How to Win in Real Estate | Dave Ramsey's Greatest Hits

Summary

In this episode of Dave Ramsey's Greatest Hits, host Rachel Cruz revisits the popular topic of real estate, sharing Dave's wisdom on buying homes. Dave emphasizes the importance of being debt-free and having an emergency fund before purchasing property. He advises against buying a house if it's not affordable and stresses the value of a 15-year fixed-rate mortgage with payments no more than a quarter of one's take-home pay. The show also highlights the necessity of professional real estate agents in the buying and selling process to avoid costly mistakes. Dave's approach to real estate is rooted in financial prudence and the avoidance of debt, promoting a path to homeownership that ensures financial stability and peace of mind.

Takeaways

• 🏠 Dave Ramsey emphasizes the importance of being financially ready before buying a house, advising against purchasing when broke.
• 💰 He suggests having an emergency fund in place and saving for a substantial down payment, ideally 20% to avoid private mortgage insurance (PMI).
• 📈 Ramsey recommends a 15-year fixed-rate mortgage and warns against buying a house with a payment exceeding a quarter of your take-home pay.
• 🚫 He advises against buying a house solely based on emotion, as it can lead to financial stress and poor decisions.
• 🔄 Ramsey shares his personal experience in the real estate business, highlighting the importance of professional help in buying or selling property.
• 📊 He provides a mortgage calculator on his website to help listeners make informed decisions about their home buying process.
• 🏢 Ramsey criticizes mega banks for their customer service and advises against doing business with them, especially when it comes to debt.
• 🤔 He addresses the question of whether it's wiser to pay off a mortgage or rent and save for a house, leaning towards the latter if done correctly.
• 📖 Ramsey references the Bible in his financial advice, stating that debt is generally viewed negatively in religious texts.
• 💪 He encourages financial independence and debt-free living, sharing stories of wealthy individuals who have built their wealth without borrowing.
• 📝 Ramsey provides a step-by-step guide in his book 'The Total Money Makeover' for those looking to improve their financial situation.

Q & A

What is the main topic of discussion in this episode of Dave Ramsey's Greatest Hits?

The main topic is real estate, focusing on advice and experiences related to buying, selling, and owning property.

What is Dave Ramsey's stance on buying a house when you're broke?

Dave Ramsey advises against buying a house when you're broke, as it can lead to financial problems and he believes it's a curse, not a blessing.

What does Dave Ramsey recommend as the ideal down payment for a house?

He recommends putting down 20% to avoid private mortgage insurance (PMI), which can save money in the long run.

What is the maximum length of mortgage that Dave Ramsey suggests not to exceed?

He suggests not to exceed a 15-year mortgage, as it can lead to unnecessary financial strain.

What should be the relationship between the mortgage payment and your take-home pay, according to Dave Ramsey?

The mortgage payment should not be more than a fourth of your take-home pay.

Why does Dave Ramsey discourage buying a house based on emotion?

Emotions can lead to impulsive decisions, which are not ideal when making such a significant financial commitment as buying a house.

What is the importance of having a high octane real estate agent, as mentioned by Dave Ramsey?

A high octane real estate agent, who is experienced and sells a high volume of properties, can help you make informed decisions and avoid costly mistakes in the buying or selling process.

What does Dave Ramsey suggest doing if you're considering buying a house but are not financially ready?

He suggests getting out of debt, establishing an emergency fund, and saving for a down payment before considering buying a house.

What is the biblical perspective on debt according to Dave Ramsey?

From a biblical standpoint, Dave Ramsey believes that debt is generally viewed negatively, as it is associated with being a fool or a slave.

Why does Dave Ramsey recommend paying cash for everything, if possible?

He believes that paying cash prevents the loss of financial freedom and peace that comes with being debt-free, and it aligns with his biblical beliefs against borrowing money.

What advice does Dave Ramsey give to someone who is considering renting versus buying a house?

He suggests considering factors like the cost of renting versus owning, the potential for future life changes, and the importance of not rushing into a purchase that could lead to financial strain.

Outlines

00:00

🏠 Real Estate Wisdom from Dave Ramsey

Host Rachel Cruz introduces the topic of real estate, highlighting its significance due to the large financial decisions involved. She shares her personal love for real estate, having grown up in the business and starting her career young. The segment emphasizes the importance of financial readiness before buying a house, avoiding debt, and the value of a 15-year mortgage to prevent financial strain. The advice is rooted in the belief that owning a home should be a blessing, not a curse, and that financial stability is crucial for a successful real estate purchase.

05:00

💰 Financial Advice for Homeownership

The paragraph discusses the financial implications of buying a house, especially the importance of not purchasing a home on a mortgage longer than 15 years. It advises against letting emotions drive the decision to buy a house and recommends using Dave Ramsey's mortgage calculator for planning. The host also touches on the potential need to move further from the city for affordability and the value of a high-quality real estate agent in the home buying process. The emphasis is on making informed decisions and avoiding the pitfalls of emotional or impulsive choices.

10:02

📈 Debt-Free Living vs. Mortgage

This section compares the financial wisdom of paying off a mortgage versus renting and saving for a house. It suggests that saving up to pay cash for a house is the wiser choice, aligning with biblical teachings on debt. The host shares personal anecdotes and the story of a wealthy individual who never borrowed money, emphasizing the freedom and peace that come with being debt-free. The advice is to avoid debt whenever possible, even when it comes to purchasing a home.

15:04

🤔 Renting vs. Buying: A Personal Dilemma

The host addresses a caller's dilemma between renting and buying a home, considering factors like financial stability, current living situation, and future plans. The advice given is to avoid rushing into homeownership and to consider the potential changes in life circumstances, such as marriage and starting a family. The host encourages the caller to think carefully about the type of property they can afford and resell, and to avoid buying a property that would be difficult to part with later.

20:06

🚫 Avoiding the Trap of Homeownership

The host warns against the common mistake of buying a house that one cannot afford or that does not have the potential for resale. The advice is to ensure that the property is a good investment and not just an emotional purchase. The host also shares personal experiences and the importance of not letting excitement cloud judgment when buying real estate. The emphasis is on making smart decisions and avoiding the pitfalls of impulsive buying.

25:09

🛠️ The Importance of Professional Help in Real Estate

The host stresses the importance of seeking professional help when buying or selling a house, as it is a significant financial transaction that requires expertise. The advice is to avoid the DIY approach and to hire a professional real estate agent with a proven track record. The host also criticizes mega banks for their customer service and encourages people to avoid them, suggesting that they are more interested in profits from debt than in helping their customers.

30:12

📉 Climbing Out of Debt for Homeownership

The host advises a caller on how to approach homeownership while dealing with debt and poor credit. The recommendation is to first focus on becoming debt-free, which includes selling high-interest assets like a car and paying off loans. The host suggests practical steps like getting a cheaper car and living independently to save for an emergency fund and a down payment. The advice is to prioritize financial stability and responsible spending before considering a home purchase.

35:13

🚗 The Controversial Topic of Cars and Finances

The host teases the next episode, which will focus on cars as a top-dollar asset and the necessity for most people. The segment hints at controversial advice regarding car ownership and its impact on personal finances, promising a discussion that aligns with Dave Ramsey's financial philosophy.

Keywords

💡Real Estate

Real estate refers to properties consisting of land and buildings. In the video, it is a central topic as the host, Rachel Cruz, discusses the importance of making informed decisions when purchasing real estate, emphasizing the financial implications and the emotional aspect of home buying.

💡Debt-Free

Being debt-free means having no outstanding loans or debts. The video emphasizes the importance of being debt-free before considering purchasing a home, as it aligns with the financial philosophy of avoiding unnecessary financial burdens and ensuring financial stability.

💡Emergency Fund

An emergency fund is a savings reserve meant to cover unexpected expenses or financial hardships. The video suggests establishing an emergency fund as a crucial step before buying a house, to ensure financial security and preparedness for unforeseen circumstances.

💡Down Payment

A down payment is the initial amount paid towards the purchase of a property, reducing the mortgage loan amount needed. The video highlights the importance of saving for a down payment, with a recommendation to aim for 20% to avoid private mortgage insurance (PMI).

💡Mortgage

A mortgage is a loan used to purchase real estate, where the property itself serves as collateral. The video discusses the ideal mortgage terms, such as a 15-year fixed-rate mortgage, and advises against extending the mortgage beyond this timeframe.

💡Private Mortgage Insurance (PMI)

PMI is insurance that borrowers are required to pay if they put down less than 20% on a home. It protects the lender in case of default. The video advises against PMI by recommending a 20% down payment to avoid this additional cost.

💡Homeownership

Homeownership refers to the state of possessing or having full control over a house or property. The video addresses the responsibilities and potential challenges of homeownership, such as maintenance costs and unexpected repairs, and contrasts it with renting.

💡Financial Stability

Financial stability implies a secure financial situation with manageable debt and sufficient savings. The video underscores the importance of achieving financial stability before making significant investments like buying a home, to ensure long-term financial health.

💡Real Estate Agent

A real estate agent is a professional who assists in buying, selling, or renting properties. The video advises seeking the services of a professional real estate agent with a proven track record to navigate the complex process of buying or selling a home.

💡Credit Score

A credit score is a numerical representation of an individual's creditworthiness. The video mentions the importance of maintaining a good credit score for obtaining favorable mortgage terms, and suggests strategies for improving it, such as paying off debts and avoiding new credit inquiries.

Highlights

The show is revisiting the most popular real estate clips from the last decade.

Host Rachel Cruz shares her love for real estate, having grown up in the business and started as an agent at 18.

Dave Ramsey emphasizes the importance of not buying a house until you're financially ready, warning against the common misconception that homeownership solves financial problems.

Ramsey advises against buying a house when broke, as it can lead to a cycle of debt and financial stress.

The advice given is to establish an emergency fund and save for a down payment, specifically mentioning 'baby step 3B'.

Ramsey recommends putting down at least 20% to avoid private mortgage insurance (PMI) and suggests a 15-year mortgage for affordability.

The show discusses the importance of emotional maturity in the home buying process, advising against impulsive decisions.

Ramsey provides a free mortgage calculator on his website to help listeners make informed decisions about their home purchases.

The conversation touches on the potential need to move further out of the city to afford a home, especially in a hot market.

The value of hiring a high-quality real estate agent is emphasized to avoid costly mistakes in the buying or selling process.

Ramsey shares a personal anecdote about a wealthy individual who never borrowed money, reinforcing the idea that debt is unwise.

The show addresses the biblical perspective on debt, suggesting that it is generally viewed negatively in religious texts.

Ramsey's advice is to save up and pay cash for a house, aligning with his overall philosophy of avoiding debt.

A listener's question about whether to rent or buy is answered, with Ramsey suggesting patience and careful planning.

Ramsey warns against the dangers of 'house fever,' which can lead to overpaying or making poor decisions in the excitement of buying a home.

The importance of not DIY-ing real estate transactions is stressed, as mistakes can be costly.

Ramsey provides a detailed plan for a listener with a low credit score and debt, advising on steps to improve their financial situation.

The conversation highlights the importance of having a good credit score or no credit score at all when applying for a mortgage.

Ramsey encourages the listener to sell their car and pay off debts to improve their financial standing and qualify for a house.

Transcripts

[Music]

hey guys I'm your host Rachel Cruz here

and welcome to Dave Ramsey's Greatest

Hits where we're looking back at the

best moments from the last 10 years of

the ramsy show on video one of the most

common topics were asked about on the

show is real estate and it's probably

because real estate decisions come with

a lot of zeros at the end of them so

this episode we're looking at the most

popular real estate clips from the last

decade and guys Dave loves real estate

so trust me there is some gold in

here if you didn't know I have had two

great loves in my life doing what I do

here and the real estate business I love

real estate mom and dad were in the real

estate business when I was growing up

and 3 weeks after I turned 18 years old

I sat for and past my real estate

license a few weeks later I sold my

first house as a real estate

agent what that tells you is somebody

out there had a lack of judgment they

bought a house from an 18-year-old

but but even then I knew how to sell

apparently at some level so you know

I've always loved real estate I I love

the business I love the people in the

business it's a it's a unique group of

individuals real estate business is the

only business where people put Glamour

Shots on their business card I mean it

it these are drama queens they have a

blast real estate people are fun that

when they're at an event that it's a fun

group to talk to because they're

enthusiastic they're fired up they

they're it's just cool and so I always

enjoy sending great real estate agents

Across America and our ELP program you

know sending you to them to find your

next home or to you know get your house

listed and get it sold for the proper

amount of money not giving it away

especially in a hot market like this and

so I I just love the business

and then you know some folks in that

business don't like me because I tell

people not to buy a

house until you're

ready cuz when people buy a house when

they're broke it makes them broker it's

why they call them mortgage brokers

broker and broker when you buy a house

you're broke you're not ready it's a

curse it's not a blessing I want your

home to be a blessing but we've passed

this piece of misinformation around in

our culture that says everyone ought to

buy a house and if you buy a house it's

going to make all your financial

problems go away the only way the little

man can get ahead is buy a house he

can't afford it's just a bunch of

crap you shouldn't buy a house when

you're

broke so I want everybody to get a house

cuz I want everybody to get out of being

broke but when you buy a house and

you're broke all kinds of crap loot

turns loose in your life when you're in

debt you don't have any money you use

your last dime for your down payment but

you buy house buy house buy house buy

house got to buy house got to buy house

got to buy house got to buy house if you

don't buy house oh renting you're just

throwing your money away buy house buy

house buy house buy house buy house oh

the payment's the same as the rent so

buy house buy house buy house buy house

buy house and everybody goes and buys a

house they can't afford and if enough

broke people buy houses you can crash

the economy y'all know

that that was a reference to 2008 that

was a 2008 joke are y'all with me here

if enough broke people buy a house you

can crash the economy with this wrong

philosophy of everybody needs a house

everybody should get a house because I

want everybody to get away from being

broke so they can afford a house so get

out of thatb get your emergency fund in

place but if you buy a house and you

don't do that Murphy will move in your

spare bedroom if you're in debt you buy

a house broke he'll move in your spare

bedroom you know who Murphy is if it can

go wrong it will he'll bring his three

cousins broke desperate and stupid with

him and your hot water he go out the

next week and your roof will leak 3 days

later and then the heat and air will go

down down oh and the sewer will stop up

or the septic tank will back up I mean

you're going to find out the joys of

home ownership when you move in a house

broke you are asking for trouble you're

begging for it so get yourself straight

get out of debt get the emergency fund

in place and then start saving for your

down payment that we call that baby step

3B because you're after baby step three

and you haven't yet started baby step

four with your retirement savings

because you're going to save up for your

down payment on your house then when you

get ready to buy a house want to put as

much down as you can put down if you put

down 20% it's be ideal because you can

avoid PMI private mortgage insurance

which is merely foreclosure insurance

that if you get foreclosed on it pays

the mortgage company if they lose money

on you if you put down 20% you don't

have to buy PMI which is useless to you

it's a favor you do the insur you do for

the mortgage company because you didn't

put down enough down payment if you put

down 20% you avoid that it's about $75 a

month per 100,000

borrowed it's 150 bucks a month for

$200,000 mortgage for your PMI so i'

like for you to put down more than that

I don't yell at you if you don't but I

will yell at you if you violate this

next one never buy a house on more than

a 15-year mortgage absolutely crazy

don't do that don't do

it don't buy a house on more than a

15-year mortgage and never buy a house

on a 15-year fixed rate where the

payment is more than a fourth of your

take-home

pay now you got to keep in mind interest

rates are what

3% you know the most of the time

interest rates have been 10 12% in my

working

lifetime but for the last decade or so

we've had these ridiculously wonderfully

low interest

rates and so you know if you can't

afford to do it right now you're not

going to be able to afford to do it

right ever so right is you know 15 to

20% down hopefully a 15-year fix for the

payments no more than a fourth of your

take-home pay so if you're in the market

to buy a house you don't buy your

largest purchase in the scope of your

lifetime On

Emotion yeah that's the last thing you

need to impulse is something this

size adults devise a plan and follow it

children do what feels good be a grownup

if you're going to be a grown-up and buy

a house be a grownup emotionally slow

down do it

right and jump on Dave ramsey.com we got

a free completely free mortgage

calculator there you want to do your

mortgage calculations it's right there

we just revamped the thing it's slick

it's the best one out there a matter of

fact it's trending is one of the best

mortgage calculators on Google right now

so just go to dve ramsey.com click on

the mortgage calculator and you can

figure out what you can do with the

private mortgage insurance on a $200,000

home how much it saves

you a few other things to keep in mind

in the home buying process in a hot

Market you may need to move further out

of the city in order to get a price you

can afford so you may be training home

ownership for a

commute closer to the city in most

markets the more expensive it gets now

certain distance from the city that

starts to become a neighborhood issue

but I'm saying if you move 30 minutes

out of town the county over those are

sometimes called bedroom communities

then that puts you in a place to do the

right kind of stuff if you'll get a high

octane real estate agent they will help

you you with your selection they'll

represent you as a buyer agent or if

you're getting ready to sell a house get

a real estate agent in your corner that

knows what they're doing this is someone

that has a lot of volume they sell 50

200 houses a year not 50200 houses in

their lifetime so do this right I mean

if you make a 5% mistake on a $200,000

transaction that's a $10,000 ouchie

because you were so smart you could do

it yourself you don't work on your

$20,000 car by yourself why would you

work on your $200,000 house by yourself

it's kind of

dumb thanks for joining us America this

is the Dave Ramsey Show open phones at

8825 5225 you can follow me on Twitter

Dave Ramsey about 700,000 of you do

Andrew says if there are two people both

serious about money and the first is

paying off a mortgage and the second is

renting and saving cash for a house

which is more

wise well if we were going to assume

exactly the same sets of income and

exactly the same set of H size of house

to

purchase um the other thing we'd have to

assume to answer the question correctly

with math would be that the rent was low

very low and very

reasonable

um

and it'll change the the numbers

dramatically depending on the ratio of

house you're going to buy to the

income that you have an example would be

let's say you wanted to uh buy a

$100,000 house and you made

$100,000 and you were newly married and

you lived in a garage apartment out back

of some rich old lady's house for 250

bucks and so you saved $50,000 a year

for two years and you bought a house for

$100,000

cash I think we would call that very

wise versus buying a house at the

immediately and paying it off over two

or three or in that case five years

maybe now here's why we would call that

wise the way I answer questions is what

would I do if I were in your shoes so

it's a little bit twisted to jump into

this scenario Andrew um it would be do

you take it's we haven't bought a house

yet do we take out a mortgage

or do we rent cheap and save up and pay

cash that's an Apples to Apples

comparison you can't say someone's

already bought a house and then paying

that off versus saving up to pay cash is

not Apples to Apples because them

selling the house you know might or

might not be the right thing to do in

other words I very seldom tell somebody

to sell a house once they're in it as

long as it's something they can afford

and instead just crank their way through

it and pay it off but but if someone

calls me and says hey should I save up

and pay cash before I buy my house or

should I by by renting cheap and piling

up a big pile of cash or should I just

buy now and pay it off as fast as I can

I would tell you save up and pay cash

for it I would call that the wiser the

way I know that the way I decided that

was again what would Dave Ramsey do now

the way I make my decisions on almost

anything if I can figure out what the

Bible says about it I do

that and the Bible does not say anything

good ever about debt

there's not one time it's mentioned

positively in the Bible every time Deb's

mentioned you're a fool you're a

slave it's a bad idea it's a curse every

time that debt is brought up that's what

it says now that's God speaking as far

as I'm concerned because I'm a

Christian and so I believe that God is

speaking there now I don't believe that

he's saying that you're going to go to

hell if you get a master card or a

mortgage it's not a Salvation issue as a

matter of fact I'm positive scripture

does not say that I also do not even

think that it's a sin some people say

dead is a sin I don't find that in the

Bible I just think it pretty much says

you're

stupid so biblically speaking dead is

stupid it's not a sin not a Salvation

issue now the only reason I let my foot

off the gas on that when someone's

buying a home here on the air is to get

a mortgage you know a lot lot of people

aren't going to wait they're not going

to do the other stuff we talk about

anyway and so I I just try to slow them

down and keep them as as tight as I can

and then turn and get the house paid off

as soon as possible I however personally

never borrow money for anything in any

circumstance you cannot make me afraid

or happy or greedy enough to borrow

money to go into a

deal there's nothing I want that bad

ever

I want to be debt free more than there's

anything on the planet I want and so I

will never trade that because it's given

me that much

Freedom it's giving me that much peace

and I'm convinced it's one of the

reasons I've become wealthy is I don't

have any stinking

payments and you don't have any payments

you know what you have

money all the money is not going out the

door when when all you do is make money

and pay payments you're broke you've

lost control of your your most powerful

wealth building tool which is your

income and the borrower is slave to the

lender so to answer your question Andrew

if we were looking at two say young

couples as an example that don't own a

home and they're at the they're at the

starting line who's wiser who's going to

end up ahead at the finish

line if they're sitting there one's

going to go buy a house now and the

other's going to rent very inexpensively

and save up and pay cash for a home very

very quickly not over 30 years but over

three or four five years they're going

to save up C and pay cash for their

first home and get started I'm going to

tell you that I think the debt-free

couple is going to when they cross the

finish line have more

money and that's because I believe in

God and I believe he says don't borrow

money and he wouldn't say that if

borrowing money

worked now that sounds pretty basic but

but here's the deal there's tons of math

to back that up and we can we can

approach this academically we can

approach it spiritually and I can show

you and I can walk you through a

bazillion ways but dude if you never I

talked to a guy last night I was Shar

and I went to a Christmas party last

night and I talked to a guy last night

that was worth almost a billion dollars

several hundred million

dollars and he comes up to me at this

party and starts telling me his story

because he knew you know what I do on

the radio and I had never met him before

and he starts telling me I have never

borrowed a dime in my life I've never

had a car payment I've never had a house

payment I started from nothing my

parents were dirt farmers I had nothing

and I I I took a job as a teacher making

$5,800 a year in 1962 or whatever it was

and I took that money and I saved and I

paid cash for our first little house and

I saved and I paid cash for our first

little piece of dirt and I built a house

on that with cash and I sold that house

and he you know and then I did this and

then I did that and and he just over the

years has built his wealth out of his

cash flow and it's grown

exponentially and I meet more of those

than I do people who leveraged their way

into wealth borrowed their way into

wealth there's very few of

those occasionally I run into one but

almost none so that's it that's what it

comes down to the borrower is slave to

the lender and so I'm going to tell you

if I can talk you into paying cash for

everything I'm going to

try

now Wells Fargo is running an ad right

now that everybody's tweeting me with

this you know this goober on there

saying don't listen to the debt

Boogeyman the dead is not a boogeyman

and of course that's aimed at me because

I'm telling people de stupid never

borrow money never borrow money and I

also tell people never to go do business

with mega Banks like Wells

Fargo I mean why would you do business

with a bank like Wells

Fargo or Bank of

America or

chase I mean that you're a number they

don't care about

you they really don't and truthfully

most of the best Bankers in the business

and I'm not against Bankers why would

you do business with a mega Bank they're

horrible the customer service is

horrendous it's you know and then they

run ads like that you know it's like

Discover card what is Discover card it's

got the Freedom

Card that's so stupid that's like

government service

a Freedom credit card that's an

oxymoron you know DMV service line if

the DMV had a line that said fast lane

for you to get your get your paperwork

done fast you know we all know what that

would mean it would be a lie and so we

we know that's not going to

happen so think think think you know of

course A banks is going to tell you

borrowing money is a good idea it's

where they make all their

money is on bar on debt that's how they

make everything of course that's what

they're going to say think

people why would you do business with

Wells Fargo anyway it's just dumb this

is the Dave Ramsey Show Jason is in

Miami hi Jason welcome to the Dave

Ramsey Show hey Dave how are you better

than I deserve what's up awesome hey I

have a quick question uh whether I

should rent or buy according to my

current financial situation uh so I'm 25

years old and have about $85,000 in cash

in the bank and I do live at home still

um but I definitely want to decide

whether to rent or Buy in the next six

months good uh get out of my parents

house okay um so I was wondering what

you would do in my situation very good

what do you do for a living I own a

photography business and an online

e-commerce store and then I also uh have

some income property uh two income

properties in Georgia excellent

excellent are they both paid for yep

both paid for and they produce about uh

five about 550 um in cash each so it's

about $1,000 a month that I receive

excellent so what is your income these

days it's about 90,000 why' to go and

you're 25 years old you got 80 grand in

the

bank yep ding ding well done well done

are you seeing uh a young lady at this

time no I'm single okay and that's my

concern which is it'll be one income

essentially M uh so I guess I'm worried

about whether I should buy something or

rent and then figure out later on in

life whether I should buy I just think

renting is essentially throwing away

money especially in Miami where it's so

high to rent but it's also expensive to

buy too so I would be buying an older

smaller apartment uh which would be 20%

down and homeowners association every

month M so I can't really afford a home

per se MH well you can you just have to

think about how you did it um but it's

um you're pretty industrious young guy

you got a lot of stuff going on very

well done very well done well I mean I'm

with you you move out within 6 months

and uh get yourself established um in in

terms of paying your own bills and those

kinds of things and it's okay if you

rent I don't want you renting as a way

of life but there's people get in such a

hurry to buy well renting sometimes is

just patience and so if you rented for 6

months and during that time you piled up

some more

money and you had a real strong down

payment it caused you to buy a different

property that was a better property well

that would have been a good thing but I

don't want you renting for six

years right exactly and like what I what

I thought about is if I do buy a small

apartment um you know small apartment

essentially if I do outgrow it in three

four years can I just rent that out and

then that covers my mortgage and then I

decide what to do later yeah you could

you could get it paid off and then keep

it like you've got those those other

properties that are paid off and they're

moneymaking machines when they're paid

off baby so I just don't know if I

should just buy the apartment and then

you know it's okay here here's the thing

or if I should just if as long as you

don't buy something that can never be

sold because it sucks so bad right you

know it just it doesn't matter you sell

it if you don't like it in two years

right MH so my son Daniel bought a home

um and uh a year and a half later met

the young lady of his dreams and and um

6 months or 8 months later they were

married and we were actually talking

about it this weekend and she likes the

house that he bought just fine but it's

always going to be his house that he

bought and so at some point they will

change houses just because the old joke

is is that you didn't know you bought

the wrong house until you marry the girl

and she tells

you right that's the old joke now that

Allison wasn't doing that to Daniel but

uh but and your girl you know your

girlfriend of the future might not do

that to you but no matter what you buy

you're going to change a phase of life

when you do get married and have kids

and you're probably going to move again

so it's okay it's okay it's if you buy a

nice little condo there get you

something going in the Miami area and

it's as long as it's something that's

that can be resold that you don't get

yourself stuck in something U then just

sell it when when your life changes a

little bit but it's okay to it's okay to

rent for 6 months and even before you do

that

it's hard to

believe it has been 40 years since I

passed that real estate

test I did take it in 27 minutes I did

get a 94 but nowadays real estate tests

are a lot harder I was 18 years

old and I sold a house two weeks

later now let me just help you with this

if you buy a house from an 18-year-old 3

weeks after he got his real estate

license you're not smart

I appreciate my old high school buddy

letting me sell him my house we were

both just out of high school oh my gosh

me and my disco clothes oh and I had

hair oh can you imagine I was driving a

two-door car showing houses oh my

goodness real estate business I love the

real estate business I grew up in the

business obviously the reason I got my

license at that age Mom and Dad owned a

company and um I I wanted to be a real

estate

I went and got my real estate and and

finance degree as a matter of fact my

degree in finance as a specialization in

real estate and sold real estate all the

way through college even in those High

interest rate days and even though I was

was as green as a gourd and didn't know

what I was doing I I sure thought I

would knew what I was doing and I

convinced a few people I did know what I

was doing but and I got some houses sold

so I did the job but man oh man oh man

what a business I love the business I

love real estate love helping you guys

buy houses and and you know we've got

2,000 or so endorsed local providers

Across America now that we endorse and

when you get ready to buy a

house these days it's a complicated

process it was complicated way back then

but it's really complicated now and

there's all this bad information because

you know everything on the internet's

not true right I mean you know because

Zillow says it's worth something doesn't

mean it's worth that you know the tax

assessor well the tax value who cares

tax value has absolutely nothing to do

with market value it's supposed to but

it doesn't you can't use that as your

gauge so you have to learn this is the

most expensive thing most people ever

buy a

house and you know it's an emotional

process you get excited I was out this

morning riding around I was looking at

some properties and some buildings on

some properties getting learning some

things and I just got real estate fever

this morning it happened to me again

it's happened happen to me like a

bazillion times in my life you ever get

the fever you get house fever when you

get house fever you get

stupid you're willing to pay too much

you're excited you've got to focus a and

you're willing to buy a house when

you're not supposed to buy a house

you're not ready to buy a house you're

going to sell a house the wrong way oh

man you can get in a real mess so let me

give you a couple things you need to do

if you're thinking about buying a house

and I want you to own real estate owning

a home and paying it off is one of the

data points of an everyday millionaire

so we want you to do that but we don't

want the house to own you so here's your

rule of thumb okay number one you don't

buy a house unless you're out of debt

and you have your emergency

fund now everybody's going to tell you

you need to run by a house but

everybody's broke and you don't want to

listen to them it's not a popular thing

to be move a little slower with more

maturity and more wisdom but who gives a

crap this is not a popularity contest

this is you your family trying to build

wealth and build stability and

sustainability don't buy a house until

you're debt-free and you have your

emergency fund and then you save up your

down payment and that's what we do ding

ding just like that and then when you do

buy a house I love the 100% Down plan I

love it when I talk to a young couple

these uh man these killer Millennials

that I get to talk to they're incredible

and they say you know we we got married

we were 23 years old and uh we lived in

a garage apartment and we were making

$110,000 a year and we save $50,000 a

year for four years and we were 28 we

paid cash for a $200,000 house I love

the 100% Down

plan and people are doing it by the way

I recommend that but if you're not going

to do that here's the

most you should borrow and it's the only

thing I don't yell at you for borrowing

but I I would prefer you didn't borrow

or that you borrow less less less less

and get it paid off as soon as possible

but the most you should borrow is a home

on a 15

year fixed rate where the payment is no

more than a fourth of your take-home pay

so don't buy home until you're debt free

have your emergency fund plus a down

payment and on a 15-year fixed rate

where the payments no more than a fourth

of your take-home pay and when you pick

a real estate do not do real estate

DIY this is not DIY okay this is a 2

2003 $150,000

transaction you don't work on your car

and that's a $11,000

transaction you don't open up the back

of your computer and try to fix that and

that's a $500

transaction and yet you somehow think

you're just going to Waddle up and not

get in a bad deal buying a house or

selling a house you make a mistake

selling a $200,000 house if you if you

make a 10% mistake that's

$20,000

think about that I mean if you make a 1%

mistake it's

$2,000 count out 10 20 $100 Uncle

Benjamin Franklin's right in front of

you on the table right now in your mind

that's

1% and if you're a novice if you've

bought and sold 10 houses you're a

novice you are likely to make a 1%

mistake at a minimum without a pro in

your corner see you put a pro in your

corner it's that simple you don't do

this without a pro now everybody's got a

real estate license is not a pro your

Aunt Sally who got her license three

weeks ago is not a pro she's a sweet

Aunt Sally but she's a novice and you

don't put her in charge of your largest

asset cuz she's your Aunt Sally well a

Sally you get her feelings hurt well so

what she's likely to screw it up more

than you are if you did it by

yourself cuz she's an enthus II Astic

ignoramus no no no no no no well I know

this guy at church oh good lord you

don't pick anything else out that way

you don't you know when you need to get

a mechanic you don't go well my Uncle

Henry got a tool box last week and so

I'm going let him work on the car

no you look at their Yelp ratings you

talk to them you find out if they're a

pro how long you've been working on cars

and 26 years okay I got an ASC

certification okay we'll let you get

your butt under the hood but other than

that

no I bought you know was at a holiday in

express last night and I bought a tool

box on the sale serious when they're

going broke no you're not a mechanic no

you're not a real estate agent yet you

got a license but just because the State

Certified you doesn't mean anything

listen you want someone that's a pro you

want someone if you're buying a house or

selling a house that's doing uh 50 to

300 transactions a

year if if they've not done 50

transactions in their entire High

freaking life

no no no no no no no no I'm going to

sell it myself that's stupid you're not

going to make any money on that again if

you make a 2% error all of a sudden you

didn't save anything well I'm saving a

6% commission no you're not because

likely the person buying it is going to

bring their agent up and you're going to

pay that agent 3% now you're only saving

3% but you've been on the market twice

as long and you undersold the property

and you didn't know what the uh what you

were signing for with the home

inspection and what you tied yourself

into to do repairs that you didn't

intend to do oh and you miscalculated

the closing costs you ate up any

possible savings because you don't know

what the flip you're doing stop that

stop it so you get a pro that's why we

vet these Pros for you the entree the

entree well they are entree leadership

they go through Entre leadership but the

Endor local providers for Real Estate

they're the best of the best they're

high octane high protein in your area

and if you get ready to buy a house or

sell a house you need a

pro somebody really knows their stuff

and we vetted them for you thanks for

joining us America L is in Midland Texas

hi ly how are you I'm good how are you

today better than I deserve what's

up uh my wife and I live with my in-laws

and we want to buy a house but I'm not

sure how to go about doing it cuz we

have four credit and a little bit of

debt what's wrong was your

credit well I've got about a 560 and

I've never really done anything to build

credit the only thing I've got going for

me is our car payment yeah you've not

only not built credit you've not paid

things on time what what is behind or

not

paid well I we've been paying it on time

but when I started I had no credit and

so I've just been building it with the

car and we paid

20.6%

interest and I had a l but I paid it off

uh cuz I'd taken a loan to down pay the

car how much do you owe on this

ridiculous

car 10,000 good Lord at 20% interest yes

sir you are getting screwed okay yes sir

uh my wife wouldn't let me negotiate the

price so your wife wouldn't let you

that's what I said

but that's not how we do stuff at my

house um the uh uh ye how old are you

I'm 29 okay and what's your income

sir I make about 45,000 a year depending

on

overtime okay does your wife work

outside the home no sir she's a state

home mom how many children do you have

two okay all right um and is this the

only debt you've

got uh I think we've got about 12,000

total in debt there was a bed that she

got that we're she pays monthly on and

she's got a loan from one of those

little loan places that I told her not

to renew

again okay all right the two of you are

going to have to sit down together and

your first goal needs to be to get out

of debt

completely and uh when you have no

accounts open about 6 months to a year

later you'll have no credit score which

is what you're going to want to do

because you've got a bunch of ripoff

Dance Company crap and you guys have

been buying stuff you shouldn't be

buying you're getting killed man

everything you all are buying is a high

interest rate they're killing you

they're beating the snot out of you all

in the name of you buying stuff you

don't need to buy so you can get a house

later so uh what I would do if I woke up

in your shoes is I would sell this car

and get rid of this debt and get me a

beater um and then I would get these

other two loans paid off as soon as

possible is the car worth what you owe

on

it um just a little more than what it's

good well you can still get out of it

I'd get out of it while the getting's

good and just get you a beater have you

got another car I have a pickup but I

use it for work and that's the only

vehicle that she's got to get around CU

I may go to work and be gone three days

or something so we need to get her we

need to get her she lives with her

parents right yes sir her dad's car is

crap and her mom

works all the time okay then we need to

get her about $1,000

car her getting around as a stay-at-home

mom is getting in the way of you all

buying a

house okay okay that's the way I'm

looking at it now I'm not sure you're

going to do any of this stuff but this

is what I would do if I woke up in your

shoes I would sell that car I get those

other two loans paid off and I would get

me a little place to rent and get out of

Mom and Dad's basement and get the

Dignity of of standing on your own two

feet then I'd start saving aggressive ly

for an emergency fund of 3 to 6 months

of expenses and then I'd start saving my

down payment and um that's going to take

you a little while I have 401k in stock

purchase through the company I work in I

would stop adding to that until you get

this mess cleaned up okay and do you

have any money in the stock

purchase uh yes sir between my 401k and

stock purchase I have about 15,000

almost $116,000 in there how much is in

the stock

purchase um a little over $55,000 I put

10% of every check for year in there

good I'd pull that money out tomorrow

that's not got a penalty on it your 401k

has a penalty on it and stop putting

money in your 401k use that money to pay

off the two loans and to get her a

little car cuz you're selling that

car now you're 100% debt free as soon as

you pull those things off you could be

Deb free in a week if you get with

it that feels pretty good now now you

get on a written budget and you start

working together on a written budget and

your first goal is to get out of the

house your second goal is to save an

emergency fund of three to six months of

expenses and your third goal is to uh is

to save your down payment on your house

it's going to take you about a year and

a half to save up and during that time

your credit score will disappear so

there's only two worlds you want to be

in for getting a home as far as a credit

score goes a very high credit score or

zero credit score

and a zero credit score comes from

having absolutely no accounts of any

kind outstanding or open they're all

paid off and they're all closed you have

any bad debt

outstanding um there's medical bills but

the people that I talk to said they

don't really go off of that in their

years people that you talk to are idiots

of course they go off of that if they

report that as bad debt on your credit

bureau that's what's keeping your credit

score down okay so you got to go get

those medical bills and get them paid

off too when you cash this 5,000 out you

don't want to have anybody on the planet

that you owe any money to ever at all

and six months later you'll have to a

year you'll have no credit

score and then you can qualify for a

house but if you walk around this 560

paying 20% on this car living with your

mother-in-law dude you're getting killed

every time I turn around in this

conversation you hearing me yes sir I

think you can do this but it's you guys

it's time for y'all to take this dog by

the ears and make it make it bark okay

you can do this hold on I'm going to

send you a copy of the book The Total

Money Makeover and it'll show you guys

exactly what to do step by step to cause

this to happen but I gave you some

pretty clear instructions there if

you'll follow them exactly this will

work if you deviate from them then you

probably got bad advice

today all right guys our next episode is

about another top dollar asset that is a

necessity for most of us the car and

I'll warn you some of what you're going

to hear is controversial but it's Dave

we're dealing with so what do you expect

and as always share this video with a

friend who needs to hear it and thanks

for watching I'll see you next

time