All Forum Posts by: Anthony Gayden

Here are the downsides I see to that idea. Selling costs would suck thousands out of your profit. If you don't use a 1031 exchange you are subject to a ton of taxes. Finding a large non-performing building to rehab will be difficult. You would lose all of your cash flow while you are working on this project.

@Joe Stafford

$72,000 year cash flow / $1,300,000 equity = 5.5% return. 

That is a very lackluster return in my opinion. I pull equity out of my current properties and buy more. If you have a lower risk tolerance then borrow less so that you don't feel as uncomfortable.

With your cash flow goals, it will take a very long time to reach that level without leverage.

@Brian Murphy

I personally have three properties with PMI right now. I try to put as little down as possible always as long as the numbers work.

I believe that things will be good going into the future and I am excited about the opportunities. I am one of those people who adapts well to change and I have prepared myself in that I have acknowledged that change is inevitable. 

Remember that there will be winners and losers in every market regardless of who is in political power.

@Cesar Garcia

You could get a co-signer or a partner. You could buy the property with owner financing, or private/hard money lending. You could use a big down payment.

There are options.

@Katie Miller

I would do exactly what I’m doing now. Nothing would change in my investing style.

 You have to guess your way through a lot of this stuff. There are a ton of things that aren't in any real estate investing book. Just keep in mind that everyone involved in a real estate transaction is making money. They want to see the transaction go through so they can get paid. They will help you navigate through the bumps. 

1. A person who is already wealthy or has a very high income such as business owners, doctors, etc. This person has enough money to buy a property in cash. Dave Ramsey himself is very wealthy and can easily pay all cash for any real estate investment. In fact he stated recently he paid all cash to build an office building for his company that cost $70 million. 

2. A person who invests in extremely cheap properties. I'm talking houses that cost less than $50K. These are usually located either in very rough neighborhoods or extremely rural areas. Very low barriers to entry here, even for those with average means. Rarely do you see those who use this method who own more than a few homes. 

There is not a single real estate investing book that I have ever read (and I have read a lot of them) that suggests paying all cash and having no debt on real estate investments in order to build wealth. In fact in most of the books it explains easily why leverage wins hands down. There absolutely is a consensus among experts that debt is the standard way to do business. So the question now is why does Dave Ramsey considers himself a real estate investing expert yet gives advice that contradicts everything that all of the other real estate investing experts suggests. 

My thought is that he knows his information is bad, but his whole company and platform is based on never using debt. He is in too deep to admit that he is wrong and that his method is not the best. 

 I really do like Dave Ramsey and I used his baby steps to get out of debt, build an emergency fund, and learn the basics of budgeting. Keeping that in mind, I do not follow his advice on real estate investing. I believe his advice on real estate investing is absolutely terrible.

1. Save $1000

2. Pay off all of your debts smallest to largest using the debt snowball

3. Save 3-6 months of emergency reserves

4. Invest 15% in retirement accounts

5. Save for your kid's college

6. Pay off your house

NOW, you can begin to invest in real estate. 

The previous steps may take you 5-10 years to accomplish. Only after you have done them can you begin to invest in real estate according to Dave Ramsey. All real estate you buy must be in all cash. So if you are buying a $200,000 single family rental, you must save $200,000 up to pay for it. Even aggressively saving $50,000 per year, expect to wait four additional years to make your first purchase.

So it could take you 10-15 years to buy your first rental property with Dave Ramsey's plan. As most investors know, you will be giving up appreciation, debt pay down, and tax benefits by paying all cash. You will also likely receive a much lower return on investment. The higher cash flow you receive will not make up for the other factors.

Leverage is a powerful tool in real estate investing. It has literally made me hundreds of thousands of dollars. Fear of debt will slow your progress and growth as well.

 Hire a good property manager. It takes a lot of the stress away.