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Does Dave Ramsey Hurt Real Estate Business?

By Michael Jacobs

Industry Observer CalDRE #01165532

October 19, 2011 03:39 AM

Does Dave Ramsey Hurt Real Estate Business?

Dave Ramsey is an author and speaker who hosts a nationwide radio show largely based on achieving financial freedom. He speaks of eliminating debt through living on a realistic budget without the use of credit cards or debt. His show is one of the pre-sets on my radio as I am in and out of the car. I've read his books and while I may not be in complete agreement with him, I believe him to have some great ideas on living a better financial life. When one of his callers asks him a question, I feel I know his philosophy well enough that I can channel Dave and answer the caller at least in my own mind.

He is a real estate broker having held his license since he was 18 years old. I believe him to be a strong advocate for our industry although he says he does not believe in mortgages for himself buying real estate.

His thoughts for real estate may surprise many. Who should buy real estate? First, you should have no debt -- no student loans, no credit cards, no car debt. You should have a six month emergency fund. If you are newly wed, wait at least one year. If you should need a mortgage to obtain your primary home -- the monthly payment should be no more than 25% of your monthly income on a 15 year fixed loan. If you are buying a property that is not your primary residence -- pay cash. Some may say: pretty conservative.

So what are you thoughts on Dave Ramsey and real estate? Do you follow his philosophy? Do you have buyers who do or should or should have followed him?

Michael Jacobs is a Realtor who serves the the San Gabriel Valley and adjacent northeast foothill communities within the city of Los Angeles and can be reached at 818.516.4393 cell or michaeljacobs@coldwellbanker.com.

Realtor Michael Jacobs - San Gabriel Valley 818.516.4393

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Doug Dawes

Keller Williams Evolution - 447 Boston Street, Suite #5, Topsfield, MA - Topsfield, MA

Your Personal Realtor®

He's right on! The rule of thumb I grew up with was 1-weeks pay towards housing. That equates to 25%. Real Estate prices may need to drop even more to accomodate this but I don't think that would be a bad thing as people would be able to afford housing.

Oct 19, 2011 03:44 AM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Doug -- it seems as if this simple idea(one weeks pay for one month's mortgage) got away from many when people could get a mortgage with what seemed to be not much more than a pulse.

Oct 19, 2011 03:51 AM

Laura Gray

RE/MAX Realty Group - Gaithersburg, MD

Micahel

Until the global economy no longer relies on the avergae American citizen to buy their products to keep their country afloat this will never happen. Trade agreements have kept Americans on a dangerous financial treadmill for decades

Oct 19, 2011 03:54 AM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Laura -- I look at real estate as a local concern not so much on a global issue for my clients and myself --- a home is not a short term investment but building personal wealth beyond the long term financial benefits that may occur.

Oct 19, 2011 04:01 AM

Suzanne McLaughlin

Sabinske & Associates, Inc. (Albertville, St. Michael) - Saint Michael, MN

Sabinske & Associates, Realtor

I agree with your comment above Michael. Housing is not a short-term investment. Paying off all debt before buying a home is not a wise move. Next, he will want you to have the equivalent of the entire purchase of the home saved before you buy.

Oct 19, 2011 04:34 AM

Jeffrey DiMuria 321.223.6253 Waves Realty

Waves Realty - Melbourne, FL

Florida Space Coast Homes

Michael...sure I believe it would be to your advantage in some cases to buy without a mortgage...but it depends on your situation. Do you need the write off? Do you like in a high property tax area (this could mean your write off will be worth more to your bottom line)? I guess what I am saying is...just like all real estate is local...all decisions are local as well. I wish speakers, the media, so called experts...etc... would stop painting with broad brush strokes.

Oct 19, 2011 05:25 AM

Joe Petrowsky

Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT

Your Mortgage Consultant for Life

There is a place in this world for Dave Ramsey. He does some great work and has made a difference in many people's lives.

Oct 19, 2011 05:39 AM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Suzanne -- in a best case scenario, I believe that homebuyers should pay off credit card debt and car loans before purchasing their first home and definitely have a emergency fund on hand to cover true emergencies. I am still a bit on the fence regarding student loans as some buyers I have worked with have this as part of their financial history.

Jeffrey -- you are definitely correct that all real estate is local. Dave Ramsey would like people to buy without a mortgage but states that a mortgage that follow his guidelines is acceptable in our "real world".

Joe at Right Trac Financial Group -- he does seem to have a loyal group of followers.

Oct 19, 2011 05:48 AM

Robert Hammerstein -

Christie's International Real Estate - Hillsdale, NJ

Bergen County NJ Real Estate

Michael - I agree with you about Real Estate being local but to have no debt in this economic environment seems a bit unrealistic. I do agree with him to a certain extent but it can be a bit too much in this environment. Just my two cents...

Oct 19, 2011 07:36 AM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Ah, Lisa(and Robert) --- your two cents worth of advice can give a big return. Thanks for stopping by and commenting.

Oct 19, 2011 07:42 AM

Don Sabinske

Don Sabinske, Sabinske & Associates Inc. - Zimmerman, MN

Sabinske & Associates Inc.

I agree with having the student loans. Paying the credit card debt entirely is not as worrisome....I always have some debt but I pay it off every month. Not having two car loans is crucial, especially if they are variable rates, which some are now.

But, I don't think Dave will kill the market, but he isn't helping much either.

Oct 19, 2011 10:33 AM

Belinda Spillman

Aspen Lane Real Estate Colorful Colorado - Aurora, CO

Colorado Living!

Michael, Interesting philisophy. Wouldn't it be nice to be as financially sound as he suggest. I know very few that fit his criteria. In a perfect world I guess. I saw on the news last night that student loans are passing up credit card debt. It is a viscious cycle.

Oct 19, 2011 11:50 AM

Endre Barath, Jr.

Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA

Realtor - Los Angeles Home Sales 310.486.1002

I remember the days we used to "preach" six months worth of reserves....funny thing I was at the dentist this morning and told the receptionist to get rid of her debt and save up for an emergency....BTW I never heard of Dave Ramsey.

Oct 19, 2011 12:01 PM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Don - making sure buyers are aware of the risks of homeownership is also key.

Belinda - financial strength can be achieved, it is definitely not easy but should be a goal in my opinion.

Endre - good advice. Locally in Los Angeles he can be heard on 980AM - 11AM - 2PM should you be interested.

Oct 19, 2011 05:28 PM

Endre Barath, Jr.

Berkshire Hathaway HomeServices California Properties - Beverly Hills, CA

Realtor - Los Angeles Home Sales 310.486.1002

Michael I will have to tune it just to hear what he has to say.BTW I wonder what he had to say about the LA Times article today?:)

Oct 21, 2011 01:50 PM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Endre -- I rarely listen to the entire show(in/out of car) and didn't hear him mention the Los Angeles Times article from Friday regarding --- I'm assuming you are referring to visas for foreign all-cash homebuyers. He wasn't in favor of the first time homebuyer credits so I am assuming he would not be a proponent of this either.

Oct 22, 2011 05:52 AM

Norma Toering Broker for Palos Verdes and Beach Cities

Charlemagne International Properties - Rancho Palos Verdes, CA

Palos Verdes Luxury Homes in L.A.

Michael - I've worked with several young doctors and they have hefty student loans but are often married with children and are anxious to establish a home after years of apartment living. I think some debt is acceptable, but if credit cards are maxed out and there are two car payments it's probably best to spend a couple years paying down debt.

I think his overall message is to change the financial habits of Americans.

Oct 23, 2011 09:45 AM

Michael Jacobs

Pasadena, CA

Pasadena And Southern California 818.516.4393

Norma - I think you are right about the intent of his message. Of course, it is not without sacrifice, nothing worthwhile is ever easy and "overnight success" rarely occur.

Oct 24, 2011 04:53 AM

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