Should I Pay Off Debt Before Buying Rental Properties? 

I am not religious, but I stick this man’s advice and principles. Everything he says is not cool, popular, fancy, fun. But it is the truth. He will not tell you what you want to hear. He tells you what you need to hear. No matter you beliefs, you can’t change how math works

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

So glad I listen to Dave. I just turned 30, been making 220-230k a year for the last two years. Paid off all of my student loans in that time, bought a house, paid off all credit card and commercial debt. My credit score hit 820 and my real estate agent wants me to buy 3-4 rentals a year with minimum money down. Lol if I didn’t listen to Dave I would probably be 1-2million in debt right now instead of completely debt free aside from my mortgage.

What Dave is saying is 100% correct.I think the problem is with younger people they don't realize the value of paying properties and debt off fast and then moving on to the next project.

Real estate mortgage is like margin in stock. It is the best thing we can wish for when everything works out perfectly. But when things turn the wrong way, we are screwed.

I listened to you Dave. 5 years ago I started paying down debt. 4 years ago I was debt free and started saving aggressively and investing my savings in index funds. 2 years ago I saved enough and bought my first rental in cash. It brings in pure cash flow. Then I got an 8 years fixed interest mortgage for the second rental, with the mortgage payment almost completely financed by the first rental. In 3 more years, the second property will start generating cash as well, and I can save some more and get the third. Yes, it is slower because it is risk free, and I may not end up a billionaire. But there is a 99% chance I end up a very comfortable everyday millionaire.

The last thing missing in this story is mental health. Big payments are stressful. You know in your gut at any moment things can go wrong and crush you. You have that shoe waiting to drop hanging above your head day and night and you don’t know when it will drop without warning. Stress ruins physical and mental health. It’s just not worth it. Forget about these ideas full of stress. Get your sleep and do things a little slower.

The whole theory of “I have 200k so I’m gonna buy four houses with 50k down on each” that only works in a perfect world, when life comes crashing down then you’re screwed. Dave is a great example of why it doesn’t work, the fact that his bank called all his notes in was an extreme situation but the same could happen if you owned 6 rental properties all with mortgages and then covid hits, or you get diagnosed with cancer, you get laid off from work and have no emergency fund, spouse racks up credit card debt without your knowledge etc…. Etc….

I remember when my dad had a copy of NOTHING DOWN on his desk in the early 1980s. He owned properties in E. Nashville & Gallatin, putting in a lot of sweat equity (and paying me for some of mine), but his tenants often couldn't (or just didn't) pay their rent. He had to sell at a loss eventually. Fortunately he had a regular job through all of that. Since then I haven't had any desire to own any real estate other than my own house.

Dave’s advice is outstanding for regular folks. However, for people who already financially responsible, there can be better ways to do some things. Debt isn’t universally bad for everyone. Seek advice from numerous sources and evaluate all of them. You also absolutely need a sufficient emergency fund if you’re owning income property.

I am always entertained when a caller is essentially asking Dave's "permission" to go more into debt. Have they never heard the show?!!

I remember the Nothing Down... I tried to get in that but didn’t have enough leverage. I dodged a bullet but it sure made sense at the time.

Debt free is ALWAYS best!! George's advice is top notch!!

You a great Mam Dave thank you for sharing 😎

I remember Nothing Down! It was a total craze…

This man is not just a millionaire. He has helped lots of people become wealthy. It's funny to me how people still discredit him.

Moving slower right now is what we're doing. It sucks to pay extra on the mortgage instead of investing, but reducing our monthly expenses will be great. Right now we have placed a cap on our monthly spending and will see how well it fits.

I'm saving to build my first small single family home to rent. I can build a $500k+ home for $200k-250k. The way the market was.. right now its insane and places are listed for 30% higher than they should be. In my market long term rentals run $25k+ a year, short term rentals run $50k+ a season. Once I get the first one built I can buy property the next year, prep it and start building the house in another year. Once I have 3 properties I could quit the 8-5. Once I have 4 I could build a new property faster than every 2 years. Once I get over 5 or 6 properties I could quit building rentals and semi-retire VERY comfortably. Debt COMPLETELY kills the cash flow.

Wife and I are 54, just paid off house and debt free. Took working a lotttttt! Over last 20 years. How can I not finance to buy my first income property without saving until I’m in late 70s before I have all cash?

typical caller: I know the "Ramsey way" also typical caller: "should I take out another loan?!!?!"

Unless you have multiple family units ($$$) Rentals are a lot of work and risk. It is not easy money.

I remember the late night infomercials! 😂

Great advice.

$750,000 in debt. No money. Smart.

I'm super stoked because I just paid off my mortgage this morning! Now I'm trying to decide if real estate is something I want to get involved in. Regardless, I'm 41 and have no debt, so I'm just ecstatic!

You have to manage risk, I don’t think a bit of leverage hurts if you have enough emergency funds.

Keep buying income producing properties. You can pay off some of the debt for sure. There is good debt and bad debt. Rental properties are good debt, Dave messed up so his view is skewed from his personal experience. People can make safe real estate investments, just don't over leverage yourself. Slow and steady wins the race, not like Dave was trying to do. Debt is a tool to be used to get started, snowballing will happen Dave is right about that. I agree with most of what was said here. Minimize your risk, but still take some risk...

The caller keeps separating his and his wife's debts, how come DR isn't questioning...why??!! 🤔

Watch out for suing tenants, maintenance fees and all that other stuff.

Debt free and that’s the way you need to be. All these people wanting rentals in ton of debt just don’t get it. There has to be someone who will fail otherwise we all would be rich from real estate. I love my low bills every month. When house paid off I’m gone do a back flip

Del Dotto makes great wine!

The first house I bought, which I still live in, was in 1985 ---a HUD repo. I had zero credit history. I walked into a bank and got a loan without any problem. I actually owned more of the bank's stock than the amount of the mortgage I wanted! The bank asked me to bring in my stock certificates and photocopied them before making the loan. I always thought that was a good story! Unfortunately, the bank was Washington Mutual. Circa 2008 the bank failed and the value of all that stock went to zero!

My dad got scammed from those $2000 tapes

He ain't gonna do any of what they said. They both have car loans, the fact that his car loan is $21k is a big enough picture of who these people are. The wife will probably think he's a wimp if he did what they told him.

I have 400k student loans. It will likely take me my life to pay that off so I'm not waiting til it's paid off before buying rental

My buddy grew up super poor in the hood his dad wasn’t around. One day he woke up told himself what are u doing you have one pair of shoes 2 pairs of jeans with holes and 2 t-shirts. He worked as many jobs as he could get, took the bus to work, rode a bike and saved up 40k to buy his first duplex. By year 5 he owned 3 duplexes and by year 10 he owned 10 duplexes paid for and a small business.

Dave there are no $100-$200k properties right now LOL.... but otherwise good advice.

What bites most leveraged investors is that they believe theres such a thing as cash flow on leveraged investments.

DR is really good a playing it super safe. Life is risky….. don’t get over leveraged ….. But if you can put 20k down on a 100k property (for example) and it has nice cash flow you will do well if your paying attention. There is a happy medium. I respect Dave, but most successful investors don’t operate his way.😊

Being smart with leverage with the right percentages with your primary income to have rentals is so crucial vs just thinking rent payments will cover you and create an additional income. It just doesn’t work like that. And we own companies that work in the trades hvac, plumbing, and electrical so having that covered helps but still have to assess properly the purchase price and how you can pay when tenants can’t.

Everyone wants to get Rich on real estate now

That's one thing i hardly ever hear Dave talk about is his compassion when it comes to himself being a Landlord. Think that's definitely something that may get overlooked on videos discussing mortgages.

There is a big difference between nothing down and 20% down ( wich can also be obtained by buying neglected houses in good neighborhoods and putting in your own labor) waiting to buy debt frer is ridiculous. You are missing out on all those years of letting someone else's rent money paid down your house. And loosing the depreciation tax break.

We don't need anymore rental homes choking the supply of homes for purchase. Enough is enough. Home prices are already at an all time high

Every time Dave Ramsey gets a chance, he plugs his life story. I might plug his life story into a trippy visual.

He needs to be selling not buying more.

In baby step 3. I love the idea of real estate. But I plan to do it debt free.

Live no debt. Owning banks makes you poor.

cash only paid for rental properties. most people can not do this

I agree, everyone stop buying real estate….so I can buy more.

That guy didn’t hear anything Dave said

Dave needed a better lawyer to read his contracts.

How do you buy a house without going into debt after going bankrupt? And then how do you accrue millions of dollars worth of real estate without taking on loans? I don’t understand.

I had a landlord that had over 52 rental homes. There is no way he bought all 52 with cash. The guy was making more in a month than I’d make in years of working. Talk about depressing.

This dude definitely went out to buy another property

I have bought a property each year for the last 6 years. I do not regret it at all. Just put 25% down and get at least a duplex.

I remember reading Robert allen books about 20 years ago

I thought he was supposed to sell the houses?? Like where does Dave stand on this.. so confusing.

It’s great how these people call in and ask what he thinks when what he thinks is available for free all over the internet . I personally buy real estate and use debt . But I already know Dave doesn’t think I should do that . Not gonna call to ask him if he thinks I should . I guess at least they help make the show .

Pay off all consumer debts stack up at least 10-20k liquid per property then go buy another. I didn’t mention if you have the cash to cover all payments and some major repairs you will be fine. Have that sitting in a high interest savings account making 3-4%

He's going to buy another house anyway.

"Turn that house into a ministry"

I bet the 52k in the money market yields more than all his rental properties.

I had to wait to pay off the first rental property before I could buy a house for myself. Unfortunately prices have risen in that area and interest rates are up so I can only buy half the size of what I originally wanted. But I have to get it now so

Bro...your gonna pay the rent or get out..i dont play like that.

Definitely. Second ever on a Dave Ramsey video!

Can someone explain how would paying off a mortgage at 2% interest rate and making less down on a new property (primary home) at 7% interest makes sense. Shouldn’t it be that you make as much down as possible on the new home at 7% rate ?

This is why financial knowledge should be a thing in schools. My dude is 34 and asks a question like this.

Dave Ramsey's advice is for people with low financial iq and discipline to help them live a nice solid middle class life without shooting themselves in the foot but horrible advice for people who knows how to aggressively scale with smart risk analysis. If I focused on paying off my first home 12 years ago instead of scaling into real estate I'd be so worst off than now. Oh and I survived all the eviction moratoriums just fine.

Did Dave imply that almost no one is sucessful from real estate investing with mortgages? That's obviously not true!

TL;DR: Yes. Edit: you had better get on it now, as real estate softens in the next 3 to 6 months those banks will be calling in your notes!

Because Dave made stupid investments in a really stupid way, a way that people knew, even when he did it, was stupid, and that means that leveraging debt and risk is a bad idea.

I am about to move and I’m renting out my first house. Mortgage is at 3.375% and is $825 PITI monthly. The home will rent for $1600. Knowing this, I’m STILL nervous about the debt. I hope it goes well

They didnt answer the guy's question.. he wanted to know whether he should sell his rentals or not

Dave and the caller are the reason why regular people who just want to own a house can’t.

With 9% mortgage rates now, this is good advice.

"She didn't have a Landlord problem, because her landlord didn't have a mortgage problem." This is how charity works.

Something tells me that Dave was talking to a brick wall during this entire call.

Dude sounds like he is in his 20s...not 30s

I personally don’t take any debt, in 2017 i got chronic disease and thank god i don’t have debt so what i end up doing is graduated from my college in 2017 and back living with my parents and thank god they saved me because i can’t work and my memory are very bad so officially i am done working. If i am in debt hollllllllly 😂 that is why i always say never take a debt because you don’t know what is going to happen to you in 5 years, i was athletic and workout for 9 years and completely healthy and smart and my score are great. But one day i got the news ans my life is destroyed. I knew there are some kids may say oh in usa they forgive you your debt blablabla. Not everyone from the usa so a rule of thump if you don’t have don’t buy it, because risk it’s not a joke. I had a Ukraine friend he had a gym before the W** happen and he is 150k in debt, now the gym is piece of metal worth 1000$ and he need to pay 150k 😂 he told me everyday he barley can sleep because of debt. He is working in Germany everyday to pay his debt.

You advise a certain way, no exceptions, and I'm not following that, what do you suggest I do? Umm... we suggest what we always suggest and for you to follow our advice.

Don't interrupt me. I haven't told you that one of those two guys who got rich is me!

Daves way is safe.... but really slow

No you don't. Don't listen to them. Dave's way is not the only way.

Better than--

surprised this comment section isnt losing their fucking minds

Ramsey is able to buy hundreds of million in real estate all paid for because he makes money with his show offering advice. However most of us have regular jobs earning far less. You can accumulate a real estate portfolio but in a smaller scale unless you earn ramsey salary.

The moratorium on evictions was deemed unlawful by the supreme court

During covid landlords didn’t need to pay there mortgage. Even if there renters paid there rent - an advantage that renters should consider when fearing bad situations like Ramswey

Pay off wife's car TODAY,credit card next then his car. Once those are done then work on the lowest debt on rental, once it is paid off, hit the next so on. KEEP up with payments on the primary house.

Buying at 70-80% isn’t a good deal. That’s why he went broke. I buy at 40-50% on the dollar. Most are trashed houses and we have cheap good labor. Really slow labor but we don’t pay much. We pick up tax sales and foreclosures and off the market houses. He got rich from selling books so idk why people ask him about real estate. He obviously was over paying.

We all knew that Dave was going to go into how he went bankrupt. Dave think he went bankrupt and did it the wrong way. He thinks everyone is like that. Not everyone is like that. No on have any empathy for him. Dave uses all these strawman arguments. But yet never asked him how much he makes on them?

Everyone just pay all your bills and when debt free that’s when you should invest lol. Everyone that waited til now missed out on lowest interest rates and crazy low housing prices

Dave is talking about a specific situation of individuals who buys with nothing down and refinance at a higher value than the actual reselling value of the house. This was quite common 20 to 30 years ago. He is than taking this unique exemple to justify recommending that people pay off all of there debt before investing. Now there is absolutely no business or real estate enterprise or REIT that follows this principle. If you have 20 to 40% equity there is absolutely no chance all of you loans are going to be called. Just keep a nice safety net and you will be fine. Keep enough cash to cover one year your loans payment and an average of 30% equity in all your properties. This is extremely safe. There is absolutely no need to go beyond that.

The main thing is to be debt free it’s a mindset

I would rather know Robert kiosaki’s advice on this not Ramsey.

Why not just pay off the debts and make more profit when the tenants pay their rent? I don’t get why you’d stretch yourself so thin and make a little bit of money across a whole ton of risk. Why not make a ton more profit with very little risk? Once you aren’t paying mortgages, a whole lot more of those rent payments go into your pocket. And that’s BEFORE you factor risk in.

So he’s broke basically lol

Let him do it his way 🤷🏽‍♀️🤷🏽‍♀️🤷🏽‍♀️

This guy sounds like many “investors “ where they aren’t concerned by the debt or amount of it, so long as it cash flows. I’m not terribly smart but I like paid for real estate.