The Ramsey Show - App - Real Estate Investing Isn't All Rainbows & Paychecks (Hour 2)

Episode Date: April 22, 2024

🎵 Live from the headquarters of Ramsey Solutions, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. I'm your host, Jade Warshaw, joined by your other host, bestselling author, George Camel, in the place to be. We're taking your calls all afternoon long. The call is simple, 888-825-5225, and we'll get you hooked up with some advice about your life and your money. All right. Let's go straight to the phone lines, George. I'm excited. Let's go.

We got Chelsea and Daniel, and let's kind of, before we go, let's kind of like frame this up a little bit. George, set'm excited. Let's go. We got Chelsea and Daniel and let's kind of, before we go, let's kind of like frame this up a little bit. George, set the stage. This is a segment we've done a few times. I guess we call it pick a side. Is that right, Producer James? So a couple calls in, both of them on the line with a disagreement. Sometimes it's lighthearted. Sometimes it's a big, you know, debate. And we just help them decide and so jade and i will cast our votes i am judge george and we got judge jade all right sounds way cooler i'm putting on my referee jersey my whistle i'm ready to get into it more like the judge's robe and tiny gavel yeah okay you went you went law i went sports i never go sports i wanted to know

all right let's check in with them and Daniel. Can you hear us? Yes, we can. All right, tell us what's going on. So we disagree with what to do with specifically, in this case, $80,000, but any situation where we get a tax return or a bonus, how we're going to use that money. And our disagreement today is that we, I would like to put it towards the house and pay off the house. And he would like to invest that money into back into the market.

And our ultimate goal here is to build wealth so that we can live comfortably when we're old and our kids can, you know, benefit from that eventually. That makes sense. So you guys are on baby steps, you know, benefit from that eventually. That makes sense. So you guys are on baby steps four, five, and six. Yes. Yes. Okay. Just to, just to confirm, you sound a little confident. Yes. That's okay. Do you guys have any debt whatsoever? Our mortgage. Just the mortgage. Okay. And do you already have three to six months of expenses saved up? Yes. Okay. So yeah. So technically you're on baby steps four, five, and six. Are you guys currently investing 15% of your gross income monthly? I'm going to say yes. I think I'm pretty sure we are.

We might be doing more than that. A little more. Daniel, do you want to add something? I think she's right. We haven't done the math, but I'm pretty sure it's around that, if not more. Okay, cool. And where did the 80K come from? Shares of stock from my company. Okay. So you bought some employee, was this an employee stock purchase program? No, it's like RSUs that you get as part of compensation. So they vested and you sold them. Now you have 80K sitting in the bank.

That's right. conversation. So they vested and you sold them. Now you have 80K sitting in the bank. That's right. Wonderful. Okay. And really the discussion is what is the best way to build wealth long term? And Daniel's saying, hey, I want to invest this money. It could grow to X, Y, Z amount. You're getting starry-eyed over those numbers. And Chelsea's security gland is flaring going, it would be so nice to get this mortgage paid off.

What do you owe on that mortgage? That's exactly right. We a $385,000. What's your household income? Around four. Wonderful. $400,000, sorry. Sweet. Okay. And what is your end goal? Let's like snap our fingers, you guys are older. Do you have like a retirement plan? Is there a nest egg number that would really excite you? I haven't invested a lot of thought in it, but I mean, a million would be nice just to like, I don't know. Okay. Enjoy the- How old are you two? Whatever, however that grows. I'm 20. Oh boy. Give me a second here. I think I'm 33, I think. Okay. You guys are younger than me. Here's my thing. What if I told you, if you guys just continue down this path, you're going to have between $5 and $10 million just sitting in one account?

Easy. Either way, regardless of what happens. Regardless if you invest this money or you pay down the house first, you're going to have $5 to $10 million net worth. If you just keep doing what you're doing. Wow. So when you put it that way, Daniel's going to get his wish because your wish is financial security.

Chelsea's wish is financial security. And so what we're arguing about is the short term. And truthfully, you guys make $400K. What if we set an aggressive goal to pay down this mortgage? Let's say we used $80K. We paid it down to $300K. We said, all right, over the next two years, we're going to pay down this mortgage. And after that, we're going to invest that mortgage payment to make Daniel happy

for the foreseeable future. You see how that's a win-win? Yeah. It's kind of a win-win. My concern there is that's two years of not investing. No, no, you're investing 15% of $400,000. Okay.

Have you plugged that into an investment calculator we're not saying don't invest and pay off the mortgage we're saying invest 15 and whatever's left pay off the mortgage and i would consider this 80 000 above and beyond your traditional income so just a little layout go ahead go ahead the the the point that we disagree on is like, do we take the like quote unquote extra money bonuses or as you stuff like that, that we get and invest it in the house or invest it in like index funds or whatever. Based on the way the baby steps work,

which is what we teach here, baby steps four or five and six, you do them simultaneously, but the, the extra, um, are you getting this every year, this money?

Uh, a couple times a year. yeah okay so what i would just consider it part of your household income and so i think to make both of you happy you can invest 15 of whatever your household income is so let's say this 80k will consider it part of your household income invest 15 of that that's the rest we put toward the house gotcha that's a good way to look at it because it comes every year. It's part of your normal income. It just comes later, basically. So I like that plan. But just so you're familiar with how the baby steps work is when you do four, five and six, four is you invest 15% of your gross. So to George's point, I love the idea of including this with that because it technically is your income. And then you get intentional about paying off your mortgage. And technically, we don't tell

people to go above 15% until they've paid off their mortgage. So that's our plan here. And that's the plan that I would recommend and advise for you. And can we do some fun math, Daniel, just to give you some peace? Sure. You're 33, right? Let's say you invest just 15% no more. Everything else goes toward the house, even for the rest of your life, and you continue to make 400K. That's 60,000 a year, right? Okay. Can you give me the dumbed down math on how you got there? Yes. So 400,000 times 15%, 60K. Divide that by 12, you'd be investing $5,000 a month. You said you're 33, right? Let's say you keep investing $5,000 a month into retirement accounts, you name it, brokerage accounts, $5,000 a month until you're 60. Even with an 8% return, which is modest,

that's $5.7 million if you started from zero today. And our team just put it on the screen if you're watching on YouTube. Good math, my guys in the booth. So, Daniel, just to give you some peace, even if you started from scratch today with this income, you would have $6 million in that account. And that's assuming you never make more money and never invest more than $5,000 a month, which is obviously not going to be the case. With a 10% return, you're talking $8 million. And you can adjust for inflation. All the nerds can come at me. I'll be okay with $4 million, $5 million, $8 million, $10 million. All that to say, your dream was a million. And I just showed you how regardless of how you get there, you're going to be much higher than that. So real nerdy, fun discussion.

But as far as picking a side, I'm going Team Chelsea and I'm paying off the house. But really, we're splitting the difference. We're investing and paying off the house. But really, we're splitting the difference. We're investing and paying off the house. Put that gavel down. That's it. Judge George has ruled. Listen, I'm right there with you, but I think I'm just the bailiff in this case. The verdict is...

Say it. Chelsea. There you go. You are not guilty. This is The Ramsey Show. Thank you for listening to The Ramsey Show. I'm your host, Jade Borshaw. Your other host today is George Camel. And I'm actually excited, George, that we're hosting together, especially talking about this brand new upcoming event that we have.

It's Dave Ramsey's Investing Essentials. And George, you're going to be a big part of this. Yes, this is a virtual event. So you can join us wherever you are. And this is really a deep dive on investing. This is something that our fans and audience have been asking for. They're saying, hey, what's Dave's real playbook beyond just Baby Step 4? What are the actual mechanics of investing? What are the options out there? Even real estate investing. Dave's got a huge real estate portfolio. He's done it the right way. He's done it at the speed of cash, which hurts people's brains. And so he's going to walk through how he buys real estate, the things he looks for. We're going to be walking you through not only retirement

investing, but other options outside of retirement. What if you're self-employed? What if you're a high earner? What are your strategies to invest and retire early? So we're going to be talking about all of that. A two-night virtual event happening May 21st and 22nd. It's online. You can watch from the comfort of your home. You just need to buy, if your spouse is going to join or you want to have a watch party with the boys, that's what I generally do. You just buy one ticket and you can join us for that. That's pretty cool. Yeah. I heard Dave talking about this the other week and he said, it's going to be like 101, 102, 103, all the way up to 104. And I think that's great because people definitely have different areas of interest and they want to go as further than they've ever gone. So it's like working out. You got to start with the low weights,

low reps, and then you get to my level. Yeah. You're benching 300. Oh, wow. Okay, George. No, I can't. I'm trying to get on that level. That's like three George Campbells. We can't do that. I love this. For the first time, Dave is opening up his personal playbook on investing. You do not want to miss this. You're going to learn how to maximize your 401k and mutual funds.

You're going to learn Dave's personal strategy for real estate investing and which investing trends to follow and which ones to avoid. The tickets are $249. Again, this is a two-night event. You're getting Dave Ramsey. You're getting George Campbell. You're getting all of this. If you're interested, go to ramseysolutions.com slash events to get your tickets today.

Can't wait. It's about four hours of content over those two nights. Listen, I'm going to be there. I'm logging on. I'll be tuning in as well from Listen, I'm going to be there. I'm logging on. I'll be tuning in as well from inside the room. I'll be there live. I love it. Let's go to Blake, who's in Louisville, Kentucky.

What's going on, Blake? Hey, thank you guys for taking my call. I've been a long-time listener, and I really appreciate it. Awesome. How can we help today? So I just had a quick question, and it's kind of a little bit of a debacle for me. We have a van that we had bought, me and my wife, whenever the height of the used vehicle market was insane. People were paying astronomical numbers for used vehicles.

And I bought it based on the safety of my daughter, who at the time was only eight months old, because the vehicle we had didn't have AC in the rear. But down to the money, the part of it. How much was the van? So the van was $40,000. Okay. And we owe $32,115 on it still. Our monthly payment is $585.75. Okay.

And I'm trying to see if I'm headed in the right direction here. I have a truck that I can sell right now for $10,000 to $11,000, and then I have a trailer just one I can haul cars on and stuff that I can sell for anywhere from $2,500 to $3,000. Okay. We also have $15,000 in savings, and I don't want to sell all of our vehicles because my wife is a stay-at-home wife, and she needs them for our two kids. Well, I'm willing to sell everything.

I know that's part of Dave Ramsey's baby steps, sell everything. Well, if it makes sense, so the truck that's paid for that's worth $10,000, is that your daily driver? No, I actually drive it. I'm fortunate enough to drive a company service truck. Oh, nice. Okay, that's good. And what about the trailer? I do a lot of side work. The trailer is just something I had upgraded. It's just something I found on Facebook Marketplace years ago. So you don't need it? I don't, not necessarily. I mean, I do haul with it every once in a while, but not enough to keep it around. You'll survive. And the 15K, is that your three

to six emergency fund? Or is that, what was, what did you have that year marked for? It was just money saved? So I actually was heavily into sports cars a few years back and I actually sold it because I realized it sat in the garage and it was unrealistic to keep. So that was that money. And we turned that into our emergency fund and it's actually, we're not even able to touch it, so that's very important to us. What do you mean by that? You can't touch it. We talked to the bank about not being able to. It requires me and my wife both to agree on moving that amount.

Oh, okay. What account is it in? What kind of account? It's a savings account. Okay, just a normal savings account but with a little bit of lock and key. Yes, exactly. Got it. it's a savings account okay just a normal savings account but with a little bit of lock and key yes exactly got it so you owe 32 000 a little over 32 000 on the van and you're thinking hey if i sell all this i can clear 27 000 well if you sell it plus add the savings to it you're going to be able to clear at least 26 000 because i want you to keep a thousand set aside um of course and and that's the plan right? You chuck that towards the van

and then, you know, you've just got a little left on it, right? My thought was to sell the truck, sell the trailer, and then we would be roughly down to 20,000 on the van and then actually sell it back to the dealership.

They would take it off our hands, no questions asked, essentially. And I detail my vehicles like I'm a fiend about it, so they're consistently clean and they love the fact that it's as clean as it is, so they're willing to give me that. So you're just trying to get out of from being upside down. Exactly. I just don't want to sit on it anymore. I have a car that my grandma gave us. My dad called it an heirloom. What happened to this whole reliability story

you gave to me? He realized that it's not that big of a deal and that anything with AC will work. What's your household income here? So now that my wife stays home, she's two weeks home now, the stay-at-home mom, my take-home is right at,

it's $69,300, I think. It's like $5,800 a month. Okay. Okay. So you're $20,000 upside down. Is that what I'm getting? Yes. And it's because we put so many miles on the van in such a short amount of time. So if you sell the trailer and the truck that only gets you $1,200, $12,000, I'm sorry. So where's the, where's the rest coming from? Because you had said you didn't want to touch the savings. Yes, so if we don't touch the savings,

so we have $32,000 on the van. If we take that $12,000 from the truck and the trailer or the $2,500, that knocks the van down to $20,000. You're saying you could sell it to the dealer for $20,000? Roughly, $18,000 to $20,000. Oh, I see. Yeah, now would it make sense to sell it back to them even if they say, hey, look, we'll only give you $18,000 for it? I don't think it's worth getting rid of this thing.

I feel like you should just keep it at that point. Yeah, I'm trying to get out from under it, and I just didn't know if it was worth to keep it or to get rid of it. I mean, how quickly could you save up another $5,000? We're actually, since she's only two weeks into uh being a stay-at-home mom we're still trying to figure out how to re-budget everything because we're we lost our let's see we lost about two thousand dollars a month in income the only reason that i might vote for you getting out of this is because it's a forty thousand dollar vehicle and you make sixty nine thousand and i'm guessing that with your that's your take-homehome, right? Yes, that's my take-home. So what's your gross on your tax return? Does it say $85,000?

Roughly. I would have to go back and look, yes. Then, you know, it's up to you. You're not out of... You were out of bounds to go into debt for it, but you're not out of bounds to keep it and pay it off. It's up to you. If you're just like, I hate the thought of this thing. I hate the side of it because of what it's cost us and you want to get rid of it and downgrade. I'm not mad at that, but just understand that, you know, you're going to have to come out of pocket at some point to get something. I know you said your grandmother has a vehicle. I don't know the state that that's in, but, you know, knowing that you've got $15,000 to the side, it might be worth it for you to put some money with that and upgrade a little bit. It's up to you.

My fear, since you love cars and toys, is that you go out and go, well, we lost that van. It was so reliable, and now this grandma's hoopty's not doing it, so now we've got to go get another $50,000 car for reliability. Well, you need to draw a line in the sand that you're not getting car loans anymore, right? Nope. We're actually done with that no that's why i'm trying to figure out how to get out of from under this because i'm at the point you know i'm sick and tired of being sick and tired i would sell the truck and trailer use most of the savings to pay this thing down get rid of the payment and then decide what you want to do with it you probably will end up keeping it just because you've already done the damage is done the loan is gone you freed up the 600 bucks that you were

paying on it. Yeah. That's going to help you in the future. But not fun. George, how often do we get people who have rolled negative equity into vehicles, they end up upside down, and it's just, they're trying to move heaven and high water to get out of these loans. My guess is 90% of the callers with car loans are upside down in this market.

Yeah. And it's one of the reasons I hate car loans so much. But the good news is is you could sell it. You got, you know. Well, if you're looking for something to do with your tax return, a lot of y'all are upside down. That's what you could do with it. You could take it.

Finally, get out of that loan that you've been paying $700 a month for. Just an idea. This is the Ramsey Show. I want to stay right side up, Jade. You are listening to The Ramsey Show. Hey, thank you for listening to the Ramsey show hey thank you for listening to the Ramsey show you know throughout uh the duration of the show whoever we're hosting with we all go out into the lobby of Ramsey Solutions there's folks that come to visit from far and wide we had a lot of folks today from the Minnesota area and it's really great yeah I see you guys it's really great you know uh people share their stories.

Sometimes they do a debt-free scream. Sometimes they just want to, you know, take pictures and get a book signed. And I love it when people hop on the stage, George, and say, this show changed my life. I love that. Nothing makes me happier. This show changed my life.

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Keep watching. We're so, so grateful for all of you that have made this part of your normal, regular rhythm. Love it. All right, George, you ready to get into it? It's showtime. Yeah, we're going to go all the way to Milwaukee, Wisconsin. We got Andrew on the line.

What's going on in Wisconsin? Hey there, how's it going? Doing good. How are you? Good, good. Thank you for my call. Long time listener, first time caller. Awesome.

Well, how can we help today? So I, best thing I ever did in my life, I bought a duplex when I was 20 years old. This was about 13 years ago. So now I'm trying to figure out, should I leverage or should I pay cash for the next one? I'm not exactly sure. Interest rates going crazy. I don't want to mess around with that. But all in escrow, I'm under $1,000 a month. So I'm not exactly sure what I should do, but I definitely want to

get another duplex. Is the first one paid off? It's $40,000 left. $ 40,000 left. Okay. Can you tell us, can you paint us a bigger picture so we can kind of understand what's going on? So duplex number one, you owe 40,000 duplex number two, what will it cost you? And in the area looking like two 50 quarter million, it's going to be the minimum.

Okay. So 250,000. All right. And going to be the minimum. Okay, so $250,000. All right, and tell us about the rest of your debt. Do you have any other debt, car loans, student loans? No, no debt. Okay, personal mortgage? That's it, that's it. Are you renting right now, or do you live in the duplex and rent the other ones out? I live in the duplex and I rent out the other half.

Got you. Okay, so essentially you owe $40,000 on your personal mortgage, which also happens to be a duplex and rent the other ones out. I live in a duplex and I rent out the other half. Got you. Okay. So essentially you owe 40,000 on your personal mortgage, which also happens to be a duplex. What do you earn? What's your income? I make about 70, 75 a year. And you're asking us, should I pay off this mortgage or should I leverage the equity and go get another one? Correct. That's my biggest decision right now. Okay. Well, I can tell you, based on your attitude, you're not going to like what we have to say, which is never leverage debt, never go backwards, always pay for investment properties with cash. You've probably assumed that. So did you want to call in for us to confirm that or what was the

hope here that that was basically me asking you like to confirm that yeah well the HELOC is going to put you at risk that's what you're going to plan on doing is kind of this burr method you've probably seen on social media I'm going to take out the equity I built the home appreciated in value I'm going to take that money I'm going to put into the next I've built, the home appreciated in value. I'm going to take that money. I'm going to put it into the next duplex and the next one and the next one. You can do that. Some people have success with it. Early still tell you they do on social media. What we have found is that to build wealth with way less risk and way more peace, we move at the speed of cash.

And that's what Dave has done. And that means you might have to get your income up if you want to buy another investment property in the next decade. And we need to get this mortgage paid off because what if you freed up that mortgage payment to then dump into a savings account or investment account and later on buy that duplex with cash? How long would that take you? Right. To buy with cash, it probably right now would take me at least five years. Okay. And so what you're saying to me is, hey, I don't want to wait five years. I want to do it tomorrow.

And you can do that, but I think it's going to increase risk, increase stress, and also decrease cash flow. Because until you free up that mortgage, it's not going to help. What's the monthly payment on duplex number one? Like what are you paying versus what you earn off of it?

So escrow all in i'm under a thousand dollars and then i bring back another thousand so i'm literally almost even every single month so you're just breaking even you're not making money well yeah yeah i'm not making money okay well then you're if you're not making money you're losing it in real estate because of all the risk the cost the maintenance the upkeep one thing goes wrong and your plan is now underwater now what you're saying is you're basically quote living rent free yeah because it's balancing your expenses are just covered but there's zero profit involved here you'd have to pay it off for you to recoup that thousand bucks or nine you said just under a thousand yep yep you're correct this all worries me of how little margin you have in this whole game what's making you want to go do it again

it's not like you're not like scrooge mcduck over here like i'm raking in the money on this duplex. I got to do it again. Help me understand. I mean, I guess I'm 30-ish, just over 30, and I almost half a million dollar net worth. I thought this was the best thing I ever did financially, I guess. What would happen if you took that, instead of investing $250,000 in a duplex that you've seen the rate of return is not great. What if you took that same money and just invested it over time in good growth stock mutual funds and earned 8 or 10 percent? And that's the thing that I do invest in.

That's where I make most of my money, I guess. Here's where I'm at. The secret sauce is not the duplex. The secret sauce is living on less than you make, avoiding debt, investing consistently. That's really the key is your savings rate and getting your income up. It's not the spread on this duplex and it's not going to be the spread on the next one. And it's not to say that real estate is not a good place to invest, especially once you hit baby step six and beyond. It's a great place to invest. As a matter

of fact, I'd love for you to tune into George and Dave's Real Estate Investing Essentials live stream that's coming up. The dates on that, George, what are the dates on that? May 21st and 22nd. Yeah. I want you to tune into that. The tickets are 250 bucks. For somebody like you, I think it's really going to be worth it. So you can see, I mean, Dave is a guru on real estate investing. And I think for you going forward to pick the right type of real estate investments, to purchase it the correct way, I think that that is going to unlock a treasure trove for you. So if I were you, Andrew, that would be, I would wait to do anything until after

you tune into that event. But I can tell you offhand, duplex number two is not the move based on the spread that you're making. That's definitely not the move for you. And at the very least, you might consider paying off duplex number one. You got $40,000 left on it. It might be worth it for you to pay that off. And maybe you end up renting out all of the units and you go move into another residence. I'm not quite sure, but investing essentials is going to be definitely the move for you going forward. Yeah. And Dave has said that the deal is really

happening on the front end. When you buy that property, you want to buy it at 70, 80% of what it's actually worth. The problem is right now in the marketplace, everyone and their mom wants to get the duplex and become the real estate guru. So there's not a lot of deals to be had. And the ones that are, quote, deals might need a lot of upkeep, maintenance, renovations. And we don't have the cash flow for that. Exactly. It can break people. Well, yeah, that's what tempts people to go into debt.

And before they know it, the thing that was supposed to be cash flowing for them is costing them money. And it's another full-time job to be, you're trying to fix it up yourself and get contractors that are reliable. It's not all, you know, rainbows and paychecks. Yeah. And just for anybody listening, if you're breaking even, you're not making money. Like that's not, you're not making anything. You're just surviving, treading water.

That's right. And listen, you can only tread water for so long before you start to go under. Not to be bleak, but that's the truth. This is The Ramsey Show. You are listening to The Ramsey Show. Thank you for being a listener. I'm your host, Jade Warshaw.

Next to me is George Camel. He is author of the number one best-selling book, Breaking Free from Broke. And you are best-selling author of Money's Not a Math Problem. I've met my match. Yes, and speaking of, let me just talk about a couple other books we have coming out. Ken Coleman, Find the

Work You're Wired to Do. I'm really excited about this number one. You hear that? It's hardcover. Hardcover, but a short read. That's opportunity knocking, Jay. That's what that is. That's hard cover that's opportunity knocking jay that's what that is that's right that's your future waiting for you to walk through the door listen this book right here this is this is swanky what's cool about it is it includes his get clear career assessments you get a unique code with each book that's right and the book then helps you use your unique results to find the work you're wired to do. And so it's a really, really cool product that's coming out.

And of course, Rachel's on her book tour right now. Yep. I'm glad for where I am, which is book number two in an installment. The first one was I'm glad for what I have. And now we've got I'm glad for where I am. She's been on a book tour. She's been in Phoenix, LA, Dallas coming up. She'll be in Atlanta on April 27th,

signing books at Barnes & Noble. So check out what's going on in your area and get Rachel Cruz to sign your book. I love this book because of what it teaches. It really teaches kids about contentment and being happy for their family and glad for their family and where they are. Love it.

Illustrations are absolutely beautiful. If you don't have a copy of this, be sure to pick one up. Can I call an audible, Jade? Go ahead. Atlanta is on April 26th. It's at the Barnes & Noble and Mansell Crossing, 1 to 2 p.m. Oh, there you go. April 26th. If you're in the Atlanta area, go to the Barnes & Noble Mansell Crossing and say hey to our friend, Rachel. I love it. And then, of course, we've talked about the Investing Essentials event. That's coming up May 21st. And as a precursor to that, you could pick up Dave Ramsey's quick read, Real Estate the Ramsey Way. That'd be a good one. So lots of great books out there. Great authors. We already talked about Breaking Free from Broke. If you don't have a copy of that one, you need to get it because it's this generation's total money makeover. That's what I like to call it. People have been saying that, and I appreciate that, and they're cutting up their credit cards because of it, and I will take that.

That's good, George. It doesn't have me on the cover cutting up the cards, but maybe one day I'll lose some hair and we'll recreate it. I'm not doing the bald cap. I refuse. Let's not and say we did. All right, let's go to the phone lines. We got Daniel in Syracuse, New York.

What's going on, Daniel? Jayden, George, a pleasure to speak to you all. How are you doing today? We're doing great. How are you? I am doing awesome. And George, I've got to say, man, I love the YouTube shorts. I just sent one to my wife this morning. Oh, thank you so much. I appreciate that. How'd she take it?

Was it like you dogging her, or was it entertaining? It was entertaining. Well, she said, no, I know that I'm eating away my money like this is not new to me oh good see usually people send it as like a passive aggressive they send my clips it's like hey you need to watch this you start budgeting better you know but that's funny i'm glad you guys are in a good spot no we're both aware of our terrible eating habits okay so my question is should i buy this house that my grandmother is offering to sell us, even though we are in $70,000 of debt?

Well, tell us more. What kind of debt is it, the $70,000? So it's in student loans, about $32,000 of me, $32,000 of my wife, and then about $6,000 in both of our cars combined. Okay. All right. And what's your current living situation? So income, I make $45,000 a year, which, yeah, not very much. I do graduate with my master's in social work in about three weeks. And then my income will increase in June to $65,000.

Okay. What about your wife? She is stay-at-home and just does side hustle for now, like DoorDash. Okay. And what'd she bring in from it? It's worth noting. I'd say about like $400 a month. Okay.

And that $400 a month, that side hustle, is that because you guys are working super hard to pay off this debt? We're not working hard to pay off the debt right now just because I'm still doing part-time school and working. We're basically just because we're new to the program. We're just learning how to live below our means. Like this is brand new to us and so far it's been an amazing life change. Listen, I can validate that. There is a part of just learning how to live on your budget that is almost like a baby step zero thought here.

Yeah. How are you living now? Are you renters? Did you buy something? Where are you living? We're living in the house that our grandmother is offering to sell us. So she's giving us a great rent price. It's only $1,000.

Yeah. Okay. So you're renting the house for $1, 1k and she has said at some point if you guys want to buy it how much would it be um not a set price but just kind of talk with them probably about 100 000 maybe 120 okay why isn't okay um what's the house worth about 200 000 so that's the killer like I know this totally is against the baby steps, but then thinking about the equity, I'm like, I don't know. Well, is she like, how urgent is this home sale? Is she going to evict you? I mean,

what's, what's going to happen? Can you rent this for the foreseeable future? Right. We could probably rent this forever. Um, I mean, obviously not, but. But does the deal still stand two years from now? Let's say you guys pay off the debt. I think it would. The problem is we'll only want to live in it, I think, a max four years or so. It's kind of small. We're going to want more kids.

Then why buy it? I don't want you to buy a house because it's grandma and it seems like it could be a good deal while you're in debt. That's thing one. And then thing two is I don't want you to buy a house because it's grandma and it seems like it could be a good deal while you're in debt. That's thing one. And then thing two is I don't want you to buy a house while you're in debt, period. Yeah, yeah. Does grandma just not need the money that she's willing to take a $100,000 hit? Pretty much, it sounds like.

Is she doing real well for herself? Yeah, yeah, they are. Okay. Well, I would have a conversation with her and say, grandma, this are. Okay. Well, I would have a conversation with her and say, Grandma, this is so kind. Thank you for the

inexpensive rent. Thank you for this amazing deal. We're in debt right now and we're actively trying to get out. Can we make this deal happen X, Y, Z years from now while we continue

this rent price? Because who knows if her situation changes too. Mm-hmm. Is she just trying to, here's the question I'm getting at. Is she just trying to find a way to give you guys a $100,000 gift? I don't think so.

I think she's just really kind and is willing to, you know, she's not going to make any money on it. She's willing to give us a deal if it benefits us. Yeah, I just don't want to buy it and then sell it quickly in like a year or two and let that be weird if we just made money off of you. That's what I was going to say. That's why I asked that question because if she was just trying to give you a $100,000 gift and she doesn't care that much about the property, then if you did buy it after you paid off the set and turned around and sell it,

it'd be no hard feelings. But after you paid off the set, if you bought this house from her and she gave you this great deal, it could feel weird for her if you turned around and bought it and then sold it in two, three years. I don't know. That could feel a little bit weird. Maybe it was something she was trying to keep in the family and give to you guys. I'd definitely do a little bit more research around that. But either way, you guys are not in a position to purchase a home. No. How much money do you guys have in savings? Pretty much nothing. We've got enough for the emergency fund.

I've got enough to pay off this last course in the summer. But that's about it. Yeah, because my worry is you become a homeowner and then this old house. Becomes an old house with a lot of old problems. And the HVAC is starting to go and the roof needs to be replaced and you still are broke. And that part really scares me because we get those calls too. That's real. So I'm going to move slowly. And yes, you might miss this deal, but I hope it still exists two or three years from now

when you guys are in a better place financially. And I would use that ammo to put fuel on this fire to get out of debt even faster. To be like, next time an opportunity comes up, we're going to be ready. That's right. Hey, how old are the kids? We just have one daughter. She's 16 months. 16 months.

Okay. Yeah, I'd be, you know, your wife's stay-at-home mom. She's side hustling. If you guys really want to knock this out, I'd be looking for ways that you can pick up side work that maybe she can extend or start working part time. I'm not sure what you guys have decided family planning wise, but you guys, I definitely want you getting off after the 70K of debt. Sometimes with student loans, people think that they can kind of just let it sit there and, you know, you can take one of the government plans and it's not so much on the budget and they just kind of are there as that mess in the closet that you kind of try to hide from yourself and everybody else so i want you getting after it your cars aren't a big deal you

should be able to knock those out fairly quickly but the goal right now is to get a thousand dollars saved and knock out this debt with the quickness yeah set an aggressive goal go you know what two years we're going to do it what does that mean 35k $35K a year. Yeah. What is that? That's almost $3K a month. How do we find that? Christian, let's set them up with every dollar so that they can use the financial roadmap plan so that they can kind of see what their future and their horizons look like for getting out of debt and they can get some very clear pathways in place. All right, folks, that does it for this hour of the show. We'll see you next time around.

This is The Ramsey Show. Take care.