Pause Investing To Buy A Rental Property?
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Just paused investing for 4-6 months to pay off two small debts and increase my savings.
Good for you! How's it feel?
Iâve completed all the FPU steps already. Now Iâm in a situation where I can buy an investment property right on the beach that I can pay cash for , but Iâll need to use my emergency fund to buy it. The house is a rare opportunity and I donât want to miss out. Can I use my energy fund for this ? Iâll make a lot of money when I sell it. Iâll only be without my emergency fund for about 6 months or so.
This is the only way I can buy this house without going into debt.
Lol. Bubble burst folks. Every doctor, CEO, or lawyer who could afford and want to pay $4000 a month to rent a 1400 SQ ft shack has already done so. Everyone owns an air BNB and prices are collapsing. The time to invest was 2019 not 2022 unless he wants to liquidate and sell 1/2 the price 18 months from now
Good basis advice for majority of people earning high net worth salaries. Majority of us will take years to save up in cash by which time the equity in the hone has already more than doubled your deposit down. Iâve got rentals all on interest only majority of profits into stocks and extra borrowing of equity gains carefully for deposits to buy more houses. Buy refurb refinance rinse repeat, 20-30 years sacrifice some houses to pay off other ones with capital appreciation plus youâve got your compounded stock growth. Just started to purchase more in a ltd company in UK, thing is itâs pointless paying any of those off as the interest on mortgages is totally 100 percent tax decuctable so encourages you to become more savvy with careful leveraging.
Paying cash for a rental property is not a good investment. If you're debt adverse, just invest in index funds and call it a day.
"Pause Investing to Buy a Rental Property?" I thought that rental property IS investing. That's how we treat ours. It may not make sense on other grounds, but the distinction between rental property and mutual funds doesn't apply; they're both investments. Attention to liquidity is in order, though, if Dave's points about debt are also attended to.
If you bought your property with cash, great! Thatâs an investment. Otherwise, itâs a burden, a gamble and an expense.
Going into debt and paying interest is not an investment. The only investor in your case is the bank that loaned you the money on the property because theyâre the ones getting a nice chunk of interest every month from you.
Paid cash for my two local rentals and the apartment rental in Rome.
I donât borrow money to invest or contribute to my 401k,IRA,emergency fund, regular savings,etc. either.
Banks donât own my stuff and too much of a liability.
@@tanyad3989 When using a mortgage to buy a rental house, the bank is investing and getting about 4-5% on their money, and the one buying the rental house is also investing, and should be making about 20% on their (down payment) money, that's after paying the bank, the property taxes, repairs, and insurance. So you're incorrect in saying that the buyer is not investing. Using a mortgage to buy a rental house tends to get a pretty good return on your money and people do it all the time.
It's the going into debt for the rental property part that's the problem. You don't go into debt buying mutual funds. At least I haven't.
@@tanyad3989 Does that make sense now?
We paid our mortgage and eventually moved and got a new mortgage. The option was to either sell the previous house to help for the new mortgage or rent out the previous house. We were not in a pinch with the new mortgage. So we decided to rent. It is still early so I can't say if it was the best option. It is a standard long term rental property though.
We do not do the dave Ramsey plan or anything. Currently we only have our current mortgage, no other debt.
The debt is coming. You will see!
always moving up in primary residence not the best move - living in a paid off house is nice, really nice especially if you use the money to invest - money making money and with the money that your money makes move up in house.
Dave: Beach house?
Caller: Mountain house
Dave: I figured
Not quite.
this is so under appreciated hahaha
He's just saying that it's a nice house in a premium location of some sort.
Beach houses have nice views, mountain houses have nice views, people want to live in those places.
It makes sense to me.
This is where I believe Dave steers people in the wrong direction. Why even call Dave knowing he hasn't changed his philosophy in this area for almost 30 years...
Pro tip: When you say "debt free" that means NO DEBT!!!
Our mortgage is paid off and I would like to buy some lower end rental property -- nothing fancy, just some older duplex or triplex. The problem is that I don't have enough to pay cash, but I can put down 25% or even 50% easy. Dave says to only pay cash for rental property but there are other gurus that claim you're crazy not to use leverage to buy rental property. It's a quandary.
Best way I can think of it is only finance the rental if you can con totally pay the mortgage from your own income indefinitely when you get a renter that won't pay
Dave's financial net worth is around 400k.... I think he knows how to build wealth with rentals.
400 million I meant to say!
You could end up upside down going into a depression and financial panic. Renters may stop paying and the bank could foreclose on you. Not worth the risk in this economic environment IMO.
@@ryankiel4895 he's not the only one with a high net worth. Some of those other gurus also have a high net worth. Some of that 400 million net worth came from selling things to people that can't think for themselves.
With this current situation, it would be wise to keep your investments going and be patient in buying properties right now as rates are quite high. Still, it's up to you though, just study and learn more about this current situation before making major decisions.
I mean a rental property is still an investment that also cash flows right?
âTheoretically!â
Until it's vacant or you have to evict and the renters wreck the place. Want to have real estate exposure but VNQ.
@@djpuplex Iâm in Mexico and invest in reits, prefer them over personal properties
I do food videos while high af on my CZcams channel. Iâm more raw & realer than most on here âïž
@@djpuplex Everything has risks. That does not mean you should try to do it.
Where do you recommend to go to begin investing in stocks?
Fidelity or Webull. Choose index funds for now until you learn more about how to pick your own stocks. Or just stick with index for life and build generational wealth đ
"the blessings of the Lord have no sorrow added to them"
Getting married, having children, starting a business, just living life in general will have it's ups and downs. There will be sorrow, and there will be joy. To think there will never be problems with anything is delusional.
Feels odd to get a drag ad on a Ramsey video
always amazes me when people call Dave with questions like this.... what about no debt don't you understand? he is already off the DR plan and probably gonna do whatever he wants.
These people are still thinking that Dave Ramsey gives thoughtful non-dogmatic advice.
I'm convinced people have never heard of Dave before they make these calls
So you want to stop investing in stocks that are 80%+ down and buy properties that are up 25%+ in the past year and at record highs?! BRILLIANT!!
Yup i have never stopped investing since high school including the DRIP plan.
Right now is the time I usually increase my buying of cheap shares of what I already have and stocks on my list.
It may not look like much now but big difference in a few years with the growth and compounding.
I think you have the math flipped on the stock returns. Theyâre about 20% down ytd. I totally agree with the point though.
@@jay12187 most stocks mid cap and below are down over 80% this year. Easy enough to Google.
@@FrankS111 Iâm bad with googles. Show me some tickers of things you legitimately think this guy would be investing in that would be down 80% this year.
to Dave, if you have to get a mortgage for a rental property, you can't afford it.
I donât see whatâs wrong with that idea.
@@taylorsmith9629 most real estate investors donât buy in full
@@reese85 Most real estate investors lost their shirts in 2008.
@@aboutwhat1930 and again Q4 of 2022
@@cremephoto you were wrong
Yeah Dave, it's a beach house in Kansa. /s
They're basically lakes, not beaches.
I want to see you and Dave in a sumo wrestling match.
Could be a lake beach.
Theres also no mountain houses in kansas city. So who knows what state this caller plans on buying in
@@ashastings92
I donât know of areas that would have expensive mountain homes unless they are talking about those high hills in the southeast corner. Kansas is one of the flattest states Iâve traveled through.
But yeah I live in Oklahoma and have a beach home on Marco Island so must be another state.
Depending on where you are now is a really iffy time for buying properties. With interest rates skyrocketing and inflation going up now is not the time to be buying in my area. Everyone is buying and hardly anyone is selling. Be cautious
Nobody is benefitting from hyperinflation.
Home buying is fine where I live. Never got caught up in the frenzy.
Just food is inflated but no big deal.
Even gas is under $3/gal.
@@blackworldtraveler3711 where Iâm at in Iowa all the bigger towns and some of the cities around my area all Iâve seen is over inflated prices on homes that need a lot of work to be updated. Sometimes it seems cheaper to buy a nice Mobile home and drop it on your own land anymore.
Buying a rental property IS investing (if you're using realistic numbers to evaluate) so his question is:
"Should I stop investing to start investing?"
I agree, but all investments are not created equally. A million dollar mountain rental is a lot more management intensive than an index fund.
Short term gain against long term liability not smart
The only prescription is more cowbell.
I missed it, how much does he owe on his first house?
Pay cash?
Only wealthy people can pay all cash for a house.
Go and do it. It sounds like he has a plan. That's way Dave cut him off.
But one million in Kansas?
How long would that take to recoup the cost?
Rent is like 1k in Kansas. That would take eighty to ninety years to recoup it.
Because his plan is bad
@@TheDragon160 Not all. Only how much it cost.
@@jimmymcgill6778 :)
The house he wants to buy is a mountain house. Not in Kansas.
You obviously haven't been to Johnson County KS. It's one of the wealthiest/expensive counties in the entire country.
"It's a good time to buy".
Video was posted September 2022. It was absolutely not a good time to buy. Anywhere.
He interviewed all these millionaire and missed nearly every real estate millionaire đ€
He has 150k saved up, I would put it into your current mortgage. It doesn't sound as nice but the idea of no mortgage would be nice. Not sure how much he still owes.
U will be sure to stay middle class with this mindset
Heâs got that fever like broke boomers in the 90s and no stopping him probably.
DAVE list up up i made my 1.4 million in assets leveraging my rentals. 20% down will make it possible to market it under the competition and keep a high occupancy rate. So dave you can no longer say you never heard a millionaire buy leveraging rental debt.
My prime went from 1.52 up to 3.9! Dam you inflation oh wait nvm thats just the banks being greedy!
It is incredibly unrealistic to save up 100% cash to buy a rental property of any kind. This is where I disagree with Dave completely, the difference between good debt and bad debt
No it is not. You just haven't generated significant wealth yet. People do it all the time. Hang in there and stay persistent. You can do it.
also, there is no such thing as good debt.
@@alrbredwall wrong. assets that appreciate over time = good debt.
of course you don't want to take on too much debt, but saving $300k is a pipe dream in today's time especially when inflation is eating away at people's savings.
@@dznArro also wrong. People buy houses in cash all the time. You haven't earned any real wealth yet. Keep st it and you will get there. You can do it.
@@alrbredwall there is a thing called good debt! I think I told you this on another vid
This is not the thing to ask Dave for advice about. He has an earned fear of real estate. He did it in the stupidest way possible, and went broke with it, so I get why he does. That said, there are ways to do this with a lot less risk
The only cure for house fever is more cowbell.
.Dave everyone is not a multi Millionaire bringing in revenue like you do.This poor guy is going to be dead by the time he comes up with the cash for the rental.Keep your close minded advice for your multi millionaire friends and not the average blue-collar worker.
If he canât afford a 2nd home as a luxury property he canât afford one. Itâs insane to still be paying off your first home and decide to go off and buy a second luxury property. If the caller could afford that he would have paid off his first home already.
Then he should NEVER have a rental. Those things are more trouble than they're worth anyway.
Going into debt for a 2nd home (already a bad idea) so you can feel like a landlord (also a bad idea these days) is a very bad idea.
This guy is barely a thousanaire.
He seem to be like a baby boomer in his 30s from the 90s with that fever.
Real estate is investing . . . A much better investment than a 401k.
Why would you want to buy a rental when homes prices are sky high?
The feel of missing out.
That guy should definitely own a rental property he just needs to go a different way of dealing with it.
He can even do something similar if he wants and it does not have to all be cash but less debt is better for him. So I disagree with dave somewhat when it comes to practicality.
Dave is dead wrong on this. As long as you can swing the payment when not rented it is a good investment. He is missing all the tax advantages of depreciation
yeah, being a landlord has no risk......pass.
Million dollars đ
Some people love to spend money
Every millionaire and land lord I have ever met uses Leverage. Debt involves risk, paying cash is a massive opportunity cost which also involves risk. Without risk there is no return...ever.
I know what you mean
And more lose everything trying than succeed.
Don't confuse risk with liability my friend. Every investment comes with some risk, but once you have a mortgage, that thing becomes a liability. You can't wait the mortgage out.
These ppl are Daveâs puppets
Why not get a $300k property instead
Plenty of beachfront and near-beachfront property (on the Atlantic, Pacific, or Gulf) under $500K. They're properties that will continue to appreciate and will easily cashflow in the summer months (assuming they don't get severely flooded or washed away).
Built a bigger property on the same lot??????? HAHAHAHAHA
Wow
Ramsey: "You should not buy investment property unless you can pay for it in cash."
You have a choice here, you can save for twenty years and never have the cash to buy a property because the price keeps increasing, or, you can get a mortgage now and allow your tenants to make the payment for you and after twenty years, you have a paid off property PLUS all the money you have been saving.
"B-b-b-b-b-but that's risky. What if you can't make the payments?" Well, unless you do something stupid, like borrow 100% on property with declining values, you sell, pay the loan, and pocket the equity that has accrued.
But hey, if you want to do it the Ramsey way, just figure out how you can sell folks a bunch of books and seminars. Cash flow is what got Dave where he is. Drink the Koolaid at your financial peril.
Dave is wealthier than you will ever be and nobody calls you for advice on money.
Yep if you have a rental you need a six month emergency fund. Been a landlord since 98 and that is how we have always done it. Now have 5 rentals two fully paid off another two have about 5 years left and the last one just bought with 20% down. The renters do pay off you property, but the depreciation is even a bigger advantage.
There is nothing dumber than buying rental properties.
Why do you say that? Real estate is usually a pretty sound investment.
Dude youâre crazy!! đ I earn cash flow an extra 40k a year from my rentals. It gives me peace of mind that it i lose my job or something along those lines, I still have a little income .
@@iiii8358 There are less stressful ways of getting extra cash.
@@amireallythatgrumpy6508 this is such a dogmatic perspective. Just because you are uncomfortable with risk doesn't mean other people are. Being a landlord is a job where you're less compensated for time but more so for the risk you take.
@@kylesizemore2751 Most landlords are not properly compensated for either.
So pay off your house. Then save a $1million which would take another 20years at that rate. Got it.
Gonna need to save more. Gonna be 1.5 by than
Your mindset wont get you anywhere
For someone who claims to have as much experience as Dave, itâs surprising to me that he hasnât figured out what opportunity cost is or how compound interest works, especially when the loan on the investment property is tax deductible.
Because being a million in the hole is a blessing.
@@Dr.Dumpnpump he knows, he just wonât and canât admit it on air because he would be going against his own business, even though he is dead wrong on this one
And this is why people should not take Dave seriously on most financial advice.
Explain what was wrong with what he said?
Anyone who recommends buying rental properties at all should not be taken seriously.
@@amireallythatgrumpy6508 Depends on the rental: location, condition, price, etc.
when you make zillions a year its real easy
Dave is self-made. Started with nothing and grew his wealth by being smart and patient. His advice is sound.
Pay off your primary home first then save to buy a rental.
His advice is right, but his continual quoting of his own cherry picked millionaire study is just comical.
Go chiefs!
Buy a house cash. Sorry but this is not geared to Daveâs targeted audience which is middle class. Get the rental property on a loan and investment the rest.
I missed the part where you get to determine who the intended audience is. This show is for people on their way to becoming wealthy. So no, doing things that wealthy people do does not mean this is not for the intended audience.
Don't buy things you can't afford.
@@choicemeatrandy6572 based on your logic that means first time home buyers âcanât affordâ the home they purchased on a loan since they didnât buy it cashâŠ..
If you have a mortgage youâre not debt free.
âIf I can look at the situation and can perceive sorrow in the future of it that usually tells me itâs not a God thing Iâm doingâ
Then why get married.
Then why apply for a mortgage at all
Then why take risk and start your own business
Then why trust a friend with a business venture
All have the potential to produce sorrow. Your wife could leave you. You could lose your job and default on a payment. You could break off ties with a friend.
Horrible quote. No one jumps on an opportunity that has a 100% rate of return for sorrow. The decision is based off a likely analysis that you will reap more profit than losses. The thing is, I think an investment opportunity is great if your leveraged at 20% and your generating great cash flow from the property. As long as you have a great savings to account for any renovations, hikes in taxes, hoa fees, or hidden expenses, then Iâd say do it.
Dave is out of touch
Where is your multi million dollar net worth?
@@alrbredwall Right here. Through leveraged real estate.
Sure thing there anonymous internet rich guy. You and everyone else in this thread seems to be a multi millionaire. Dave is real rich and he has a track record to prove it. No one has heard of you.
@@alrbredwall Dave doesn't follow the babysteps. Might be time to educate yourself.
@@Cwilly13ify the baby steps work and allow for regular people to SAFELY retire very wealthy. If you have aspirations beyond that or want to treat being a millionaire like a 100m sprint then the baby steps wonât cut it. Big rewards require bigger risks. There is a smart way to use leverage to build wealth but it is still a larger risk.
Rich dad and poor dad say it otherwise
Kiyosaki? That dude is a joke.
Because of the economic crisis and the rate of unemployment, now is the best time to invest and make money đŻ
The economic crisis has only just begun. Wait till inflation is 80% like it is in much of Europe.
Boomer needs to rethink his method.
Nope. Reality needs to get in touch with itself.
Love all the advice and vids, but the second religion somehow becomes part of financial advice they totally lose me.
Ramsey is so out of touch.
No, he is right.
@@TheDragon160 Ramsey is out of touch
@@kevinlam4773 you just said what the other guy said. I guess ur a bot
@@TheDragon160 about what exactly
How? Explain how
Buy real estate ? Wow I know many fools still falling for this trap . God save them.