highly risky due to exposure. That’s why sophisticated homeowners and investors typically take out mortgages, even when they don’t need them. I mean do you think Mark Zuckerberg really needed a loan to buy his home?



Dave’s approach to money can be frustrating and effectively make many methods of investing and getting ahead impotent. If you have piles of cash, you can do it — but it still may not be the best choice. At the very least, it will make your process super slow if you’re trying to save to buy buildings for cash — and, of course, that is a risk, too. Good leverage can be very good and safe if used wisely. Though if you are determined to get in without borrowing a penny, you can start generating income via debt and equity partnerships, crowdfunding, or even wholesaling real estate.

Investors: Where do you fall in this debate? Do you think it’s necessary to use debt to build a real estate portfolio?

Let me know with a comment!

About Author

Sterling White

Sterling White started in the real estate industry at a early age back in 2009. The company he co-founded Holdfolio is a real estate crowdfunding platform based in the Indianapolis market. Before founding Holdfolio Sterling and partner Jacob Blackett were involved in the purchasing and selling of 100+ single family homes nationwide. In his free-time he trains for a World Record


  1. David Krulac

    Having bought and sold over 900 properties, I know something about buying real estate. the first 11 properties that I bought were all 100% financed, not 90%, not 80%, not even 70% financed. Dave Ramsey would not approve, but I don’t exist for his approval. Because I started with nothing, no savings, no rich parents, no silver spoon, I had no choice but to get 100% financing to get in the game.

    On the other hand the of last 100 properties, 99 were all cash; Dave Ramsey would approve!

  2. Mindy Zimmerman

    Dave Ramsey has great advice for people who don’t have good money management skills. Just like most things in life, I think the best route lies somewhere in the middle. I take a view that combines Dave and Robert Kiyosaki’s teachings. Use Dave’s philosophy to eliminate bad debt, use Robert’s to grow wealth. It’s impossible to avoid bad investments (not just real estate) but educating yourself so you make the wisest decision is the best you can do.

    • Mindy your post is spot on. I really like your point that Ramsey is great for learning how to get out of debt, but when it comes to building wealth, Kiyosaki has a much more effective approach. When I read Ramsey I kept thinking “this book has some solid principles, but is not a means for wealth building” When I read Rich Dad I thought “I want to do what this guy has done”.
      For people who are not carrying debt, it does not make sense to me to put everything I have toward paying off my mortgage, when that money could work harder for me invested smartly.

  3. jesse hargrove

    I have been a follower of Dave Ramsey for many years. I believe that his advise on personal debt is right on target. However when It comes to investment property it is almost impossible to pay cash for all your property’s sure he can do it he is a multi millionaire. If you listen long enough you will find he mainly invest in property not the 4 categories of mutual funds he talk’s about. I believe if you read between the lines what he says is live below your means and invest the rest of your income. I have personally worked with his mutual fund adviser and if you have no clue it might be worth the 5.75% load funds that they will sell you. Most of the show these days are just long commercials.

      • jesse hargrove

        Hello Sterling,

        I did give them a try. With little results. In 2014 I pulled it all out of the stock market
        and invested it in a self directed IRA. Purchased a single family home that has apericeated 30% plus the rent feeds back to my IRA it is a total win. I purchased another in 2016 and am looking at a 4 family now. I am following Dave Ramsey
        all the way to the bank.

        • Celia Burkheimer

          Hi, Jesse.

          I am interested to know if you are using a trustee for your self-directed IRA, and if so, who? I did a little research on several firms earlier this year but wasn’t able to get comfortable with any. I do like the idea of investing in real estate through a self-directed IRA, though.

  4. Michael David

    Before we had heard of Dave Ramsey for us there was Larry Burkett and his radio show. He was essentially a Christian version of Dave…Larry was challenged by a member of his church who said God didn’t care about money and that he probably couldn’t find any passages in the bible about money. Turns out money is one of the most discussed topics in the bible and Larry set out to teach Christians what he learned…

    In 2001, we began implementing Larry’s teachings about getting out of debt and by 2007 were 100% debt free… We now have several SF rentals and teach our children the business.

  5. Lee G.

    Great post. It depends on your goals and I agree that when I used to listen to Dave Ramsey, I thought his advice catered to the masses and lower to middle class people with moderate aspirations of wealth.

    The decision I came to about a year ago was to pay off investments on a 15 year amortization schedule. That way, by the time I’m middle of the way through my investing career, I expect to have 2-3 paid off completely.

      • Lee G.

        I have no regrets on paying on 15 year loan. However, I have a above average paying job. I know much of this depends on each situation. I am fortunate in that fact. So that decision would be to reduce risk in the form of debt, or to go for higher returns that real estate can provide.

        I appreciate that we have had this discussion to help talk out these ideas. For me, after reading other posts, if you are going to be in real estate investing at all, why make that decision if you are going to heal with the headaches of this investment choice. Low fee mutual funds will is safer and has no headaches that real estate has. So if you look at it that way, paying faster than 15 years may make little to know since until you have hit home runs in the past.

        • Chad Olsen

          That is an interesting point of view. I would disagree with the statement that 15 year mortgages are better, even slightly, than a 30 year (assuming all things equal and fixed). The loan constants (cost of money) for these loans are as follows:

          Loan Constant on 5% loan 15 year fixed = 9.49%
          Loan Constant on 5% loan 30 year fixed = 6.44%

          If the CAP rate on your property is 8% (somewhat typical for turnkey rental), then with a 15 year note you will be LOSING ~2.5% a year where you will be making ~0.5% per year with a 30 year note. You make your money on a deal with the financing.

          Having the longest term possible to pay down your note is where you hedge against inflation and are able to cover your downside. If your cash flow is really good on the deal and you can make the same payment as the 15 year note, then do that! That’s great. But if something goes wrong with the deal then you are not OBLIGATED to pay that higher monthly payment and can go back to the 30 year payment.

          Purchasing an asset, any asset, is buying a cash flow or appreciation or both. Buying an asset to have the asset is really just buying a liability. Why be tied to a specific dogma about being debt free or pay your mortgage down fast? Those are not the ways of the wealthy. The intelligently use long term financing and equity positions when they are financially sound, not because of dogma.

        • Chad Olsen

          I did the math wrong on the previous comment.

          15 yr fixed @ 5% = 9.49% LC
          30 yr fixed @ 5% = 6.44% LC
          CAP Rate of 8%

          15 year fixed spread = ~(-1.5%)
          30 year fixed spread = ~+1.5%

        • Lee G.

          The math presented to me in Gary Keller’s popular book on RE investing, which compared a 15 versus 30 year term….in years 1-15 the 30 year loan had a better return, but it was years 16-30 when there was no debt payment and a large increase in cash flow per month, this averaged out to a 1-2 percent better return over the entire 30 year period.

          This is of course the buy and hold strategy of RE investing.

  6. Charles Morgan

    Not having millions or hundreds of thousands to work with, I have had to take on debt for investment properties.
    All of my “doodads” are paid for with cash, with the exception of my personal residence. I did take out a loan on it to pay off the hard money loan but I used a large chunk of that to pick up another investment property.

  7. Scott Painter

    One year ago, we bought a foreclosure for cash. We were living in an owner occupied 4 plex with a 80% mortgage and owned another condo rental which had been paid in full years prior. 5 banks turned us down for a construction loan or gave us limiting terms. (They approve the contractors, condo is out of state, double closing costs etc.) Having a paid for house does not guarantee you get to your assets when you need them.

  8. Darron Stewart

    Dave Ramsey has sound advice in paying cash, as I have picked up foreclosed investors properties, but never one that was paid for with cash! As for his advice in investing in tax liens, he said that you can’t make any money in it, well he appears to not have all the experience necessary to make an educated determination! Slow and steady using cash can win the race!

  9. Pete T.

    I never got the whole dave Ramsey thing. He reminds me of another Suzy Orman spouting off the obvious and passing it as financial advice. Why would any investor tie their selves completely to one persons ideas? That said, is advice could help prevent someone from taking the Rei plunge too soon. You don’t want to manage re if you can’t even manage yourself

  10. Chad Lusted

    I’m surprised no one has mentioned this. To me it’s simple. If you are using debt to generate returns greater than your cost of debt, then you should leverage. This goes back to the example in the article about buying 4 properties for 250K each and 75% leverage rather than 1 property for 1million cash. If you are generating greater returns on those properties than the debt is costing you, then you should leverage. If you are getting charged more on the debt than the returns you are generating, then you should not. Ramsey’s negative view on debt is completely accurate on using it to fund non-investment activities that generate no returns, but seems to be missing a simple finance principle when it comes to investing.

  11. Abigail H.

    I’ve taken Dave’s advice as a challenge, and I’m working to pay cash for my first investments from savings and wholesaling profits. It will take some time, but it’s more in keeping with my risk tolerance/capacity.

    • Chad Olsen

      Good for you getting into the game! However, I feel that you may be waiting and letting good opportunities go by because you were set on paying all cash.
      Think of debt line a car where the gas pedal is the amount of debt you have. You want to go from San Francisco to New York. If you are only paying cash for your deals, that’s like walking and not taking the car.
      Some will structured debt will let you get moving so that you at least have some momentum. When you start out on a trip you go slow, then you pick up speed once you are comfortable with what you are doing on the highway. Then when you get to your destination you slow down again. Debt if the same thing. You start slow, get more debt as you know how to use it, then deleverage once you reach your goals.
      Think about the choice that this could mean for you and your family.i support whatever you decide.
      We will be waiting for you when you get there!

  12. Raj Patel

    Great Post and replies I think as people have stated Dave Ramsey is great for people who don’t watch their finances. I think his strategy of not liking debt can be utilized a little for RE investing I think if you don’t like debt and have some extra funds get a 15yr mortgage instead of 30yr so that way you are paying down principal more fast and make sure and I think that if you decide to sell the property in 7 to 10 yrs you might be able to see a bigger bang for buck even if the property doesn’t appreciate in value since with 15yr you are able to pay down more debt and also mentally it doesn’t seem like dire when your cash flow is not much extra even if you only get same amount as a mortgage each year you are able to see more principal paid down which mentally can feel good that even if you are not getting much cash flow you are still paying down principal faster which can help you stay motivated to stay in the game and remember the principal pay down is not taxable also i think sometimes if your income is not high then small extra income on investment RE after expenses and depreciation is not going to be much tax burden small ex
    on a 50-60k loan at 5% loan its only $150 or so more in payment from a 30yr to 15 yr and that $150 is only $1800/yr which won’t be able to help you pick up another property lets say you need $18000 to get another property it would take you 10yrs of just cash flow savings for that but with a 15yr mortgage your balance would be very small after 10yrs and almost paid off and also even if you sell the property at that point of 10yrs for just 5-10k profit from your purchase price you will receive much more in money after tax consideration since there is not much appreciation and you are paying a lot small remaining mortgage.
    So I think Dave Ramsey of NO debt is hard but i think you can take it a little and not like debt and attack it in a way that would work for you. Would like to hear other people comments and suggestions Thanks

  13. Chad Olsen

    I think that the biggest lesson here is that your risk level changes over time and that not every solution is right for every person at every point in time. There are opinions everywhere on this subject, some people are well off and others just trying to make their way through the morass of data to determine what is real and what is not. I, for one, have spent a significant amount of time and money learning more about the effective use of debt and when to do so. The math supports utilizing well structured debt and equity to make an asset worth acquiring. Not just real estate, but any asset. This forum is focused on real estate but it can apply to any asset out there. What most people miss is that the ultra wealth out there use debt for almost everything. Apple has nearly $2B in cash that it sits on. What do they do? Go out and borrow money at 1-3%. Why? Because it is safer and cost effective. The biggest lesson is to understand that you also need to sit on a pile of cash. The article says that if you had $1M in cash would you buy one or four properties with that as a down payment? My answer would be I’d do 10! And find ten different equity partners to put up my down payment and reserves. Because the best place for my $1M is in the bank sitting there giving me the ability to get 10 $1M notes. And if something happens to one of these deals I can sleep at night knowing that I can cover most issues that would come up. Debt is no more a weapon than a hammer, screwdriver or gun is. They are all tools used for a specific purpose at a specific time. Blanketing statements that debt is bad or good don’t hold water any more than cars or guns or airplanes or buildings are good or bad.

      • Chad Olsen

        I have not yet been able to find good equity partners for deals that I’m interested in. It’s like finding another significant other. 😉

        But we do have a good portion of our “equity” acting as reserves right now. That money has allowed us to get favorable rates six new turnkey properties with 30 year loans. I’ve also analyzed these deals and only purchased properties where we were going to be able to utilize the cash flow from the property to build up a primary reserve of 6 months capital in less than 2 years.

        For me the most important thing about buying/controlling an asset is to have well structured financing first and then find a stable performing asset that I can leverage against.

        Just my two cents.

  14. Greg Braun

    Thanks Sterling for this post.
    This has been a dilemma for me. I am working on Dave’s plan now to become debt free. With real estate I have been attempting to out-earn my spending. This seems to be a big goal of many who get caught in the materialistic culture we live in. I realized for me to be a better manager of a small business I need to be a better manager at home with my money. Removing the financial stress at home is going to help me focus more on real estate. As far as debt as a tool in real estate I do plan to continue to use it but carefully. The trap many fall into in my opinion is treating that borrowed money like it’s not theirs. I would equate it to how you might drive a rental car vs. your own car ( at least for most of us). They are not as careful and might do things with the rental car they would not do with their own. Far too many people have that attitude with money. Make sure you are careful and buy like you would if it was your cash, because it is yours while you are borrowing it.

    Mindy Zimmerman your comment was right on. Dave’s advice is great for personal finance, which can affect your business. I think for business there is a happy medium depending on your risk tolerance.

  15. This topic has always been a struggle of mine. I hate bad debt but I will be the first to admit I have too much of it. With paying for my own wedding, and student loans it has been a fact of life. The good news is that my wife and I make a strong income together so there is plenty of money left over at the end of the month. The challenge is when you listen to Dave Ramsey he is wayyy too hyped up over that trip to Starbucks or buying just 1 thing that you do not need because everything should be going to debt. Contrast that with Grant Cardone who basically says dont worry at all about paying debt, every left over penny should go towards funding your dream whether that is a business, real estate, etc and then when the big money comes in go ahead and pay off the debt. Like most people on this post my wife and I are settling in the middle. We are paying a little extra on the debt and saving a bunch for investing In REI. I believe Ramit Sethi has the best teachings these days on money and finance and basically says automate everything you can then focus on raising your income so you can invest in your dreams.

  16. Lee G.

    One thing I would like to add to this conversation is that the book by Gary Keller “Millionaire Real Estate Investor” suggested that 15 year loans were preferred by the 100s of successful investors interviewed and polled which was much of the basis of that book.

    I recall that the 15 year over the long term slightly beats the 30 year. Important word is slightly. However, I think this point is important to consider because the advice in that book appeared to be solid by my estimation.

    That isn’t to say 30 year loans are wrong. As I recall, it seemed that these Investors would gravitate to them over time (and maybe not in initial stages) as they matured and were experienced.

  17. Colin Reid

    I like Ric Edelman. He says rich people get big, long mortgages and pay them on time. The rate you can earn by investing in stocks or RE are greater than most mortgages. So capture that spread.
    I’ve done the math on my properties, and it doesn’t make any sense to pay them early when I could use that extra money to make more money. I even looked at all the options on a recent refi, and it wasn’t even profitable to bring a down payment, or do a 15 year. I don’t plan to pay any extra until no one will lend me any more money below 6-7%.

  18. Scott Schultz

    everyone has a different philosophy on this, my thoughts are Have no Personal Debt, and adequate Equity in case the SHTF, i feel comfort in knowing i have at least one house with no mortgage, meaning I will always have a roof to be under, I prefer that to be my personal residence, but its tough not to leverage the larger value at Owner Occupant interest rates. I would say as long as you can weather a 20% market correction without your notes being called due, you should be fine. Ramsey is great to listen to, and inspiring, but im not 100% with him on business debt.

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