Real Estate the Ramsey Way - Step-By-Step Guide To Building Your First Home

Episode Date: August 3, 2026

Should you build or buy your first home? Dave breaks down the home-building process from start to finish, sharing what first-time buyers need to know to avoid costly mistakes and make one of the biggest financial decisions of their lives. Next steps: ·   🏠 Not sure what to do next when buying or selling your home? 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. Explore more from Ramsey Network: 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💰 George Kamel 📈 EntreLeadership   Ramsey Solutions Privacy Policy

My husband and I, I'm 26 and he's 23. We are curious as to, like we just kind of want your opinion or your thoughts on whether it's better to, like, buy or build our first home. How long you've been married? Three years. What price range are you looking at? See, that's up in the air right now, too. There are three options we were kind of thinking of, and it was either to just buy a home and start building an equity, a small home, like a three-bed, two-bath kind of thing, because he works from home, so he'd need an office. Or we could build like a small slab house while we cash flow are like Barn Dominion build that we would prefer to do, or we could get a construction loan.

And those are the kind of those three options we were looking into. Last year we made $86,000. He's been doubling his income every year in his business since he started two years ago. He made 26 the first year and then 48 the second year. Good. Good for you guys. Okay. We're on track for about 60.

It's really, you're in a good place. And I can just give you the pluses and minuses and you can decide, all right? Which way you want to go? The positives of just buying a three-bedroom two-bath. and getting started and then just start piling up some cash and doing the barn dominium as stage to sell that house when you get ready to do the other one. But just get started in home ownership. It's simple.

It's clean. It's not going to extract a lot of bandwidth from your life. Okay. Did you say he started a business? Yes. Okay. then I'm probably going to go that way if it's me because I don't want him taking his eyes off this business that's prospering because he's over screwing around building a barn to minium all the time. Yeah.

And if you tell you, you can't do two things at once and be any good at them, okay? So I want him to continue to grow this business. It's the goose, man. It's laying the golden eggs. Let's just kick that thing into high gear for the next three or four years. And then then you can write a check for a good contractor and bring. in the Barnumianian thing. Now, if you're going to build, the downside is it is a great strain on most marriages when you build a home. You're going to fight. Okay? Just count on it because you're

going to have disagreements about this. And for some reason, we decide that we're going to kill each other over the color of the kitchen. I don't know why, but we do. It's like we die on the most unusual of hills, right? And so you need to back up from that and commit to, A, we're going to be nice to each other through this process. We're both going to have a vote. You don't get to scream, I deserve this, either one of you, all that crap, okay? So then when you do that, then the next thing you need to do is there's three things that drive a build. Otherwise, you're going to drive yourself crazy, and you're going to have scope creep, and then it's going to end up being a financial nightmare.

One is you lay out a detailed blueprint of exactly what we're going to build. And you go over it and over it and over it and over it and you tear it up and you do it again. And you, it is very cheap to build a house or a barn dominium on paper. And it's very cheap to change it on paper. But if you make it up as you go, it's super expensive. 73,000 change orders, right? No. Yeah.

So that's a piece of paper number one. that will lead you to a piece of paper number two, which is a detailed budget of exactly what's going to be the dishwasher, exactly what are we going to spend on lighting, exactly what is the bid for the concrete, who's putting up the structure and what's that going to cost? What's the roof and what's the bid on that? Get hard bids. And you build a budget that you need to hit that budget. You know, there's going to be a couple things change, but the last house I built, I hit

within 2% because we made the budget in great detail before we broke ground. Okay, in detail. And we're in agreement on that, Sharon and me. This is what we're going to spend. The decorator comes in with the neat idea. Tuffies. Okay. Tuffies. This is what the budget is. We decided ahead of time. Decorator, you're going to operate within the budget. You don't get to set the budget. Contractor, you're going to operate within the budget. You don't get to set the budget. So these are the pieces of paper we managed to. Then the third piece is the schedule. And how long is it going to take to build this?

And before we broke ground in June, we knew that February 14th was the day, Valentine's Day, we were going to start installing trim. We knew when the plumbing ruff end was going to be done. We knew when the roof was going on to the day. It was all scheduled out throughout the next 14 months. And we built, we ran a 14-month schedule. and finished it in 12. We came in within 2% of budget

and we finished with early. And the builder loved us because we actually did what we said we were going to do. We didn't drive him crazy. There was very little drama. All the drama happened on the paper before we broke ground. So budget, blueprint, schedule, and then freaking stick to them.

Otherwise, this thing will cost you twice as much as it should and you're going to go broke doing it. But I recommend that be your second project, not your first. Your first one should be you guys go buy a house and grow a business. Dave, I think you just broke her brain a little bit. I mean, Barnedominiums look so cool. Not at all. It all. It makes sense. So cool when you're scrolling on Instagram.

And then when somebody pulls apart all the little pieces, it's like, oh, okay. Okay. Yeah. A lot of glamour. This is me. I can be, sometimes my wife says I'm way too risky on some things and too risk-averse on others. I would want to see that that business have a couple more years of oomph to it before I leveraged on a brand new build because I would hate for you all to have planned

because the temptation is going to be it doubles every year and if you're on track to hit 160 this year because you hit 80 last year, it's going to be really, it would take an act of God's worth of discipline to say we're not going to go ahead and pretend you're going to make, you know, 320 next year.

Yeah. Right. I would love to you all have... You'll build a much better place if you wait two years. Yeah. You can have the place of your dreams in a few years,

especially if you got cash. Yeah. And you put yourself in a cash position. Meanwhile, you're sitting in a home that anyone else will be happy with. Three twos are always pretty easy to move. Yeah,

it's a great property. Yeah. It's like the ultimate American property. That's it. You know? So, and Barnumianms, by the way, are not. Correct.

Yeah. So there are. like what's called a white elephant. No one wants them but the guy that built them. That's it. Selling a used boat? Sure, that you carved out in your basement. Yeah, that's the one.

Yeah. Where did, of those three things you identified, where do most people get sideways when it comes to building their own thing? All three. All three. They change, they don't, they don't spend enough time on the blueprint. and so they build by change order, which doubles your cost and doubles the length of time that you're building, which also doubles your cost, right?

Yeah. So you get scope creep on the money is the problem with all three. And so you don't stick to the budget because your budget's not realistic because you didn't lay it all out and you didn't do it. But I can hand the electrician, the blueprint, a year in advance, and he can give me a bit. Yeah. I can hand the roof or a blueprint a year in advance. He can give me a bid.

Now, he may price adjust it a little bit later, but I'm going to. be real close. My mother-in-law's got a house that recently went under contract to sell for 335, and then a couple weeks later it appraised for 360. They haven't closed on the house, and they won't for another two or three weeks. Is there any recourse to close that gap at all? Okay. Somebody missed it. The real estate agent? I believe so. And I hear all your commercials about the trusted real estate agents, and I think that was certainly the case. My minute, it was one of our agents? No, no, no, no.

I'm saying I wish we had gone to. You think the agent screwed up in the original pricing and convinced your mother-in-law to sell her house too cheap? I believe so. Do you think the appraisal is actually accurate? Yes, I do, because the house is, I was surprised when she said we should list at 335. and then she went and sold it before it even listed. It was just kind of a, you know,

a friend of a friend situation. I bet. Everybody jumped on her. Mm-hmm. So it's $35,000 underpriced or about 10%. And there's already somebody. It's bought. It's under contract.

It's supposed to close any minute. You're right. Yeah. Well, I'm, um, the first thing that pops into my head, James, and I'm just going to, off the cut. is, well, she sold her house too cheap. That's sad because she's given her word. She signed a contract, and I don't want her to get sued for specific performance under this contract. And then the

second thing that pops into my head is I'm going to kick the incompetent real estate agents, but I don't, ethically, I can't tell her to break that contract. I wish she had done a better job and listen to you. I wish she'd done a better job at selecting her agent. And I bet I'm going to hear that this lady is in, needs this money bad, doesn't she? Something like that.

Yeah. Gosh. It would help if she had it. We could put it that way. Well, it always would help, yeah. Right.

Yeah. Is there anything else going on in the deal? Is the contract contingent upon a whatever, whatever, whatever? Like a, like a home, A home inspection. Has the home inspection report come back? The home inspection came back clear.

There's nothing pending there. The only thing I can think of is if their loan falls through last minute. Yeah. I mean, there's, sorry, I'm trying to think three weeks until closing. Yeah. So I don't know if they're a loan as approved. I have no idea. But if that falls through, we can relist and then, you know, we solve that problem.

Exactly, exactly. You know, and then. And get a new real estate. agent, yeah. Certainly, certainly. Yeah, I mean, unless there's something sideways in the contract deal that she can use to ethically get out. Like, I knew a guy who had his house on the market, and the radon inspection came back and found radon, and they wanted him to spend $500 to fix the radon. And he said, no, contract's over and canceled the whole thing, because he wanted out of the deal, and he used that to get out of the deal. But he had a legal, ethical out because he refused to

fix the radon and he had the right to do that in the contract. So, you know, that's the kind of thing like if they came back with something in the home inspection, you say, well, I'm not going to do that. You can do that. That's part of the home inspection process. And then they would go, well, you know, okay, we'll take it anyway. No, we're not going to fix it. And we're not, based on this home inspection, we're not selling the house. You could just, I mean, there'd be a way to walk out of it then legally and ethically. But I don't think there is here. You know, I'm not an attorney in Illinois. you might ask one to be sure. Just to see.

I know. Competent real estate agents are important. I know. And I would feel bad for that family on the other end who's in contract for something. Then you kind of go back on your word. Just from like a, I mean, it's worth it. It's worth. I'm saying like the new price is what the house is worth.

I get it. We think it is. But that still feels off. You gave your word. You sold the house. Yeah. And people walk away from contracts like they walk away from everything in this society. today too much. You should honor your word. And so I hate it. I don't like it. I've signed up for things

I wished I didn't sign up for. And also too, it's a, you know, to sell a house today is harder than it was a few years ago. So she may have even, even if it was at 360 had to negotiate down some anyways. So you may not have gotten the full 60 anyways. You would never know. But, yep, sorry. So you should get a high octane, high protein Ramsey trusted real estate agent or you shouldn't get one at all. This is what you get. You make a mistake, it's a $30,000 mistake. It's huge. 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.