Dave Ramsey's Real Estate Principles

the largest investment the largest expenditure that the average family makes is your home real estate it is therefore the largest possible blessing and the largest miss you can make buying it wrong buying it the wrong time not knowing what you're doing and yet everyone says buy house by house by house by house as soon as you get like four years old they start telling you to buy a house if you are renting Oh Lord you can't be a renter renters are awful don't be a renter interventions are bad you don't want to be a renter right and you don't want to be a renter for the scope of your life but there are times in your life when renting makes more sense than owning and one of those times is when you're brand-new and you're broke and you're young I mean you don't have any money when broke people buy houses you and make some broker why they call them mortgage brokers you get broker broker and broker when you're broken you buy house Murphy moves in your spare bedroom you know that's the guy that can go wrong it will and he brings his three cousins broke desperate and stupid with him the hot water heater goes out the roof leaks dog gets run over in the street your life looks like a country song you know and it's what happens when you're broken you buy house house is not a blessing for broke people is actually the month-to-month month in and month out it can be more expensive to own than to rent because if that four thousand dollar heating air system goes out and you're a renter you call the landlord and go do your eating their systems out and they just send somebody magically over there to fix it don't they isn't that interesting but otherwise you got to wring your hands and come up with four freaking thousand dollars and that's very real stuff so to start with let's just establish when it comes to real estate that renting is not a bad thing when you're when you have a plan to get yourself together financially you need to be out of debt need to have an emergency fund of three to six months of expenses then save up your down payment but a lot of people get they get all hot and bothered and they say stupid stuff like wow this is stupid if you've ever said this you were stupid I've said it I was stupid when I said it I was stupid when you said you were stupid here's just ready for this well he you know the house payments the same as the rent payments so why wouldn't I own see that's stupid because you left out the four thousand dollar heating air system you left out the taxes go up the insurance goes up and you left out dot dot dot and so you know it's really not cheaper and it is in the long run because houses go up in value and in the long run the payment if you take a good fixed-rate mortgage doesn't go up and rent does go up so long-run owning is a good idea but on the short-term for the first year you own it's cheaper to rent most cases anyway well there's you can't fight and then people start coming around dinner and throwing around all these absolute fatalism crap and like I was forced there's just nothing in this whole city like like York City is weird or something they're your cities and I mean it's just everybody's got a place to rent so when you buy and you put the house on a 15-year fixed-rate mortgage you basically have a forced savings plan that's one of the benefits of owning you also have it because you know as you're paying the principal down you've got this money built into the house called equity your equity is what the house is worth - what you owe on it and the equity increases as you pay down the mortgage obviously it's also an inflation hedge now most of you have not lived in inflationary times but I remember inflationary times I got my real estate license in 1978 inflation was running 12% a year on houses I'm in a house went up 1% a month in cost or value cost if you were a buyer value of you're a seller right and so if you own property and inflation kicks in the primary element of inflation is housing there's other car gas and cost of bread and that kind of stuff but really the cost of housing is your primary element it's one of the largest chunks of inflation and you are getting that to your benefit when you're an owner and of course your home grows tax-free up to a half million dollars it's a tax-free investment I have million dollars married filing jointly it's the profit you can make on a personal residence if you've owned it two years or more that's pretty cool so there's a lot of reasons to buy when you get ready to buy don't buy the top of the neighborhood buy the bottom range your bottom half of the neighborhood you'll get better appreciation there and a better chance of resale when you do get ready to move and when I took my very first appraisal class in the real estate business the guy in the class said there's three things that create value in real estate location location and location I've seen a single-wide mobile home sitting on a piece of dirt that brought over a million dollars in Malibu just north of LA yeah and some of your really really nice houses aren't worth a million dollars so that's all about the location now it wasn't the mobile home that did that it was a piece of dirt it's freaking Malibu is expensive you know per square foot there's nothing more expensive in the u.s. right now then Manhattan and so those are views that are our friends listing in New York you got location location location when you're picking out a home if you can find something with a view it's up on a little bit of a rise a little bit of a hill or in the case of Tennessee or those of you out in the Rockies up on a big hill that view is worth you ever a million-dollar view yeah that's that's where this thing comes from people pay extra for a view and if you're on or near the water we have a little neighborhood right here just down the street from our office that's been there since I was a kid it's 100 years old you know it's called meadow lake now the lake is no more lake than flat of the moon it's a freakin pond okay it's a little-bitty pond but it's called Lake because this builder built houses around it a bazillion years ago the houses on one side of the street are quote on the lake the houses on the other side of the street are not on the lake you would not believe how much more the ones on this pond I mean Lake bring more than the ones across the street if you've ever bought real lakefront property or beachfront property you know if you're across the street from the house that's on the beach or across the street it's a whole lot cheaper there's a reason on the water or with a view anytime you can sneak into that into your equation you're going to see better appreciation and stand in the street and look at the house and go is this house just really ugly as it got bad bones is it got bad curb appeal don't buy an ugly house it's not gonna get prettier because you move in it I have bought some ugly houses and you know what when you get ready sell them they're still ugly houses they don't go up in value if it's ugly it's just ugly all the way to the bone you know just use some sense when you're doing this stuff let's talk just a little bit more and then we'll take your calls and I can realestate this half hour [Applause] [Music] so we're talking about the largest investment most people ever make your real estate purchase now I've bought all over probably over 2000 pieces of property in my life over 1,500 for sure somewhere in there I'm currently on a bunch of real estate I love real estate as an investment built several homes and grew up in the real estate business got my real estate license when I turned 18 years old three weeks after I turned 18 backin way back in our 78 1978 so um but uh so I've done a bunch of real estate deals and to me it's all just a house I don't really get all torqued out about certain pieces of dirt some people get all twisted up about dirt or a certain piece of property or you know that kind of a thing I mean there's the things that I'm nostalgic about for sure and thinking about but but you know it's just a house and there's one on every corner they're everywhere and there's another one so yeah you just slow down and not get house fever when you're buying and you get all stressed out like right now people are running around they're you know there's like multiple offers coming on a listing because some of these markets are white-hot and people get stupid just slow down it's the largest purchase you're ever going to make for most people as piece of real estate and your spend more money there than you spend anywhere else slow down a good rule of them on any decision making is this the small little dinky decisions that you're making like make them fast and then that leaves you bandwidth emotionally and timeline is everything else to spend time on the large decisions you know people get in line to buy they can't decide whether buy clips gum or or or buy you know dentine and they get all paralysis of the analysis about their breath or something and take some 30 minutes make a decision on gum and then on the way home they impulse a car you know see that's backward you just it's come you're not going to be pretty when you chew it anyway you're just use or shut up get the gum it's just gum you know and then slow down on these big decisions so when you're buying a house do not buy the top of the neighborhood it's just a discussion one of my leaders stopped by my office while ago said I was looking she was looking in a new home a really nice property and just concerned about the neighbor wondered if it about what I thought about it it's great neighborhood I think she'll do great there but my first question is you're not buying the top of the market don't buy the top of the market and that's in that neighborhood owned by the most expensive home in the neighborhood because it's harder to sell people are not looking for that house that price range when they go to that neighborhood they're looking for uh notch or two down and you want to be in that notch or two down you'll get better appreciation and have a better chance of selling it when you do that and remember like we said before the break there's three things that affect property values location location and location and in every city they're those invisible lines ever hear somebody say I grew up across the tracks on the other side of the railroad is that that railroad track wasn't it was a an invisible line and on one side of the railroad was where the poor people were and on the other side is where they weren't that's what they mean by across the tracks right and so that's you know that's what you're looking at and you don't know where those tracks are if it's over the city you don't know I mean you look around sometimes there's some telltale signs the way the neighborhood has kept up or something but I grew up in a neighborhood where it was nice brick homes built in the 60s typical suburban neighborhood and these houses you know I went I was 16 years old they were selling for forty five thousand dollars now they'd sell for 145 probably or 100 and 180 or something like that but but say a hundred say they're selling for $45,000 strangest thing the exact same house same timeframe built actually a little bit older was right across the main drag a mile away the main drag you know main artery of traffic running north and south through our city and on one side of that artery that same house brought five thousand dollars less which is ten percent less it'd be fifty to fifty one thousand on one side rent we 5,000 oh there's 10% swing but but square-footage you know the the the items that you find in the home the quality of construction the age everything was very very similar the only difference was one was on one side of the run room was on the other and it was perceived for whatever reason to be slightly cooler to be on that side of the street and people would pay for it and people pay for it because people paid for it and that's how location Location Location centers into this and again we said be near water when you can and be near a view or with a view or on the water when you can you're always going to see much better returns there and have a much more much more likelihood of selling there you're buying bargains when you're buying a house you look for things that people people can't look past the average buyer can't look past the minor things and minor things are things you can fix easily like carpet or paint color or a gutter hanging off you can put a set of gutters on the house from nothing and I hope I find the gutter hanging off and the weeds are tall oh darn by a lawn mower you know and get a deal on the property you know and buy like a whole truckload of lawn mowers for what you save on this property matter of fact you could hire people to cut the grass for you is what you save on the property right so but you know take things like that I used to go into property I would love seeing something that was very poorly decorated or it was a mess the lady didn't keep house well immense there was a bargain because the typical person can't look past the unmade beds and the Elvis print over the master bedroom bed you know and you remember the old 1970s green shag carpet we actually had rakes that we raked the carpet do y'all remember that yeah I used to look for that gray Keable carpet because that meant it was old right and then it was nasty usually and you could put carpet in a house for nothing compared to getting a bargain on the house now I want to deal I'm talking a substantial discount but these are all aesthetic things paint carpet that kind of even a roof you can put a roof on the house most of the time that's not that killer all right here's one I love in the south it's got termites and people just pass out and flopping the floor and foam at the mouth and everything else it's crazy I'll just tell you there's termites everywhere in the south it's humid and they're everywhere and you need a termite letter and you wanna make sure the house hadn't been torn down by termites but again I've owned almost 2,000 pieces of property the number of times I've seen a house that was completely destroyed by termites that someone just didn't notice the house was falling down you know it's almost zero but I have bought deals on houses because people got emotion it's God turned by the infestation it cost me three grand to fix five boards and I bought the house forty or fifty thousand dollars off because everybody got emotional about a couple of white bugs spray the crap out of them with a termite company and you know replace four boards and put an exterminator in there it's not that big a deal you know it's not yeah you again inspect it make sure it's not falling down around your ears but these things that people get completely torqued out about or where you find your bargains what you don't buy is what we said earlier it's a house it's ugly if it's got bad bones and it's ugly from the street don't buy it it's not going to get prettier and it's not pink color we're talking the way it's built it should about house should not have been on that lot it's poorly designed it's got the wrong columns it's got the wrong front porch the wrong elevation it just looks like crap and you know what it's going to look like crap the whole time you live there when you get ready so it still don't look like crap people are gonna stay on the street go that's the ugly house and they're gonna want a discount a deep discount you thought you got a bargain but it's not you're going to turn and give somebody else a bargain to get rid of it I've owned a couple of those bad news don't do that and the same thing is true with a bad floor plan so these people they do what we call country house they keep adding on rooms and adding on rooms and there's no architecture and so you end up walking through two bedrooms to get to a bathroom and all this crap and it's just got bad walls you know the thing is just pieced together it's like we're bolt this on here we'll bolt this on the air like a bunch of people drink through two cases of beer and then came up with an idea on how they're going to add on to the house you know it's a bad idea so don't get into that use good real estate agents they're worth their money use a home inspector always get an appraisal and always buy title insurance never buy a property without title insurance it's worth every dime there's a couple of pointers for your real estate class for the day right here on the Dave Ramsey show hey guys thanks for watching if you enjoyed this video click the subscribe button to get the latest content and check out these other great clips from the show [Music] [Applause] [Music]

Channel: The Dave Ramsey Show

Views: 1,440,182

Rating: 4.8792443 out of 5

Keywords: Dave Ramsey's Real Estate Principles, dave ramsey real estate principals, ramsey real estate, dave ramsey real estate advice, dave ramsey real estate, real estate dave ramsey, dave ramsey real estate principles, dave ramsey on real estate, dave ramsey real estate investing, dave ramsey investing in real estate, dave ramsey on real estate investing, dave ramsey real, real estate principles, real estate, dave ramsey, debt free scream, money, investing, dave ramsey baby steps

Id: pXIimVQsKm0

Length: 17min 35sec (1055 seconds)

Published: Fri May 19 2017