Real Estate the Ramsey Way - Our Plan to Rent Out Part of Our House to Afford It Backfired

Episode Date: September 22, 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 home ownership with confidence. Sylvie is with us in Colorado Springs. Hi, Sylvie. How are you? Hi, I'm doing okay. Thanks for having me on. Sure. What's up? So, recently started reading the Total Money Makeover,

and we're on Baby Step 2, feeling really overwhelmed. and thinking that we've gotten ourselves into a situation because of some unwise decisions. Some background on that. My husband and I were doing okay. The only debt we had was student loans, but we were living in my in-laws basin apartment. We decided we wanted to get a house. We moved close to my family. We got a house that my parents had to co-sign on because we couldn't afford the loan.

And we decided that we could afford the house if we built ourselves a basement apartment and rented it out. And now it's been about a unit. reaching, yeah. Yeah. So you bought a house you can't afford is what we're saying, for sure. I mean, no, no, period. I mean, you got a co-signer and a renter is the only way you pulled it off. Yeah.

This is for sure you can't afford it. They don't even have renters yet. No. Our basement is half finished. It's just framed. My husband's been trying to do it himself. And it's been a lot more work and a lot more time and a lot more cash intensive than we thought it would be. We've got like $10,000 on credit cards just from the basement.

renovation. We've got 14,000 that we owe my mom because she also gave us cash for the down payment. What is the house? What do you owe on the house? We owe 400,000. Okay. And what's your household income? We make a little over 100,000 a year. That's pretty new just as of a few months ago. My husband's been getting some promotions and raises recently. You need to call a Ramsey trusted real estate agent and put the house on the market this week. So the one issue is that I'm worried we can't get more than 400,000 You don't know. You don't think. You've worried about it in the middle of the night.

You have no data. Okay. If a good real estate agent comes out there and tells you you're screwed, then maybe you're screwed. But right now we don't know. Okay. So what did you pay for it? We our deal with whoever we bought it from was that we paid $380 and they gave us $20,000 in concessions. And so our loan is $400,000.

I got that. And so how long ago did you buy it for $380? A year and a half. Okay. Yeah, you may have trouble getting out of it. That's possible. Even if you come out with $15,000 or $20,000 worth of debt to write a check to get out of it and go rent, you're going to be better off than you are right now.

You are completely handcuffed. And I'd stop the madness on this basement. Stop now. Yeah. So we stopped everything that we haven't already bought the supplies for. We literally have like a hole in the side of our house because we created a new entrance and haven't put the door in yet. So we're going to do that because we already.

have bought the door, but we're going to stop everything else that we haven't bought our supplies for. Yeah, you need to call a realtor. Go to ramsysolutions.com and get a Ramsey trusted real estate agent over there this week and start talking to you about what we can list it for and what you've got to get completed on this renovation before we can actually put it on the market. Because right now it's so torn up, nobody's going to look by it unless they've got imagination and they're going to discount you for that.

So you've got to get the freaking door in and some of these other stuff. paint the walls, get the stuff done, get it ready to sell, and let's see if we can't get enough out of it to break even and get free. You are standing neck deep in a bear trap, girl. So we don't have, like, walls downstairs. It's just frames right now. And we have to put a lot of cash into it even to buy dry wall. I understand.

I don't know what you've got to do to get it ready. I just know that you've got to get out of it, and you can't make a bunch of excuses as to why you can't get out of it until you talk to a real high-quality, high-octane real estate agent that can tell you, okay, you can't get rid of this house as long as that crap's down there. You're going to have to go finish that drive-wall. Okay, that's fine. Now we know what we've got to do.

Or I can sell it just fine, and it'll bring $460 right now with that stupid bear studs down there. Okay, then let's put a sign in the yard and get rid of the stupid thing. There's nothing about this that says blessing. It all says curse. Okay. So if we can't sell it for more than $400,000, then you're going to have to borrow the money. You're going to borrow the money, the $10,000 because you sold it for $390 or whatever it ends up being. But you're going to have to start working a plan aggressively to where as soon as you possibly can that you're out of this house.

And no excuses to keep it. It was a bad deal. You stepped into a mess. You bought something you could not afford. And now you've got co-signers and borrowed money on credit cards and mother-in-laws and renters that aren't even there yet. Oh, my God, what a mess. And also you could do something that you just couldn't afford to do. You guys just made up a mythical plan that nobody could execute.

You know, I'm going to do all these renovations. When? Because I'm at work. Yeah, okay, there's that. You know, and here we go. You're going to be sitting here five years from now, and this house is still going to be hanging around your neck like a millstone. You've got to get rid of this thing as fast as you can with as little loss as possible. If you get out of this and put $5,000 in your pocket, you need to run out of the attorney's office after the closing and stand in the parking lot and do a dance.

That's what you need to do and just go, I'm free! Yeah, that's not debt-free. I'm just house-free. Folks? Buying a home is sometimes not a blessing. Take note. 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 ramsysolutions.com slash trusted agent. John is with us. John is in Raleigh, North Carolina. John, how are you? Good. How are you doing? Better than I deserve. What's up? Great. I'm a college football coach. I've been coaching for about 16 years. My wife and I have been on the plan since 2018.

Fast forward seven years and we're in Baby Step 7, also Baby Step Millionaire. So we are fully on board. Way to go. Thank you. Thank you. Yep. We're fully on board. My question today centers around whether we should buy. a home. I called you about three years ago, and we were renters at that point. And really, my worry was, hey, we move a lot as coaches. Should we buy a house or should we just stay renters?

You told us to buy. You know, we're sitting here three and a half years later, and we paid that starter home off. But now, you know, we've got two little girls. Mama wants a new house, and she wants a bigger house. And really, to keep it simple, my worry is that, you know, we are going into year four here at this. If we do move, my worry is that we move, and then we've got to move, you know, again really quickly. And her worry is that if we don't move, we look up and we're here for 10 years, and we're still same three-bedroom town home.

So that's kind of the question is a philosophical one on what you think. Well, you know, the current house is worth what? Four-60, 470. And the upgrade house is worth what? We're looking at right around a million. Okay. Have you got the 600? No, sir.

So you're going to have to go back into debt? Yes, sir, in that case. Okay. How much you guys have in savings, John? Nothing. Everything we've got is, you know, other than our, you know, emergency fund, everything we've got is in the home equity and, you know, fire is in retirement.

Okay, okay. How much do you make a year? together right around 500 okay so really in a short period of time you've done this with this fabulous income yes sir okay all right no i would not move up in house right now you don't have any money and um when you can save up and put a bunch of at least half of the move up in cash i would do it and take a small mortgage maybe um that would fit, but I do not want 100% of your net worth tied up in your house. Gotcha.

And currently we're right around half and half, just like, you know, the studies always show. I'm sorry. Where's the other half? We're 500 or 450, 460 in house, and we're in 500 or so in retirement. Oh, in retirement accounts. Okay. Yeah. Yes, sir.

Then it's not 100%. Okay. That's not as consumed then. But, I mean, you have absolutely no cash to put towards this transaction is what you're telling me. No, and this assuming would have, you know, our home equity plus cash to throw towards it. I mean, obviously, let's say, let's say you're going to move from 400 to 800 and you put

200 cash with it and took a 200 mortgage. I'm probably up for that one. Gotcha. But right now, you're just financing 100% of a want upgrade. And it's not going to do with the stability. It's just got to do with the, with the math ratio. That makes sense. But philosophically, you're saying the stability doesn't matter to you.

No, because in Raleigh, North Carolina, you can sell an $800,000 house. Okay. It might not be able to move an $8 million in Raleigh real quick. But $800,000, that's prime market right there. You can sell that thing in 30 seconds if you did change cities. So you can turn this over. But, yeah, I think you just save for another year, like maniacs, with your great. income. Yeah, if you did worst case scenario and the fear happens, oh my gosh, we get,

you know, we have to move. You sell it. Well, you sell it. So you don't have two mortgages until it sells, right? I mean, like, there's still, there's still ways to be able to do it, especially with that, yeah, with y'all's income. So. And an $800,000 house will sell if that scenario goes down. But I know, I don't want to finance 100% of an upgrade. Her, her desire with your household income is reasonable. But, you know, you know, you know, you know, you know, you know, you know, You guys just haven't executed on your plan long enough yet to be in a position to do that desire. Yeah, but in the next, you know, year or two, you guys could be there. You probably save a couple hundred a year.

Yeah, for sure, for sure. You know, if you watch what you're doing, you ought to be able to if you're making 500. Mm-hmm. And so, yeah, and so let's talk about that. Let's talk about not doing big, crazy, wild out-of-control vacations that do small inexpensive ones. Let's talk about other expenditures in the household that are, that are, that are, you know, some of them are reasonable and some of them are not. And let's talk about, let's talk about we want a house bad enough to not do some of those things

and limit the household budget. And not on beans and rice, but just being very intentional and saying, you've got this great income. I mean, God forbid you live like you're making 200. You bank 300. Pretty good place.