Author Topic: Distancing myself from Ramseyism.  (Read 32462 times)

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #250 on: August 08, 2017, 02:05:41 PM »
It's not unrealistic to expect that Dave is getting $2500/mo on scads of homes he bought for under $100k during the crash and those homes are now worth near or over $300k. 

Nashville recovered very quickly from the collapse and is now experiencing an acute housing crisis.  There are dozens of tower cranes dotting the skyline. 

jmecklenborg

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Re: Distancing myself from Ramseyism.
« Reply #251 on: August 08, 2017, 03:27:42 PM »
It's not unrealistic to expect that Dave is getting $2500/mo on scads of homes he bought for under $100k during the crash and those homes are now worth near or over $300k. 

Nashville recovered very quickly from the collapse and is now experiencing an acute housing crisis.  There are dozens of tower cranes dotting the skyline.

DC is similar too, housing market is making a new bubble.  The cranes will go away in the next recession.  But the S&P 500 will continue to outpace the housing market over the next 50 years, in my opinion.

Unless we go to nuclear war with north korea, then this is all pointless.

No doubt that stock prices will outpace the price of homes as it always has, but a rental property purchased at a good price earns huge "dividends" as compared to any stock.  A single family home purchased as a rental property has the advantage of capital appreciation in addition to the rental income, unlike a 4-family or larger multi-unit complex.  The disadvantage of single-family rentals is the much higher per-unit management hassle/fee as compared to a plex. 

The money from buy & hold real estate gets huge when the 1. property is purchased for under market value 2. the property is completely paid off so that 3. almost all of the collected rent can be reinvested. 

Dave is adamant that he is a cash buyer 100% of the time.  This approach mitigates risk but it's very difficult to do because few people have the patience to pass on deals until they have enough cash to buy a first rental property.   

Re3iRtH

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Re: Distancing myself from Ramseyism.
« Reply #252 on: August 08, 2017, 11:52:15 PM »
I found the following post at https://www.biggerpockets.com/forums/79/topics/37369-dave-ramsey-s-real-estate-story-


Dennis Treacy HVAC Contractor from Philadelphia , Pennsylvania
replied almost 8 years ago

Dave ended up in the dumps along with a few other REI folks I personally know. Before that tax code change. Guys like Dave made their money on selling limited partnerships on insanely over leverage real estate. The limited partners mostly highly paid professionals who needed big tax right offs bought in by paying the monthly mortgage for the owner investor.

Here is how the investors made the big bucks. First find a totally worthless rental building, the bigger the better. Buy it for what it was worth (just about nothing), next fix the place just enough to make it habitable.
Next sign leases with folk who were at least breathing, make the rent as high as believable, next go to a lender who was not being properly regulated, was allowed to lend money based on the new value of the building which was now based on a totally rented fully leased building.
Easy slam dunk deal, the investor is holding $100's of thousand of borrowed tax free money, and the limited partners paid the mortgage, plus the other expenses involved in the building. The professionals got a huge write off by owning the losses of the building, without being on the mortgage docs or owning the building.
The investor had easy management, he did not worry about collecting rent, or upkeep as the limited partners paid the freight.
The tenants never complained as most did not pay the rent anyway.
But Uncle Sam threw a monkey wrench into the deal. The new tax code disallowed loses from real estate for these professionals who earned above $125k and that is all of them.
The limited partners stopped paying the mortgage, and walked away free.
My friend had 2.6 million dollars of mortgages to pay on negative cashflow buildings. He of course also ran away with his credit totally destroyed forever, and the lenders mostly failed.
This my friends was called the S+L crisis.

Dave probably pays cash because his credit is shot to hell, my friend has a $1million judgment on his credit to this day.
Don't worry about him though, he has quite a few college rental buildings hidden in land trusts to keep the lenders a bay, he paid cash for them, he had squirreled a few of those limited partnership bucks away.

How history repeats itself.


Very interesting.  I second my opinion that he makes more on books and radio than real estate.  He brags about his successes but I don't believe he is upfront about his failures, and just to make a guess I doubt he is making more than if he had put all of his extra income into the S&P 500.

I don't know about that. I was listing to the show and he let it slip that he has over $100 million in real-estate.

Not necessarily, he could have earned $90M in books / radio and then earned $10M in real estate over the years, but now has $100M in real estate as he uses most of his earnings to buy real estate.  He mentions on his show all the time that he loves real estate so I don't doubt that is a big portion of his overall portfolio, but it doesn't mean that the value of his properties is based on growth within the portfolio vs. him leveraging his high income to buy lots of things.

He actually did mention that a lot of it was due to growth. He was advising someone on the split between real-estate and mutual funds. He mentioned that he ended up being heavily weighted in real-estate because he had some incredible gains from the bargains be bought in 2007-2008.

If he had bought the S&P 500 index fund in Jan 2009 it would have gone up 175% (2480 vs 900), while the median home price in Nashville increased 52% ($232000 vs $152000) over the same time period.

Good rationalization for investing in stocks vs. real estate.

In reality, that same real estate could of enabled one to earn enough passive income to FI/RE in 3-4 years of acquiring properties, providing a solid $3-4K of passive monthly income. In addition, it would show as $0 of income or a slight loss on your tax return.

For the same amount as the down payment on those rentals, the mutual fund investor could have fun waiting 10 or 20 years, HOPING they could FI/RE at that time, and pray it doesn't happen to be a down market.

I speak from my own experience. I don't experience up or down months or years. Every day of every year is an "up" day (rental income). I love John Bogle, but index fund investing is too safe and more importantly, too slooooow and too loooong, even for a relatively high income earner. Different strokes for different folks.

talltexan

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Re: Distancing myself from Ramseyism.
« Reply #253 on: August 10, 2017, 07:15:42 AM »
Saying the median home PRICE increased 52% isn't the same as saying all homes appreciated 52%. Some homes could go up by a bunch, raising the median because which home IS the median changes. If Dave owned those homes, then he makes more than 52%.

VoteCthulu

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Re: Distancing myself from Ramseyism.
« Reply #254 on: August 11, 2017, 03:34:44 PM »
I love John Bogle, but index fund investing is too safe and more importantly, too slooooow and too loooong, even for a relatively high income earner. Different strokes for different folks.
It's interesting to see the large variety of risk tolerance in these forums, from the Permanent Portfolio advocates who use 50% gold and treasuries to protect against volatility, to the 80-100% equities index fund crowd, to the 50+% real-estate, crypto currency, etc. folk. I love the variety, and I hope everyone keeps posting about the ups and downs of their chosen investments.

neonlight

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Re: Distancing myself from Ramseyism.
« Reply #255 on: August 12, 2017, 02:28:46 AM »
I love John Bogle, but index fund investing is too safe and more importantly, too slooooow and too loooong, even for a relatively high income earner. Different strokes for different folks.
It's interesting to see the large variety of risk tolerance in these forums, from the Permanent Portfolio advocates who use 50% gold and treasuries to protect against volatility, to the 80-100% equities index fund crowd, to the 50+% real-estate, crypto currency, etc. folk. I love the variety, and I hope everyone keeps posting about the ups and downs of their chosen investments.

I am the latter category with real-estates and crypto taking up 50+%. My plan is to divest crypto into safer assets. Last checked 25%+ real estates and 28%+ crypto.