Real Estate the Ramsey Way - We Regret Buying A Fixer-Upper

Starting point is 00:00:05 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. Let's go help out Christy in Houston, or as John calls it, H-Town. What's up, Christy? You have to say it like that, apparently, Christy. How are you doing? Hi, guys. How are you? I'm doing great. What's going on? Yeah, so I was hoping I could get your advice. My husband and I bought a home about two years ago, and we did not realize the extent of repair that it needs, and the area is a lot more unsafe than we anticipated.

Starting point is 00:00:48 So we're planning on selling the home and moving to an apartment. And so we just wanted to know if you guys think this is the best option for us right now. I hear no red flags. If you want to move, you want to move. You made a bad decision. It didn't end up working out. There's no harm in selling it and renting for now until you feel. figured out what's next for you. What would it sell for in its current condition?

Starting point is 00:01:10 Our realtor says it could be hit or miss. He said a quick sale would be about $2.30. If we left it on, could be $2.50 and upwards. We just won't know until we list. Okay. What's the urgency? Is it very livable now? Are you guys safe? Can you, you know, stage it, market it, do all the right things to try to get the most bang for your buck? It is livable now, but maybe a couple months ago we had to do some floor work ourselves in order to make it livable because of the rod in the foundation. So it's not completely fixed. There's areas of the house that I would probably avoid, but it's not unlivable. It's not unsafe. I mean, we could list it and get a decent amount. What did you pay for it? We paid, we got 223, but it's a home from my father. So he gave us a

Starting point is 00:01:59 gift of equity. So we owe 181 on it right now. Okay. So you'd probably walk out of this thing with 20 to 40 grand if you're lucky after fees? Okay. And you would just, do you guys have any debt right now? We are, we have $1,000 left to pay hopefully by the end of this month. Amazing. Do you have any savings? We don't. So we would be starting other than the $1,000, right? We would be starting our emergency fund. So you'd leapfrog to babysept four, five, and six, where you're debt free with a fully funded emergency fund, you'd rent. And then beyond that, I'd begin saving up a down payment, and your next purchase is going to be very different. You're going to do it out of a place of strength.

Starting point is 00:02:40 You're going to know what you're getting into before you get into it. You're going to choose a better neighborhood. You're going to choose a home with less problems. And so I feel good about you guys selling this thing. And you have a good realtor? Do you trust them? Yes, he's actually a family friend. So I've known him since I was about 12 years old, and I'm 30 now.

Starting point is 00:02:58 Okay. Well, you can trust them and they can be a terrible realtor. Are they really good at their job? Are they going to get you top dollar for this? this? I believe that he would do every effort. Okay. To make sure that we did. Yeah. Awesome. And we have a whole real estate home base. If you want to check it out for more resources on this, you can jump on ramsysolutions.com slash real estate. And there we have articles, how-toes, calculators, courses, you name it, to help you guys through this home selling process. But it's a hard lesson to learn, Christy, but you guys are getting

Starting point is 00:03:28 out of this thing mostly unscathed. I mean, you're safe. You're going to make a little bit of profit. I'm going to call that a win and a lesson learned. Dan, I guess to free you from any existential dread you have, if you had bought this house and it was the greatest move you ever made, it's still okay to sell it. If you all are ready to move and you want to downsize, move to an apartment for a season, knock the lights out. Right. Yeah.

Starting point is 00:03:50 So either way, I think there's a lot of emotion in it, George, and it's like, I feel like I'm quitting. I feel like, we gave up on the dream. No, man. You learned. You learned. No one to quit. We thought we were going to be houseflippers, and we hate this. And so we want to back that thing up and get out of this.

Starting point is 00:04:03 Awesome. Knock it out. Go do it. Love it. All right. Next, let's go to Richmond, Virginia, rather. And Jennifer is there. Jennifer, how can we hold? Yes, thank you. My situation is I have $275,000 to buy land, build a house, and everything, you know, furnishing is everything. That's all I have. And it's cash. I'm not going to have a mortgage. And it's proving different. difficult to budget for that. I'm wondering if I should rents for a year and what I do for a living is I buy real estate, I improve it and sell it, and do that for a year with the cash that I have to try to build up a little bit more for my ultimate home. Well, yeah. How much do you need? Well, you know, it's land is so hard to find and so expensive. So I would be more comfortable at 375. Okay. And you've run out the numbers because what I want, I want to make sure we're fully in with detail counting the cost of this so that you don't enter in and realize, oh gosh, I don't have enough money. And now I am kind of considering debt when that's not what you said you wanted to begin with. So I really want you working out the numbers to go.

Starting point is 00:05:28 okay, if I spend X on this land, what can I then spend on the build? And is that enough to get me what I say I want plus furnishings, right? So we're doing a detailed, in many ways, just a detailed budget on this that's directly for this home build. Right. The tricky part is I'm not tied to any specific area, so I'm looking in four different states just for something available. Inventory is very low right now for raw land that's decent.

Starting point is 00:05:58 Are you operating with cash? Jennifer, when you say I'm going to rent for a year and I've got to buy some more properties and flip them and then create more cash, are you doing that with cash? Yes, I am. I'm in my early 60s debt-free. My monthly expenses are $1,500 a month. I love that. That's all I wanted to know. I like that strategy. You have such a low burn rate and you're debt-free, and I love that you're going to be patient. Flip a few more properties. stack some bigger cash. Get the house I want that I've earned. Come on, Jennifer. I'm totally fine with renting in the situation. And listen, what I want you to do is we have a really great real estate home base

Starting point is 00:06:38 that could probably help you out when it comes to finding the land that you're looking for. So if you go to Ramsey Solutions.com slash real estate, they're probably going to be able to get in there and help you find the tract of land that you're looking for. Yeah. Okay. Yeah. I've averaged 75K take home over the past seven years. So it would take me, you know, a little over a year to get what I need.

Starting point is 00:07:03 But then, of course, expenses are going to go up too probably. They are. And I do think that you have to balance that carefully. And just hear me say, I think the best way to buy a home is cash. That's great. A lot of people can't do that. But no one would fault you, Jennifer, if you ended up having a $30,000 mortgage or a $70,000 mortgage, I just want to give you that piece of this that.

Starting point is 00:07:27 if you don't want to wait another two years, you'd be all right. You wouldn't yell at her. I wouldn't yell at her. I also thought about buying the land and just parking an RV on that, and that way I'm not spending money on rent. That's where I, that's where we drift away. That's where you and I drift away on ideals, only because the goal for you right now is to save up money,

Starting point is 00:07:51 and with the RV you are having something that's depreciating, and I'd hate for you to tie even more money up in that. I mean, obviously it's your life. And if you're the RV type, you know, buy something very, very used and very, very inexpensive. But I tend to like the idea of you renting a little bit better. Yeah. There you go. All right, Jennifer, love that call. Boy, she's making things happen. Yeah. 60 years old, debt free. Got our own little real estate empire. Would you do the RV or the rent? You know, I was thinking, if it's a nice piece of land that I'm going to do something, I might put a airstream. No, a cool little shelter that could be multi-use, live in that for a little while. No.

Real Estate the Ramsey Way - We Regret Buying A Fixer-Upper

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