Real Estate the Ramsey Way - My Wife Says Raising Rent Is Mean—Is She Right?

Episode Date: March 31, 2025

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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. All right, let's go to Scranton PA. Whenever I hear Scranton, I think of Joe Biden. Oh, yeah. I think of the office. Michael Scott. I think of Michael Scott. All right, let's go to Joe in Scranton, PA. What's going on, Joe? Hi, how are you? Doing good. Joe from Scranton. Brandy. Look at that. Yeah. And Biden's not from Scranton. He's from Delaware.

I know, but he's always talking about the good people of Scranton. Was his dad from there? Somebody was from there. Yeah, his parents were. Okay. There are good people in Scranton, Joe, because we're talking to you. What's going on? Yes, there are.

I have a question about me and my wife discussing raising the rent for our tenant next door. We lived here 20 years before we bought the house and the owner then, didn't have a mortgage, so our rent was really low. And he didn't change it for 20 years. He did raise it when he was thinking about selling the house. And so we bought the house two years ago. Her rent was, I believe, 460 or 465. We raised it when we bought the house to 600.

So it's been, and then about a year, a year and a half later, we raised it, it's at $750 right now. I want to raise it up to $9.50. just because I believe it should be offsetting our mortgage more. Our mortgage was 1350 when we first got it, and it's gone up to like 1480, something to do with something with the ESCR. I don't really understand it all that much. And I know someone else bought a mortgage since we had the first mortgage,

I guess someone else bought it and blah, blah, blah, and, you know, it's a different mortgage company now. But it's up to $1,500 and your rent isn't even covering your mortgage? Not even half of our mortgage. Why did you guys buy the house? That's exactly why I asked my wife. She loves the house because it's got a huge yard. The grandkids come over and play in the summer and all that stuff, blah, blah, blah.

But it's a house you all don't live in. So is the tenant just... No, we do live in it. It's a duplex. We live in the tree bedroom side and we run out the two-bedroom side. What's the property worth? Like, what did you buy it for? 167.

$167,000? Yes. And what's it worth today? We did. We renovated the kitchen, which was $34,000. The bathroom was $12,000. I don't know what that brings it up. But from when I was told, my brother-in-law, I just sold his house yesterday. He said he got way more than what he paid for it. He said, right now here, the market is really great for selling your house. But she doesn't want to sell the house. Have you looked to see, like, what are comps for rentals like that in the area? Yeah. If you can get a two-bedroom for $1,100, you are lucky. They go from 1,100 to 1,350 in our area, and that's within a five-mile radius of our home.

You cannot find an apartment for... Sure. These apartments are like... So my question is, I mean, on your end, as the investor, you've made a terrible investor in Joe. Exactly. I mean, you're literally losing money. I mean, it just doesn't... That makes no sense.

Yeah, yeah. And then, on top of that, what market value is asking for your investment, you're you're charging half of that and I understand why probably from an emotional level of the sweet lady that's lived here for 20 years and and I get that but you guys don't have you don't have the financial means to be a blessing to her because you you have to pay a mortgage so that's the part of debt you know and again not harping on you Joe but um you know that you yeah you're in a system now and it'd be unwise for you and your family to be basically paying a mortgage on, like, you don't even mean, like, paying part of her mortgage. That's right. Right. Exactly. That's what I feel like we're paying half her rent.

Yeah. I mean, that's what you're essentially doing. Like, we're Christian. My wife is very heavy in her faith. Like, I mean, she speaks at church and everything else. I mean, and she's like looking at her, like her mom and a friend. And she can't separate the business part of it. where you've got to raise this rent up.

She wants to pay the house off in five years. You can't do it with the rent we're getting. Who manages, who's the main driver of the landlord relationship? Is it you? No, apparently, no. It's my wife. Oh, okay. Because I was going to say this might be a time where she, you know, if she feels like

this is my friend, this is how I see this person. And maybe the separation is you're the one who's kind of like taking over that role. I did do it last time. the one that did it last time, but she says, oh, I just feel like it's, we're going up to night, she did, she agreed yesterday to go up to 950, okay, but that's still, well, just, there's no moral, there's no moral, um, issue here. Like, there's nothing, I mean, you mentioned the Christianity thing. I'm like, there's nothing, they're not doing anything wrong. There's nothing that, right. It's not, it's not, it's unbiblical to charge rent for what rent is costing. We're charged with something's worth.

Yeah. Yeah. Joe, I feel like you and your wife are completely on separate pages here. We are. From buying the house in the first place to now. I didn't want to buy it. I didn't want to buy it. So why did y'all buy it? She wanted it.

She wanted it for the grandkids, for the yard. Yeah, but you're still complicit in that. Like, you have to also, at this point, once somebody says, I want something, you say, I don't want it. But once you go along with it, now you're with it. Right. You know what I am with it. But I want her to turn it over to me and let me handle that part.

Yeah. You know what I mean? Yeah, I do. And I think probably it's for the best because some people, like, it takes a level of like, to be able to stand your ground and business matters. Like, I remember when you went to just 600, she was like, oh, I'm taking a back. I can't believe you did that. And like, I'm like, are you serious?

Okay, are you guys? Yeah. Okay. Everything else, Joe, like from a financial standpoint, are you guys on the same page about what you're wanting out of life, like of being debt-free and all of that? Okay. So you and her. She took the B. Ramsey Financial Peace thing at church and everything.

This is why it boggles my mind. Yeah. So you guys together, Joe, the neighbor is a side issue. It's really you guys being on separate pages. So you all tonight, I would run the numbers and just say, okay, what is our goal? Our goal is to be debt free in five years or whatever, you know, you guys said or she said. She wants to have the house paid off for five years. If we keep it for 30 years, that's true.

$146,000. I hear you. I hear you, Joe. So listen, if that, if that, what has to be true for this to come to fruition? Well, that means we have to pay X amount every single year. That breaks out to X amount per month. So we either are going to have to find that from our income and we're both going to have to work extra. We're going to have to raise or we raise a rent over here to meet market value. Again, you're not, you're not, you're not being corrupt to this neighbor and, you know, taking advantage of her or, you know, that's not the case. You're running comp. So, and the neighbor's still there. So that's the big thing. You've raised rent a couple of times and she's still there. She's had six kids that are grown and her son actually pays the rent. He sends a check

to our account. Yeah. So, yeah. But again, I want the neighbor to be the second. I don't want the neighbor to be discussed. I want the numbers to be discussed. What has to be true for us together with our goal to pay this off in five years or whatever the goal is that you guys decide? Here's our goal. What has to be true? Then the numbers are going to lay out the element and either the goal's going to change or how we get to that goal is going to change by raising rent and other and other factors. But you guys joke together, you two are a team. Out there's the problem. That out there is the problem. How are we as a team going to solve this? So remember, you're on the same team. You sound like you're fighting at each other. Put the problem out there. It's you two together against the problem.

Let's go to Gino. He's in Detroit, Michigan. Gino, what's going on? Hi, how are you guys? We're doing great. How can we help? Thanks for taking my call. Yeah. So I'm on Baby Step 6, getting ready to pay off the house.

I have about $55,000 left. Awesome. And the plan was to pay it off last December, December of 24. And we found out in August of 24 that my wife has cancer. Oh, my gosh. I'm sorry. So I paused on. trying to hit that goal to keep some liquid money available for medical bills.

For sure. And we've kind of, she's done through the chemo and everything and she's had her surgeries and, you know, the prognosis is good. You know, time to move forward. I'm wondering if you think it's wise to continue on with going to pay off the house. I was planning on trying to pay it off this August. But just trying to look for some objective third party opinions. Yeah. Do you guys still have your emergency fund in place?

Yeah. And how much is that? I have about $100,000 in savings. Okay, great. And the doctors, I'm so, number one, I mean, what an incredible story. I'm so thankful that it sounds like it's good, right? Pregnosis, yeah. Are you guys in a place of just healing now, or is there going to be ongoing treatments?

What is this? So, yeah, there's going to be some ongoing treatments for the next year. year. I believe as long as nothing happens with my job, my insurance, I have enough in my HSA to cover all the insurance expenses. Okay. So, but yeah, the doctors are saying, you know, she's in a good spot, but, you know, she's got some radiation, some other things going on for next year. Okay. But those will be covered by insurance is what you're planning on right now. Correct. Okay. So, I mean, yeah, G. I think I would start chipping away. I don't think you may not have to be as aggressive of like hardcore but i think at this point because of your savings because of the insurance

and because of where she's at in her story with cancer and being kind of on that other side with still some treatments to go um yeah i i would probably press play again yeah and then if anything pops up though gino like something else comes back or whatever i would pause it all again like and and make sure she's taken care of right so like all your focus would would go back to her if something changes. But as of now, from what you're telling me, I think I would start adding in some extra mortgage payments and putting extra towards the house. I definitely would. I mean, the prognosis sounds positive. You've got 100,000 saved, which sounds like more than probably six months of expenses. And I could understand wanting that, especially in the situation that you're in. So I agree

wholeheartedly. How fast do you think, you guys, if you weren't using this 100,000 for the house, and you were just starting to put some extra towards it, how fast do you think you could pay it off? I could pay it off today right now. I mean, I could do it right now. Oh. I was just, yeah, I mean, like I said, my plan was to pay it off last December,

but I've just... Using 50 of that $100,000, you were telling us? Yeah. Okay. Okay. What's your income? It depends because of overtime, but roughly 100 to 115.

Okay. How much is the mortgage? payment each month? 900. Okay. So yeah, you'll get $1,000 back basically.

Yeah, in no time. In the budget. Would you do it? I would do it. I think that any measure of extra peace would be welcomed at this stage in life. And so I think I would do it. You've got a wonderful income.

You would still have $50,000, which is a lot of money sitting there in cash. And now you've got $900 or a little less minus tax interest. And you're a... And you said a lot of... of it is some of this money's in the HSA or extra money in the HSA that you would use? I've got enough in the HSA to cover all of our premiums for the year.

Okay, good. Gotcha. Okay. But it was just like, do I keep some liquid money for just in case or do I, like I said, I've got some money locked up in CDs until August. That's why I said August. Okay. So how much is it those?

Yeah, when they mature, what would that be? That would be 40 in those. Okay. In August. Yeah, I would pay it off, you know. Okay. That's kind of what I thought, but I just wanted like an objective third party. Oh, for sure.

Yeah. I, yeah, my hesitation, of course, if this was any other call with any other, you know, just person calling, it'd be like, oh, yeah, today. Hit that mortgage, you know, payment button and just pay it all. But the hesitation comes with the sickness and cancer. It's just scary. I mean, it really does kind of freeze you. And again, all signs so far are positive from what you've told us. So that's the confidence moving forward.

But so my pause and my hesitation was just like, okay, yeah, it just, money just gives you a lot of options. And that's why we are such a, you know, big on not having debt and saving and all of it because it does turn a situation like what you guys walk through as horrible and horrible as it is. When you're in a good financial spot, that level of the stress, the financial stress isn't there. That's right. Because you've put yourself in a great position.

So whenever I hear like a lot of money is sitting there that feels like safety, and when there's something that's like a risk, like in a health situation like that, you know, it's just it is scary. Yes, the unknown. But I think final answer, Gino, as we're kind of going around this, is yeah, I would pay it off.

Yeah. And especially when those CDs mature in August, like I would cash those out for sure. And put some of this, too, Gino, really find like an emergency fund that's realistic and I would do six months for you guys. And then if there is extra out of that funds, out of that 90,000 that you'll have in August,

maybe open up like an S&P index fund or a vanguard or something. I put a little bit just an invest some because, because again, you know, want it working for you. That's right. That's right. You don't want a ton of it just sitting in a high yield, enough that you can get to if you need it. And, you know, those other investments, it's not retirement. So if you needed it, you could pull it out of the market.

But at least it's sitting there doing something more than just a high yield. I love you as a HSA too. I think that for me was also a kind of a tipping point on feeling really good about it. I don't think it would have been a bad decision either way. but really it's you guys feeling good about it and it not causing more stress. Yeah, and there's extra safety with that HSA paying the preamance.

That's great. Very, very good. Thanks for the question. I pray she continues to heal. So I'm glad I'm so thankful. So thankful.