Real Estate the Ramsey Way - We Have A Rental Property Nightmare

Episode Date: July 27, 2026

A short-term rental that loses money every month can quickly become a financial burden. We talk through what to do when a property isn't performing as expected and how to evaluate whether it's still worth keeping. 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 wife and I purchased a short-term rental in October of 2024 and at the advice of a tax strategist that we hired. And we're bleeding $2,500 to $3,000 a month in this short-term rental. Okay. And I own a business. My wife's a full-time nurse, and we get taxed heavily. Obviously, the business does. And that's why I enlisted with a tax strategist to understand, you know, options, you know,

as far as building generational wealth and how to do that. And that's when we got into the short-term rental. And, you know, we got bonus appreciation, so that was nice. You know, we were able to write off the federal taxes and stuff. But bleeding $2,500 to $3,000 a month is not, doesn't leave very good taste in my mouth. Of course not. You might as well pay that to the government and taxes at that point if you're just going to bleed. Like, I might as well not even do it.

You're either giving it to a lender or to the IRS. Pick your poison. Correct. Correct. So my real main question is, you know, what? I'm really, it's hard for me to trust people now because of how, you know, this, this leaves us how it tastes in my mouth. And I just need really good direction. You know, what do we do with our money to help build generational wealth, to find properties that cash flow?

What should my next steps be? What is your business? We want to do something this year, but I'm nervous. We own a print company. Okay. Where do the real estate come into play? Because these are two different goals. I want to build wealth, but also I want to be a real estate guru and leverage a bunch of debt. Correct. The real estate came into play because of the taxes we were getting, we're getting heavy tax. But would you agree that getting into real estate just for tax purposes is not a good idea? My wife's right. I guess she said true. You're losing $36 grand a year because of the tax strategy saying, dude, you want to say it on taxes? Just leverage it an Airbnb. It'll be great.

Well, I think you thought you were going to build wealth too. I think you thought you were going to use that as a wealth building vehicle as well. Not just a tax shelter? And that's the goal, obviously, is wealth building for generational wealth. What went south? What went south with the short term? Was it the location? Did you not get the rents you thought you were going to? Like, what happened?

Well, I think it's our property, in all honestly, I think it's our property manager. So our realtor is also our property manager. And when I met with him, I'm pretty up fun. I said, you know, listen, I said, I just need to know what our worst case scenario might be with this property. He said, your worst case scenario is you're going to be out of thousand miles a month. I said, good. Let's go. We're good.

That's sold. So you knew that. from the jump. Oh, yeah. Okay. And I was fine with the thousand. I knew it wasn't going to cash flow well, but I also was using the benefits of, you know,

how much we were going to save on taxes, and then also building generational wealth and making this kind of a yearly thing we wanted to do. Okay. So it just, nothing was looking good. So what would this property sell for? Property management company?

A million 35. It's worth, according to Zillow, a million 65. We also own a home, our personal residence. We bought that for 820 or about 965. What's left on that mortgage? That one, 617. Okay, and what's the mortgage on the short-term rental? That's about 820.

Okay, so you got, let's call it, 150 grand in equity on the short-term rental you could get out? Correct. What other debt do you have? And all that, again, obviously I got to pay. We did do a loan where there's a prepayment penalty. So we got a five-year prepayment penalty, which goes down every year. So we'd have to eat that, obviously. What kind of loan is this?

It's a called a DSCR loan. Okay. What other debt do you guys have outside of the two mortgages? Truly, I know, I've got a car. It's about 600 a month. Business pays my car. We have 0% credit cards that aren't due to, and next year, it's total about 37 between both of us, 37K.

You're a credit card company's dream. I'm sorry? You're a credit card company's dream. I know. Because guess what's going to happen when you can't pony up 37 grand out of nowhere to pay the balance? Well, now, let me give you the full picture. I have 160 sitting in the bank. So, and my wife has, you have anything?

I think she's, yeah, maybe 10 grand my wife. Between both of us, 170. Okay, cash. I already know. I know it's going to pay off that 0% credit. How much? Okay, well, great. How much, what's the total amount of your wife's vehicle, not the monthly payment, the total amount? Total amount. It's a lease. Oh, it's a lease. And what about you? My car's paid through the business. It's a 524 month. It's a super out back in me.

How much is the debt, though? What's the total debt? I owe it. It'll be done at the end of this year, and then I either will lease another car. What's the total debt? Don't be scared. I apologize. Don't be scared. So what's 524 times? No, no, no, no.

What's the amount that you owe on your car? How much do you owe? Yeah, we owe my car is going to be three grand. That's it? That's all you have left? Yeah, because it's the lease. Oh, yours is the lease too. Okay.

Goodness gracious. These are the nicest cars known to man. What are you guys driving? 600 bucks a month for a lease? When's the lease up? When's the lease up? We're both the end of the year. We're both the end of the year.

Okay. And are you planning on buying them out or what do you, what are you thinking here? I don't know to be totally honest. I haven't thought about it. Okay. So we're going to help you think through that. What I want you to take away right now, John, is you're kind of like a happy-go-lucky guy and you're fun to talk to.

But I'm concerned about your situation greatly. You've got a lot going on. And the good thing is, I think, a couple of moves could get you on just a couple of small tweaks could get you on really, really solid footing. But you'll have to agree with George and I that you're in a dire

situation in order to actually do this. Because I feel like you kind of think it's not that bad. You guys have out-earned your stupidity for a long time, and you can continue doing that. I just think you will, you vehemently disagree with everything we're going to throw at you, so I don't even want to waste the time. But I'll tell you what I would do. I would sell the short-term rental,

walk away with whatever money you can get, take your 160, pay off all of your consumer debt, and then anything remaining, it becomes emergency fund plus paying down the mortgage. Gotcha. But leveraging the debt game... Paying down our primary residence. Paying down everything. Pay down all of the consumer debt first, get an emergency fund, focus on paying off your

primary mortgage. Right now, you're just trying to accumulate stuff and assets and car leases, and we're trying to simplify your life to where you get to keep what you take home, regardless of how much you pay in taxes. I'd rather you pay what you owe in taxes and not have all the stress in your life and go, that sucks. I had to pay the IRS more than I thought. But it's a nothing burger if you had no debt. You figured me out perfectly because my wife would tell you I do stress out a lot about it.

I bet. It's not worth it. It's very stressful. It's stressful for me just to listen to it. So I can only imagine how you feel, you know, when you lay your head on your pillow at night. But think about what George just said. You got $170,000 cash. Okay, we pay off the credit cards.

that leaves us with around 130 or so. You decide whether or not you're going to buy out these leases. Do you know what the buyout is for each of them? I don't. I think it's around 20, 25 maybe. For each? If I'm speaking correctly, for each. Would you guys want to keep those cars?

I'd have to convince my wife to it. I don't care. Okay, let's say you did. If that... If you want to keep your car, she doesn't care. Okay, so let's say you spend $40,000 and you buy out these leases. Now you're at 90. you've got $90,000 sitting there after you've gotten out of these leases,

after you've paid off some credit card debt. Is there anything else that we need to know of that needs to be paid off? No, I just gave you all the that we have. Okay, so now you've got some actual cash. You sell the short term rental, because did I hear you say you bought it for 1.3 and it's worth 1.6? No, no, no, a million 35, and it's according to Reville, it's worth a million 65 now. Okay, a million. So you'll probably take a little loss on that, but you'll gain three grand back in your life from not bleeding.

And so that's where I'm going, this is worth it, don't have the sunk cost fallacy. It sounded like you didn't want to sell this Airbnb, though, this short-term rental. I mean, I'll be honest with. I do love the house. I wish, you know, my wife and I would love to be in Florida one day. I love to be in the house. But if it's going to cause me stress every day, I'd rather do the smart thing than the future, you know, the goal thing. And let's talk about the why behind it because I think you had.

I like what you were thinking about, which is what are ways that I can build wealth for my family. I think that that's something that we all need to be doing as parents and as spouses. But the way to do that, we did the largest study of millionaires. And the best way to do that is to have a debt-free lifestyle, a budgeted lifestyle, a lifestyle that values having the right insurances, saving for emergencies, right? And then investing in your 401K regularly. That's how millionaires are built. They invest in their 401k regularly.

I have a mortgage that we got two years ago. We moved into our home. It was newly constructed. It went from a construction loan into a 10-year balloon. Oh, no. I know. At a 7.5%. And so I'm actually about to start nurse practitioner school this summer.

And so we're looking at going ahead and refinancing now while the rates are lower. and we have a couple of different options that have been presented to us, and my husband and I are kind of having a disagreement. So we have gone through the Financial Peace University, but it was a few years ago. And so I know the answer is 30-year fixed. No, 15-year-fixed. Well, 15-year-fixed, yes. But we haven't been given that option so far. The only option we have is either a 5.25 percent, 5.5.

year arm or a 6.5% percent. 15 years. 5.22 right now. So we haven't gotten anybody to give us that. Why? I don't know why because our credit is really good. Call Churchill mortgage. Churchill mortgage.

This is the people we've endorsed for 30 years and they do it. They do 15 year fix for Ramsey listeners every day. Certainly in Oklahoma City they do them for sure. Yeah. So, yeah, we'll do that then because that's what we're, he's really leaning towards the 5.25% arm. And I'm like, that does not sound good to me because we go from, we're going out of the jumping out of the fire into the frying pan, the frying pan of the fire. I mean, it's like one dumb, one dumb loan into another dumb loan.

No, an adjustable rate's going to tag you later. It's going to give you all kinds of trouble. And a fixed rate 15 year is cheap as that right now. I'm looking at the screen right here where the rates are. And it says 5.22 right now, this week. So. Yeah. And so, yeah, that's what.

Now, obviously a 15-year payment is going to be more than your 30-year payment that that balloon is based on. Right. But it's not going to be that much more because you're saving 2% by refinancing. Right. It'll be a little bit different. Yeah. Yeah. So what is your, what's your balance with a payoff?

So right now it's still at $200. $429,000 as of our latest. Okay. So it's like $4,500, let's call it $4,800, which is $400 a month in interest savings by refinancing from $7-2 to $5-2, okay? And so, you know, roughly $400 a month, not quite, but almost, $400 a month, that your interest rate goes down. But then when you switch to a 15-year, it's going to go up.

and so you're probably going to see an increase of $100 or $200 a month, but you're going to be in a much better long-term plan. Right. And you said you're going to nursing school? Nurse practitioner, yeah. Oh, really? Okay, that's awesome. Good for you.

Yeah. Thank you. I'm excited. But it's definitely the second half of the program, I will have to go part-time. So right now we make about equal, but when I go part-time, it'll be. What's your household income? So right now we're making about, let's see, I make about 4,400. He makes about probably close to about $4,000 a month for him.

So we make over. You're making about $150 a year, roughly. Okay. Yeah, about $150 a year. And then when you graduate, it's going to go way up. Yeah. So way to go. I love it. Congratulations. Yes, it's worth it to bite the bullet and put a little strain on right now to get the right kind of mortgage in place and get rid of the high interest rate and the balloon. But don't jump from the frying pan into the fire. Yeah, and make sure you guys are planning out, Kendall, when you go part-time that you guys have money saves, that if you need to, whether it's shifting lifestyle or have some money that's supplementing during that year or two that you have where you have to go part-time.

so just be thinking of that out, plan out how we're going to eat during that time. Yeah, definitely. Yeah, good question. Way to go. Well, you win the argument, and Churchill Mortgage can help you guys with that process, I promise you. 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 in, 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.