Real Estate the Ramsey Way - Is Rent-to-Own a Smart Way to Buy a House Faster?

Starting point is 00:00:05 Dave Ramsey here and welcome to another episode of Real Estate, the Ramsey Way, where you'll learn how to make smart home decisions, avoid costly mistakes, and navigate homeownership with confidence. Fina is in Los Angeles. Hi, Fina. How are you? Hi, Dave and Ken. Thanks so much for taking my call.

Starting point is 00:00:27 I have a call. I have a question about rent-to-own homeownership. So my spouse and I are debt-free. and we are currently saving for a down payment on a home. Good. So we've come across some of these rent-to-own offers, and while they really sound like a shortcut to homeownership, they're not.

Starting point is 00:00:46 They're not. They're not. Okay. So is it legit or is it just a... Well, they're legit, but the math doesn't work in your favor. And the legal position doesn't work in your favor. You can pay on it for years and years and years and years and still not ever end up with a house

Starting point is 00:01:01 if the company you're dealing with goes bankrupt. Okay. And if we do a direct, you know, kind of like a private sale. Just do a regular purchase. No, just don't do a rent-own. Rent-own has got the math is set up to where we used to do leases with an option or rent-to-own all the time when I owned a bunch of real estate in my first life. And the number of people that actually followed all the way through and closed on the deal was zero. Okay.

Starting point is 00:01:30 Yeah. Gotcha. So just save up and take a little bit more time, do it the slow way. save up and put your good solid down payment, 15-year fixed-rate mortgage, where the payments no more than a fourth of your take-home pay. And that will get you there. Dave, what's the marketing hook? What's the emotional pull when you've got a rent to buy? Quick and easy. Okay. Real estate is difficult and slow. Right. Buying your first home, particularly because it's complicated, it's something you've never done.

Starting point is 00:02:00 It's intimidating. It's a big number. Yeah. It's all of those things. it's slow and it's complicated. So they flip this one at you. And so you just go, oh, you just slide right in here to start paying. Just you're a renter now. Just keep being a renter and then you get home. Right. But then when you add it up, you paid for the stinking thing three times before you get into it.

Starting point is 00:02:20 And the way to think about it is this, okay? If you need a washer and dryer, if you're broke, save up and buy one on Facebook marketplace that's slightly used. from some old lady in the rich end of town who just wanted to upgrade and bought the brand new one. And this one's four years old or three years old. And you can buy that for, you know, washer and dryer is $2,500. You know, a front load, be $2,500 a piece, that kind of thing, right?

Starting point is 00:02:52 Or, and you can buy that for $500 or $600, okay? Or you can go to the wrong end of town where people get ripped off and do literally rent to own. It says it on the front, on the washer and dryer. and when you add up how long you've rented that before you own it, you will have paid $8,000, you know, for a $4,000 or $5,000 set, you will have paid $8,000 and you could have bought it fused for $500 and owned it.

Starting point is 00:03:23 So this is what you avoid. You just avoid that because basically they're making a bank on you. Hey guys, thanks for listening to Real Estate the Ramsey Way. Now, if you're here, probably thinking about buying or selling a house. It's exciting and one of the biggest financial decisions you'll ever make. But you don't want to do it with an inexperienced agent who will rush you into costly mistakes like the ones some of our callers find themselves in. You need a pro who knows what the flip they're doing and will keep you on track with your financial goals.

Starting point is 00:03:58 That's why we only recommend Ramsey trusted real estate agents. These are vetted, hand-picked pros who actually listen to your needs, guide you through the process, and fight to get you the best deal. To find a Ramsey trusted agent near you, go to Ramsey Solutions.com slash trusted agent. That's Ramsey Solutions.com slash trusted agent. Joe's with us. Joe's in Detroit. Hi, Joe. What's up? Hi, Dave. Hi, hi, guys. I really appreciate your phone call. Sure. How can we help? I have a question about my mortgage. So I own about 50,000. I own about 50. $55,000 on my mortgage right now. Mm-hmm. And I have about $70,000 in a high-yield fund right now.

Starting point is 00:04:45 Cool. Pay it off today. Pay it off right now. You have a paid for a house, homie? That's so fun. See, that's what I'm... Okay, so my financial advisor, so I'm making about 5.4% on my fund right now. And my mortgage...

Starting point is 00:05:03 mortgage interest rate is only like three and a quarter. Hey, you need a new financial advisor. Your financial advisor is a moron. Because he's making 3% on the spread too. He's not making anything. Nobody's making anything. This is 5%. Hey, dude, look at this.

Starting point is 00:05:19 $55,000 times 2% is $1,000. Woo-hoo! Whoopty! You can't buy a biscuit with this guy's advice. Well, yeah. So for the last like four or five months, I've been putting an extra $1,000 on my mortgage. Today. Hey, pay it off.

Starting point is 00:05:43 What are you doing? Listen, if your house was paid for, would you go get a mortgage at 3% to invest it at 5? I hope not. Yeah, I know. Pay it off today. And fire your guy, man. Get you a guy who's got a brain. Yeah, bro.

Starting point is 00:05:58 Pay it off. If you hate it, if you wake up two months from now and you're like, Ramsey was nuts. I hate not owing anybody on my house. I hate my mortgage. I miss my mortgage. You can go down to a local bank and take out a loan. They'll hook you up.

Starting point is 00:06:14 They'll hook you up. 30 years of doing this, I've never had anybody call me and go, Dave Ramsey, I hate you because when I paid off my mortgage, I just, I was miserable. I wanted one so bad. I wanted a mortgage so bad. Your advice is so horrible. I wouldn't got another one. I've never had that one time.

Starting point is 00:06:28 I've had people pissed at me for almost everything, but not that one. Thank you.

Real Estate the Ramsey Way - Is Rent-to-Own a Smart Way to Buy a House Faster?

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