Any deep dive into personal finance will likely bring you to Dave Ramsey – the author, radio host and entrepreneur who has made a name for himself as an expert in finance.
His straight-shootin’ attitude and easy-to-follow approach has made Ramsey a fan-favorite for people looking to manage debt and grow their wealth – but what does he have to say about real estate investing?
With a hot market and high interest rates, now is a great time to brush up on your real estate investment knowledge. Today, we’re exploring seven pieces of real estate investment advice from Ramsey himself – and whether you should listen to it.
7 Pieces of Real Estate Investing Advice from Dave Ramsey
1. “You need a local real estate agent.”
The Ramsey Solution’s How to Invest in Real Estate guide writes:
“[A local real estate agent] will know what areas you should look into and what hurdles you might face as a real estate investor. And when it’s time to buy a property, they can help you get a better deal than you’d get on your own.”
But is that always the case? Finding a realtor can be time-consuming and add an extra step to your real estate journey – so is it really worth it?
Ramsey is right. A realtor offers key insights into the homebuying process, and a local real estate agent can offer insights specific to your area, including:
- Market knowledge (like neighborhoods that could best fit your needs, buying trends, etc.)
- Property search, which means you can spend less time searching online
- Negotiation skills to help you get the best deal
- Access to a network of other professionals, like contractors, inspectors, appraisers and more.
As realtor David Cobb said in our recent podcast episode, expert realtors have access to private listing networks and pre-MLS listings, widening your options. He recommends looking at online reviews as a way to find a realtor with a track record of success.
2. “Stick to the budget – especially in a hot housing market.”
Ramsey writes that the emotional aspect of a home search can lead to ever-increasing budgets, noting that “one in five first-time home buyers offered more than their budget allowed, and nearly 15% totally waived contingencies (like a home inspection).”
Is that always the case – or is a little extra dough worth it for your dream home?
Ramsey is right. When your real estate investment is also your family’s home, it’s easy to get swept away by grand visions. It can also be discouraging to put offer after offer in on a great home, only to lose out to a better offer.
However, it’s important to keep a long-term perspective. You likely set a budget for a reason, and upping that number could affect your ability to meet other financial goals.
If you find the “perfect” home, but it’s out of your budget, then it’s not the perfect home – keep looking!
3. “There’s nothing passive about being a landlord.”
Many people think that renting out property – whether it’s a single family home, apartment complex or office building, can be a great way to generate passive income. Dave isn’t so sure.
While investing in stocks or bonds is truly passive (in that the value of your investments increases or decreases without any effort on your part), being a landlord requires quite a bit of effort.
Ramsey is right. Being a landlord might be appealing when you consider the extra income, but also keep in mind that it’s a responsibility. Whatever type of property you’re renting out, in most cases you’ll be the one they call for repairs, maintenance, etc. Those tasks can take up your time and add up cost-wise very quickly, too!
If you’re interested in generating passive income but really want to emphasize the “passive” part, then being a landlord may not be the right move for you.
Related: 7 Clever Ways to Save an Extra $100 Each Month
4. “Pay in cash any time you buy or renovate investment properties.”
Dave Ramsey is clear on this: Mortgages shouldn’t be in your investment plan. He writes:
“The truth is, there’s no such thing as “good debt.” Debt always equals risk – and the riskier your investment, the more likely you are to lose everything.”
Is he right – and does a real estate investment require a 100% down payment?
Ramsey is (kind of) right. If you have a significant amount of extra money, this is solid advice. But for most people, paying all-cash on a property might impact your ability to invest in retirement, pay for emergencies and cover other important costs.
This is also only a good idea if you have enough extra cash to keep your emergency fund full and pay for unexpected repairs – skipping the mortgage on your investment property is great, but not if you have to take out loans later on to cover costs.
Of course, if you can comfortably pay in cash for your investment property, it’ll save you money and keep you out of debt!
5. “Always choose a 15-year fixed-rate conventional loan.”
Ramsey strongly suggests no mortgage – but if you’re going to, it’s got to be a 15-year fixed-rate loan. He writes:
“Going for a 30-year loan may seem like a good way to lower your payments, but it’s also a good way to pay a ton more (like, tens of thousands of dollars) in interest while you stay in debt for an extra decade and a half. You should also stay far away from FHA and VA loans, and all their pesky fees.”
Will a 30-year loan really cost that much more than a 15-year mortgage?
Ramsey is (kind of) right. Fifteen-year mortgages will indeed save you thousands of dollars over a 30-year loan, while also getting you out of debt much quicker.
However, it also means you’ll have a larger monthly payment. If you’re in a place where you need more cash available or you’re prioritizing other financial goals (like retirement contributions or helping your parents pay for long-term care), the 30-year repayment plan may make more sense.
Like in most cases, a one-size-fits-all approach to financial planning usually isn’t the answer!
6. “Flipping houses isn’t as glamorous as TV shows make it seem.”
He says:
“If you love hands-on work, then have at it! If you don’t, you’d better hire a contractor. And either way, budget plenty of time and money for the process.”
Is a DIY house-flip as fun as it seems, or will it end up costing you more time and money?
Ramsey is right. House-flipping looks easier and like more fun than it actually is, and even a seasoned DIY-er will likely need (costly) expert help. Often, house-flippers uncover unexpected (but necessary) repairs that disrupt both timelines and budgets.
Unlike renting (which builds income as soon as you find a tenant), the longer it takes to flip a house, the more the house costs you since you’re paying the mortgage and utilities until you sell it, which adds the stress of a time crunch.
7. “Getting preapproved before you go house hunting is a must.”
In his 2023 Real Estate Trends: What You Need to Know report, Ramsey writes:
“[Getting preapproved] is even more important when home supply is low. If you don’t do this legwork ahead of time in a market like this, you could give a preapproved buyer free rein to swipe the home you want right out of your hands.”
But a preapproval requires sifting through a lot of paperwork, and if you’re just considering a property purchase, is it really necessary?
Ramsey is right. Preapproval gives you a strong idea of what you can afford, makes you more appealing to sellers and will make the buying process go smoother.
Investing in real estate – whether it’s your first home, a vacation space or a rental property – is a big decision. Dave Ramsey offers solid advice for you to reference, but keep in mind that each person’s financial journey is different. Take the advice you need and leave the rest – and if you’re unsure, it’s best to reach out to a licensed real estate agent or your financial advisor to get personalized guidance.
Invest in Your Future with PrairieView
Interested in learning more about real estate investing? Connect with a member of our team to get started today.
[Disclosures]
PrairieView Wealth Partners, LLC is a registered investment advisor. Information in this message is for the intended recipient[s] only. Please visit our website prairieviewwealthpartners.com for important disclosures.
PrairieView Wealth Partners, LLC often communicates with its clients and prospective clients through email and other electronic means. Your privacy and security are very important to us. PrairieView Wealth Partners, LLC makes every effort to ensure that email communications do not contain sensitive information. If you are not the intended recipient of this communication, please delete and destroy all copies in your possession, notify the sender that you have received this communication in error, and note that any review or dissemination of, or the taking of any action in reliance on, this communication is expressly prohibited. We remind our clients and others not to send PrairieView Wealth Partners, LLC private information over email. If you have sensitive data to deliver, we can provide secure means for such delivery. Please note PrairieView Wealth Partners, LLC does not accept trading or money movement instructions via email. Please visit our website prairieviewwealthpartners.com for important disclosures.
Please remember to contact PrairieView Wealth Partners, LLC if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, or to modify any reasonable restrictions to our investment advisory services. A copy of our current written disclosure statement discussing our advisory services and fees continues to remain available for your review upon request.
The information provided herein is for informational purposes only and does not constitute financial, or legal advice. Investment advice in an advisory capacity can only be rendered after delivery of PrairieView Wealth Partners, LLC’s disclosure statement (Form ADV Part 2) and execution of an investment advisory agreement between the client and PrairieView Wealth Partners, LLC.
