Real Estate the Ramsey Way - My Siblings Want Me to Take Out a $1 Million Real Estate Loan

Episode Date: March 9, 2026

Your home should be a blessing, not a burden—but unfortunately, some people learn that the hard way. Get the answers you need with Real Estate The Ramsey Way, and learn what to avoid and how to do real estate the right way.   Next steps: 🏠Have questions about how real estate can help you reach your financial goals? Check out our ⁠⁠Real Estate Home Base⁠⁠ for free tools and resources to guide your next steps.   🏠And if you’re ready to buy or sell your home, ⁠⁠connect with a RamseyTrusted® real estate agent⁠⁠. They’re experts who’ll help you confidently navigate homeownership the way we teach.   Listen to more from Ramsey Network 🎙️ ⁠⁠The Ramsey Show⁠⁠  🧠 ⁠⁠The Dr. John Delony Show⁠⁠ 🍸 ⁠⁠Smart Money Happy Hour⁠⁠ 💡 ⁠⁠The Rachel Cruze Show⁠⁠ 💰 ⁠⁠George Kamel⁠⁠ 🪑 ⁠⁠Front Row Seat with Ken Coleman⁠⁠ 📈 ⁠⁠EntreLeadership⁠⁠ 💸 ⁠⁠The Ramsey Show Highlights⁠⁠   Learn more about your ad choices. ⁠⁠  ⁠Ramsey Solutions Privacy Policy⁠

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 home ownership with confidence. Laura's joining us now in Hartford, Connecticut. Laura, how can we help today? All righty. I've got a presidential real estate property that my mother owns in Brooklyn, New York. It's currently in a trust.

And when she passes, it will be inherited by myself and my three siblings. Hey, Laura. Laura, can we see if we can have you adjust your phone so we can understand you a little bit better? Sure, sure. Is that better? Oh, so much. Thank you. Great.

Great. So the property is worth about $2 million. It's a residential property. It's got two rental units now, and it's being rented. I am debt-free and ready to retire in 2026. my husband's already retired. I've got two siblings that when we inherit this property would like to knock it down and develop it into a four apartment building,

which I'm guessing they'd run about $4 million, which means each of us would be about a million dollars in debt. Oh, boy. And I've got two other siblings that just want to sell it and divide the profits by four. How do I convince the two that want to sell it? I mean, sorry, that want to invest it, that that's a terrible idea. If I heard you correctly, I'm just asking, is it three to two? You plus two against the other two?

It's myself and another who want to sell and two others that want to. Oh, two on two. So we're split down the middle. Right. And they either want to develop it or just keep it and divide the rental income amongst the four of us, which is nothing. And the assumption is that everybody should just be willing to go into a million dollars of debt to do this. Exactly. Well, that's absurd.

Or become landlords, right? Because they've given you two options. Develop it or we just rent it. Right. And the rental income, it's probably be $1,000 each a month, which in my mind is worthless. Well, if the two siblings were so willy-nilly to say, hey, just fork over a million then why don't you tell them to fork over the money to buy you out? They don't have it and I don't have it.

No, no. There you go. No, but no, I think, Jade, you're actually on to something. So if it were me, I would say two things, maybe three. We'll count them in a second. Here's what I would do. Number one, I would make the case that what you're asking me to do is to go into debt and I don't do debt.

So it's off the table. You've got to make it super clear to them. where they're like, oh, she's like, doesn't appear to be movable on this. It's just I'm not doing it this stage of my life. Hubs is retired. I'm just not going to go into debt for scenario one. Secondly, I'm going to get out of your way quick. Second, I would say I'm not interested in getting $1,000 a month.

That's like peanuts for me at the stage of my life. Right. Okay. And then three, I'll tell you what I would do. If you want to take out a loan, which their option number one is to take a, out debt to knock this down and they can take out money and pay you your share of the $2 million. Right, which is less than the debt that they would take to develop it. Because if they want to take out debt, they're going to do it anyway.

And that's not, you're not on the hook. So you go, give me my money. Let me get out of the way. Here's what I don't want to do. I don't want my value system to create conflict. So I've told you what I'm not going to do. Let me tell you what I will do. Here's my cut of the $2 million.

And so you, part of your home. whole debt structure. You give me my cut and guess what I'm going to do? I'm going to walk into the sunset with my husband and we're going to be in Cancun and we'll talk to you at Thanksgiving. That's what I would do. Make the math make sense for them because and it's the end of the day. It won't. It's the end of the day. So correct me if I'm wrong, Ken, but I see two million dollars and I see four people. So each of you has got 500,000 in this. That's right. So are you telling me that they would rather fork over one million a piece instead of 500,000 a piece? Or do nothing and divide the rent and be landlords for the rest of our lives, which is a terrible idea.

It's horrible. But now, let me ask you this. They can't do any of this without you, correct? Does it take a majority rule? Or, I mean, excuse me, is it a unanimous decision or how's this going to go down? I believe it has to be all four. I need to agree. It does.

So, Laura, my, did you ever see the movie Braveheart? No, but I think I need to. You've got to go watch Braveheart tonight. There's the penultimate scene, okay? And in this history, I'm not going to tell you the whole story, but there's a scene where the English army is, they're on horseback, and they have a huge army, and they're coming after the Scots. And the Scots have got axes, and, you know, it's just, it's just little rabble-rouser group led by Mel Gibson. And Mel's got a plan, okay? And he knows that the British are going to be overconfident, and they're coming at him, okay?

long story short he's got these long poles they've cut trees in there waiting for these horses to get close enough to they can lift up these sharp things and and here's what he says to the guys the horses are thundering down on them and they're freaking out and he goes hold and they get closer and he goes hold and so my message to you is laura it's a unanimous decision hold the line i gave you what i would say option one nope option two nope Option three is, give me my 500 grand and you all go bananas. I'm not going to hold up your vision at all. I think it's the only thing they're going to want to hear and I think that's the only

thing they should hear from you. So no to the debt and developing it. No to being a rental and yes to give me my 500K. Hold, hold, hold. Doesn't have to be ugly. Just, guys, you can do this. I'm not stopping you. But give me my money.

It takes 500K. You're willing to go into a million. Give me 500K. Thank you. I'm super passionate about that. I think, Laura, that's the play. Jade? I agree.

I agree. Yeah. You got all the cards. They can't do it without you. So make it super simple. And by the way, here's the messaging. I want you guys to be able to do this. I would start with, hey, you know the plan?

I thought through it. I want you all to be able to do it. Knock it down. rebuild it. It's going to be fabulous. But do it without me. One caveat. I don't have the stomach for it.

My husband and I got a different plan for our life. Want you to be able to do it. And so here's the easy thing. Buy me out. And I'm cheering you on. I would frame it that way. Listen, I've already said it. And I agree with you.

So Lord, don't let any family pressure or any of that change your mind because you're going to end up resenting them. Yeah, I agree. I already do. I was going to say somebody's the ringleader in all this. and it's not you. Who's the ringleader? My older brother who thinks this was a family. It's a home that our great grand parents were born in and it needs to stay in the family. Got it, got it, got it.

Oh, by the way, it is. It's staying in the family. You're not holding any of that up. Hey, hey, brother, it's staying in the family. It's just going to take $500,000 over here in my bank account, and it's going to be super simple. Hey, guys, thanks for listening to Real Estate the Ramsey Way. Now, if you're here, you're 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. 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. Amelia is in South Carolina. Hi, Amelia. How are you?

Hi, Dave. I'm well. How are you? Better than I deserve. What's up? Great. Okay, well, I'm calling. because my husband is a physician and his practice is a private practice and they are about to merge tomorrow with some other groups and we just figured out that his 401K from his old company or you know the company he's with today that's about to become a new company tomorrow we don't have to put that in to the new company's 401k I guess we can instead make it a self-directed IRA. Or you could just roll it to an individual IRA. Yeah. Yeah. So I think that that may open

up lots of different options and just wondered if you had any advice. Like could we consider putting some of it into real estate investments or something like that? Okay. All right, good. Well, the first thing is, yes, I would roll it to something. I would not leave it with the new company 401k. This is an opportunity to move it to something where you have a lot more control and a lot more options. At a minimum, you sit down with a SmartVestor Pro and you pick a series of good mutual funds on your own and you manage, you roll it to an IRA. There's zero taxes on that and you manage that from this point forward at a minimum. Okay. If you chose to do a self-directed, you could roll some or all of it that way. How much is in it? It's our biggest of all of our

retirement accounts. It's $1.155 million. Okay. Do you own other? investment real estate now? No. Okay. How old are you guys? 52. Okay. All right. So here's the, yes, you could roll half of it or some of it or all of it. Let's say you moved a half a million over and you bought a couple of $250,000 rental houses in South Carolina. And you put the other half a million or other $600,000 in a regular IRA like I was talking about in mutual funds. Okay. In the self-directed then, you can buy real estate, as you mentioned, and you could do those two $250,000 houses in there if you wanted to. Okay. The downside is two things.

One, people screw up and forget that you can't touch any of the money from those rental houses. Okay? Just like you can't cash out your mutual funds in your IRA until your 59.5, you're going to get penalized. Okay. So you can't pull the rent money out. use it. 100% has to be operated like it's someone else's company and you can't embezzle or commingle funds in any way. It has to be a standalone operation and 100% of the repairs are done from the IRA, the roof, the heat and air that goes out on the rental, the carpet that has to be

replaced on the rental and 100% of the income created in the rental has to stay in the IRA. You understand? Okay. Yep, that makes sense. Because if you pull one dime out, number one, they may toss you out of the whole thing, but number two, you're going to get penalized on that dime and taxed on that dime when you pull it out. So don't commingle it. And people often mismanage these things. So you've got to just be real airtight with that and promise, promise, promise, and stick with it. The second thing is you've never owned any real estate. not as an investment. Yeah, and you're getting ready to be a landlord and buckle up, Buttercup.

This is a new experience. Okay. So when she pulls the rents, those hypothetical rentals that she purchases, she pulls the rents, that money has to immediately go back into the IRA. You're not pulling it. You're running it as a separate company. It's got its own checking account. You're running it as a company over here like it's not you, like you're doing it for

somebody else. So it all stays encapsulated within the IRA. So there's no liquid money for repairs. No. That's interesting. Yeah, well, the rents would create because they're stuck in there. You can't pull the rents out. Wow.

Okay. So the rents begin to build up cash. Right. Over time, hopefully you're cash flowing. I mean, you're buying two paid for rental properties, right? So hopefully you're cash flowing. You're making some money. So those $2,500 rents are piling up.

And you've got to pay property taxes out of that, pay insurance out of that. You've got to do your repairs out of that. And what's left in there is profit. 100% of that profit stays in there. That's what we're doing. So, yeah, you just got to be ready because here's the thing. If you get in these things and this is a lot of trouble, you'll make more on those two rentals. If you buy them well and manage them well, then you will on mutual funds.

But you're also going to invest a bunch of time in it. Okay. That makes sense. Because people who say real estate's passive investing make me laugh. There's nothing passive about it. Okay. It's real estate. The beauty.

of it is it requires some more effort with mutual funds you can set it and forget it look at it once a year twice a year and not worry about it you know i look at my real estate stuff every month i get reports on it every single month and that's just me looking at the people that are managing it for me that work for me okay and i look at my mutual funds once a year uh-huh that's a i mean so i i burn a lot more brain calories on my real estate than I do on my other, but I make more money on it. But I love real estate. I'm a real estate guy. So it makes a lot of sense for me.

I would not put 100% of it in real estate. I would do something like I outlined maybe 50%. Okay. But do you think with the real estate market where it is right now that this is a good time to consider something like that? If you get a bargain on a piece of real estate, it's always a good time. Okay. Don't pay retail.

Good Lord. No. No. We want to get a deal. And so we're going to get a deal. We're going to buy a $300,000 house for $250 because we're writing a check and we're closing Friday. You want to sell your house. It's sold.

I'm getting a bargain. Okay. And we're looking for a deal. And deals are hard to find, but they're worth it. It's $50,000 you made right then as soon as you buy it, $50,000 under market. And that's what I'm looking for if I'm buying. I don't buy houses anymore. But if I was buying houses right now, that's what I'd be doing.

I'll be looking for a bargain. Are they everywhere on every corner? No, they never have been. There's no market that they're everywhere, but you can find them, and there's somebody out there needs to sell a house right now, and there stands Amelia with cash. And yeah, you can do it. And here's the other thing.

If you get into it and you hate it, you can sell them inside the self-directed IRA and roll the self-directed into mutual funds into a regular IRA. You can put the car in reverse. back out of this and maybe not even lose money but if you just get into it and go this is a pain in the butt i don't want to fool with this and i want to like to be traveling i don't be dealing with renters right and so that's okay that that's fine so you can put the car in reverse and get out of this so yeah if i were you i'd try it since you got the itch but but i wouldn't try it with more than

half and i wouldn't do it and of course you're going to pay cash but um i actually knew a guy that did this because he was a guy that did flips and he took his million and made it made it into three doing flips. Wow. All inside the IRA, though. Yeah. He couldn't eat out of it. Well, I was going to say it's kind of a fail safe.

He had to have a job over here to eat. Yeah. It's a fail safe in that way. You're not going to spend your earnings. It keeps your hands off of it unless you screw up the whole thing, yeah.