The Ramsey Show - App - When You Get House Fever You Get Stupid (Hour 3)

Episode Date: January 18, 2019

The show about you

🎵 Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Mark is with us in Oklahoma City. Hey, Mark, welcome to the Dave Ramsey Show.

How you doing, Dave? Better than I deserve. What's up? Okay. I have a opportunity to obtain a sponsorship to get my Series 7 license. And I wanted to know if I cut back on my job and the goal of paying off the home to obtain this goal. To study for the test, you know, it would probably take five months or so. So it's a very short-term goal. The house is obviously about a three- or four-year goal.

We're currently in baby step four, five, and six. So how much income will you lose when you cut back? So that's the other kind of thing that kind of throws my thinking off. In June of last year, I got laid off from my job, and I've been laid off this entire time. Recently, we self-funded our way to go to truck driving school, and I got done with that, and now I have a job driving a truck, and I'm making about $60,000 a year there. You said when I study for my Series 7, I'm going to cut back on my job.

What do you mean by that? Well, I'm working 13, 14-hour days, and I'm also going to school online to obtain a bachelor's degree in finance. And so all of it together, it's just kind of a lot. And I think, like, I'm focusing on so many different areas, and I'm not really focused in one area, so I feel like all the other areas might sacrifice a little bit. Okay. I still haven't heard how you're working 14 hours a day driving a truck

yes okay and you can cut that back to instead of 60 or 70 hours a week you're going you can cut it back to 40 i don't think i can cut back that job i would have to go find another temporary job for the time being because i don't think they're going to allow me to cut back that job that i'm in now okay and uh so you went from being laid off to making 60 000 thankful you got a job to now you're getting ready to change jobs again so that you can cut back your hours i yeah the opportunity came up to obtain a sponsorship for the Series 7. It came up while I was in the truck driving school, so it was just kind of like, okay. I mean, listen, I've had a Series 7. The opportunity to get a sponsorship for that's not a big deal.

People hire people every day to sell stock and sell mutual funds and get a Series 7, and they sponsor them all the time to do that. Most every company out there that's hiring will sponsor you to do that. That's not like you got into med school or something. It's not that rare. It's not that big a deal. Taking the test is very hard. It's about like taking a CPA.

I mean, it's a rough test. I'm not sure it's a five-month prep, but it's a hard 90-day prep. And, you know, so what is it you want to do with your lifelong term? My lifelong goal is to be a financial advisor. That's definitely what I want to do. Okay, cool. And so you're making $60 now. If you cut back to $40 in a different job, what would that job pay?

I think probably, you know, maybe $15, $17 an hour. Okay. And you would take like 40 hours? Yeah. And I would invest time in school and then invest time in also studying for the Series 7. I've tried doing it this way, but I just feel like I'm not retaining the information that I need to retain. And that, you know, I'm just focused in too many different areas. Oh, yeah.

It's hard to study for a Series 7 and work 14 hours a day. I got that. That's logical. What I'm trying to do is figure out how to feed your family because you're making 60 and you're getting ready to go to 30. Well, my wife also makes $40,000. So right now, currently, we have a combined income of $90,000. But you wouldn't then. You would have a combined income of about $65,000 or $70,000.

Yes, and we have been making it just fine for the last six months on unemployment, making what I was making there. On unemployment, I was making $1,760 a month. Okay. All right. Well, basically what you need to understand, and the reason I'm asking all these questions is, you're paying $30,000 for the opportunity to take the Series 7. That's what you're telling me. You're going to give up $30,000 of income to go take your Series 7.

So would you recommend putting it on hold until... No, I just want you to say that out loud. And what that brings me to when I say it that way is, I wonder if there's something you can get that's better than $17 an hour, if you can get a more traditional 40-hour in-town route type of a thing that's not $17 an hour. $17 an hour for a CDL sounds low to me. It is low. I wouldn't be using my CDL if I did that.

I would just be going and getting a job that I could work 40 hours a week. Okay. Let's try to get a i mean if you got an in-town route that's not a 14 hour a day thing that's true you could get an in-town route maybe making 40 or 50 and let's kick that up and then you're paying 10 or 20 of lost income in order to take your series 7 i think that's a better way of looking at this rather than just going um you know well no matter what matter what it costs, I'm going to take my time off. No, we need to have a little better plan on the income during the interim.

But, yeah, I think you pursue this, and you're right. I'm not arguing the point that, I mean, again, I'm taking that test. It was a long, long time ago, but that's a tough test. It's right up there with taking CPA or something along those lines. And so you really do have to study. I took my real estate license test when I was 18 years old in 27 minutes. It was not a tough to study. And I got a 94.

But that test was stupid. It's a lot harder now. That was a long time ago. But, you know, Series 7, Series 63, that stuff's real. So you really do have to use some brain cells on that one. Yeah, I think you do this, but I think you slow down enough in this process to land a good CDL job 40 hours a week before you quit the 14-hour day job. Then you start the Series 7 stuff. But you don't just go, well, no matter what it costs, I'm going to go do it.

No, no, that's not going to be smart. There's a way to do this that's more gradual and wise, and that's what I would tell you to do. So good question. Thank you for joining us. We're glad you're here. This is common sense for your dollars and cents. And sometimes it's just you and me talking it through, baby.

And life is just entertaining. That's why our ratings are so high. And 15 million of you tune in every week. Thank you for doing that. This is the Dave Ramsey Show. I'm going to go on a little rant here for a minute. I took a call from a father who wanted to know how to plan for the care of his special needs daughter after he dies. Why is it that parents of special needs children are so deliberate in their planning while other parents have a tendency to be sloppy? Do the needs of your family matter less if something happens to you? Oh, I'm sorry, did I

just guilt trip you into getting some term life insurance? Well, then good. Your family needs you to step up. Having the right amount of term life insurance is a matter of personal responsibility. If you want to use the new year as a reason for doing the right thing, then do it. Term life insurance is something every family needs, which is why I talk about it every day. It's not complicated, it's not expensive, and you need to do this now. Zander Insurance is the only place I recommend. Visit zander.com or call them at 800-356-4282 please learn from other people's mistakes and get It's hard to believe it's been 40 years since I passed that real estate test. I did take it in 27 minutes.

I did get a 94, but nowadays real estate tests are a lot harder. I was 18 years old, and I sold a house two weeks later. Now, let me just help you with this. If you buy a house from an 18-year-old three weeks after he got his real estate license, you're not smart. I appreciate my old high school buddy letting me sell him my house. We were both just out of high school. Oh, my gosh.

Me and my disco clothes. Oh, and I had hair. Oh, can you imagine? I was driving a two-door car showing houses. Oh, my goodness. Real estate business. I love the real estate business. I grew up in the business.

Obviously, the reason I got my license at that age, mom and dad owned a company, and I wanted to be a real estate mogul. I went and got my real estate and finance degree, as a matter of fact. My degree in finance has a specialization in real estate, and sold real estate. And sold real estate all the way through college, even in those high interest rate days. And even though I was as green as a gourd and didn't know what I was doing, I sure thought I knew what I was doing. And I convinced a few people I did know what I was doing. And I got some houses sold, so I did the job.

But man, oh man, oh man, what a business. I love the business. I love real estate. I love helping you guys buy houses and you know we've got 2 000 or so endorsed local providers across america now that we endorse and when you get ready to buy a house these days it's a complicated process it was complicated way back then but it's really complicated now. And there's all this bad information because you know everything on the Internet's not true, right? I mean, you know, because Zillow says it's worth something doesn't mean it's worth that. You know, the tax assessor or the tax value, who cares?

Tax value has absolutely nothing to do with market value. It's supposed to, but it doesn't. You can't use that as your gauge. So you have to learn this is the most expensive thing most people ever buy a house and you know it's an emotional process you get excited i was out this morning riding around i was looking at some properties and some buildings on some properties getting learning some things and And I just got real estate fever this morning. It happened to me again. It's happened to me like a bazillion times in my life.

You ever get the fever? You get house fever? When you get house fever, you get stupid. You're willing to pay too much. You're excited. You've got to focus. And you're willing to buy a house when you're not supposed to buy a house. You're not ready to buy a house.

You're going to sell a house the wrong way. Oh, man, you can get in a real mess. So let me give you a couple things you need to do. If you're thinking about buying a house, and I want you to own real estate, owning a home and paying it off is one of the data points of an everyday millionaire. So we want you to do that, but we don't want the house to own you. So here's your rule of thumb, okay? Number one, you don't buy a house unless you're out of debt and you have your emergency fund.

Now, everybody's going to tell you you need to run and buy a house, but everybody's broke, and you don't want to listen to them. It's not a popular thing to move a little slower with more maturity and more wisdom. But who gives a crap? This is not a popularity contest. This is you, your family, trying to build wealth and build stability and sustainability. Don't buy a house until you're debt-free and you have your emergency fund, and then you save up your down payment. And that's what we do. Ding, ding, just like that.

And then when you do buy a house, I love the 100% down plan. I love it when I talk to a young couple. Man, these killer millennials that I get to talk to, they're incredible. And they say, you know, we got married. We were 23 years old, and we lived in a garage apartment, and we were making $110,000 a year, and we saved $50,000 a year for four years, and we were 28. We paid cash for a $200,000 house.

I love the 100% down plan. And people are doing it, by the way. I recommend that. But if you're not going to do that, here's the most you should borrow. And it's the only thing I don't yell at you for borrowing, but I would prefer you didn't borrow or that you borrow less, less, less, less, and get it paid off as soon as possible. But the most you should borrow is a home on a 15-year fixed rate where the payment is no more than a fourth of your take-home pay.

So don't buy a home until you're debt-free, have your emergency fund plus a down payment on a 15-year fixed rate where the payment's no more than a fourth of your take-home pay. And when you pick a real estate, do not do real estate DIY. This is not DIY, okay? This is a $200,000, $300,000, $150,000 transaction. You don't work on your car, and that's a $1,000 transaction. You don't open up the back of your computer and try to fix that and that's a five hundred dollar transaction and yet you somehow think you're just going to waddle

up and not get in a bad deal buying a house or selling a house you make a mistake selling a two hundred thousand dollar house if you if you make a ten percent mistake that's twenty thousand dollars think about that i mean if you make a one percent mistake it's two thousand dollars count out ten twenty one hundred dollar uncle benjamin franklin's right in front of you on the table right now in your mind that's's 1%. And if you're a novice, if you've bought and sold 10 houses, you're a novice. You are likely to make a 1% mistake at a minimum without a pro in your corner. See, you put a pro in your corner.

It's that simple. You don't do this without a pro. Now, everybody that's got a real estate license is not a pro. Your Aunt Sally, who got her license three weeks ago, is not a pro. Now, everybody that's got a real estate license is not a pro. Your Aunt Sally, who got her license three weeks ago, is not a pro. She's a sweet Aunt Sally, but she's a novice. And you don't put her in charge

of your largest asset because she's your Aunt Sally. Well, Aunt Sally, you'll get her feelings hurt. Well, so what? She's likely to screw it up more than you are if you did it by yourself. Because she's an enthusiastic ignoramus. No. No, no, no, no, no.

Well, I know this guy at church. Good Lord. You don't pick anything else out that way. You know, when you need to get a mechanic, you don't go, well, my Uncle Henry got a toolbox last week, and so I'm going to let him work on the car. No. You look at their Yelp ratings. You talk to them. Well, my Uncle Henry got a toolbox last week, and so I'm going to let him work on the car. No! You look at their Yelp ratings. You talk to them.

You find out if they're a pro, how long you've been working on cars. 26 years. Okay, I got an ASC certification. Okay, we'll let you get your butt under the hood. But other than that, no. I bought a, you know, I was at a Holiday Inn Express last night, and I bought a toolbox on sale, and it was serious when they're going broke. No! You're not a mechanic.

No, you're not a real estate agent. Yet. You got a license, but just because the state certified you doesn't mean anything. Listen, you want someone that's a pro. You want someone, if you're buying a house or selling a house, that's doing 50 to 300 transactions a year. If they've not done 50 transactions in their entire freaking life, no. No, no, no, no, no, no, no.

Well, I'm going to sell it myself. That's stupid. You're not going to make any money on that. Again, if you make a 2% error, all of a sudden you didn't save anything. Well, I'm saving a 6% commission. No, you're not, because likely the person buying it is going to bring their agent up, and you're going to pay that agent 3%. Now you're only saving 3%, but you've been on the market twice as long,

and you undersold the property, and you didn't know what you were signing up for with the home inspection and what you tied yourself into to do repairs that you didn't intend to do. Oh, and you miscalculated the closing costs. You ate up any possible savings because you don't know what the flip you're doing. Stop that. Stop it. So you get a pro.

That's why we vet these pros for you. The entree, the entree. Well, they are entree leadership. They go through entree leadership, but the endorsed local providers for real estate. They're the best of the best. They're high octane, high protein Entrez Leadership. They go through Entrez Leadership, but they endorse local providers for real estate. They're the best of the best. They're high-octane, high-protein in your area. And if you get ready to buy a house or sell a house, you need a pro. Somebody really knows their stuff, and we've vetted them for you.

And if you're thinking about buying a home and you think you've got a house fever but you meet the guidelines we're talking about, I can help you with this. Our new Home Buyer's Guide starts out by teaching you real estate lingo, what to expect at the closing, what happens after the signing on the dotted line. It's got the questions you need to ask an agent when you're interviewing them, and it's completely free to download. Go to DaveRamsey.com slash Home Buyer's Guide, or go to the site and look for the yellow banner at the top.

The Home Buyersguide. It's a free download for you. DaveRamsey.com slash Homebuyersguide, or the yellow banner at the top. It's free. This is the Dave Ramsey Show. There's nothing smart about smartphones if your wireless plan is blowing your budget each month. Pure Talk USA offers smarter wireless with unlimited plans starting as low as $20 per month. You never pay data overage fees and we never turn off your data. No contracts, no hidden fees.

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Enter promo code SAVEDAVE and receive 50% off your first month. That's puretalkusa.com. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Terry is in Austin, Texas. Hi, Terry. Welcome to the Dave Ramsey Show. Thanks, Dave.

How are you doing? Better than I deserve. What's up? I'm 63, retiring and selling a home with net proceeds of around $600,000. We are now looking at a retirement property in a new location. The advice I'm looking for is this. Do I carry a mortgage in retirement, or do I pay for the home outright and be mortgage-free?

Now, I've got about $4.5 million in retirement funds active in the market. The target property mortgage would be right around $600,000, $3,000 a month at a 30-year mortgage. I've got about $600,000 in emergency cash that's not in the market. I've got a $3,000 a month annuity that turns on in June of this year. And at 66, I've got $3,500 a month coming in from Social Security. And my plan is to pull 4% off that $4.5 million that I've got in the market. What price range of home? You said mortgage. What was the price range of home?

$800. Okay, and you have $600 from the other house and $600 in cash. Yep. Why would you not just pay for it? Well, that's the question. It's just whether I carry a mortgage or just pay it off. And I'm touring with, because the reason I'm conflicted is because of keeping it in the market. You don't want, no, no, no, no, no.

You're not taking anything out of the market. You have $600 in cash from the sale of the house, and you've got another $600,000 in your emergency fund. Correct. That's not in the market. Well, that's what I'm saying. Instead of paying the home off, carrying a mortgage, and putting that $600,000 into the bond market.

Instead of putting it in the market. But you're not pulling any out of your $4,500. That's correct. Yeah, you've got $ any out of your four and a half. That's correct. Yeah, you got four and a half plus 1.2. That's correct. Okay. Yeah, you pay cash for sure. There's no way I'm going to have a mortgage.

Congratulations. How much of this did you inherit? Dave, none of it. None of it? Zero? I'm just a working class guy. Working class? What did you do for a living? I was a salesman.

A salesman? Good. What was your best household income year ever? $700,000. Whoa, you killed it. You were a great salesman. Good for you. Okay, so I see how you did this then. You made a lot of money and you saved most of it. I'm a good saver.

Yeah, you are a good saver. Well, and I can tell that because your questions are very detail-based and very intentional. You've already laid this out three different ways in your mind in great detail. That's how you got here was your intentionality. I mean, because you're sitting on almost a $6 million net worth. Right? Yeah. And you did this from nothing.

Way to go! Touchdown, coach! Good job! Well, thanks. I appreciate it. What's your advice to the 26-year-old salesman that's listening? Live under your means. It's not what you make, it's what you spend.

Mm-hmm. One, okay? And don't carry any debt. I'm 100% debt-free and I've been that way for the last 30 years. Mm, okay. All right.

And don't, debt is like a black hole with a chain around your foot pulling you over the side. Mm-hmm. Okay. So you don't want to do that. No debt.

Good job. I love it. Very cool. Well, I just want you to take your own advice then, okay? All right. That's it. That's why I'm conflicted. There is nothing to be conflicted about.

Think about what brought you here. What brought you here was what you just told that 26-year-old, and that's what's going to keep you here. No debt, living on less than you make, and managing and being intentional with the investments and with the process. And you did this steadily over time. So the 4.2, how much of that's 401K? 2.5.

Okay. Wow. Good for you. You're a classic, man. I love you. I'm so proud of you. Well done, sir. You are living the American dream.

You are an American, not an Americant. Hold on. I'm going to send you a copy of Chris's book, Everyday Millionaire, because you are one. Everyday people, I'm just a working class guy, built extraordinary wealth, and now you can too. Look at that. You made a great income, though, dude. But your net worth is way above a million, too. I mean, it's about six, so a little over six.

So good job. Ding, ding. I love this. So fun. Yeah, definitely pay cash. Open phones at 888-825-5225. Nick is in Phoenix. Hi, Nick.

How are you? I'm doing good. Thanks. My question is, I make a pretty good income. I don't make as good as the last guy, but I am mostly debt-free other than my mortgage, and I just want to know what to do from here on out. You've got me motivated to work towards retirement, and I'm in a position where I could either buy some investment properties in the next coming years or pay off my mortgage.

No, it's not or. It's just which one I do first. Right. We do both. It's just which is the order, right? Because even if you bought investment properties, you turn around

and pay off your mortgage. But if you pay off your mortgage, then you turn around and buy off investment properties. So you have your emergency fund of three to six months of expenses? You know,

I'm a new listener, so I don't know a lot of the stuff you're talking about, but I've got some money in the bank. How much money you got in the bank?

Currently, probably $15,000 15 000 okay and what's your household income i make about 300 000 my wife does about 60 000 okay so first thing is you're probably a little light on cash i would build that emergency fund up a little bit given your huge income it doesn't have to match your income but three to six times your monthly expenses just so you're sitting on cash sitting there up to a certain point gives you a level of peace and 15 is a little thin for that i would have that at 30 to 40 if i were in your shoes okay so that's first thing i would do the second thing i would do then

is i'd start putting if you're not already 15 of your household and income away towards retirement how much are you putting towards retirement now i put put the $18,600 into 401K. And my wife does, I'm not sure what my wife does, a couple, probably $6,000, $7,000. Okay. Let's max out both of those, given your income. And it's $19,000 this year. How old are you? Okay.

I'm 40. Okay. All right. $19,000 this year, you can max out and max hers out. And that'll get you up to 15%. You want to be at 15% of your household income going into that. Everything above that, I throw at the house until the house is paid off. Once the house is paid off, then you've got cash coming out your ears.

You're just going to be cash flow crazy, and you quickly save up and pay cash for your first rental. Then you've got even more cash coming out your ears because a rental with no debt, whew, they cash flow like a bandit. And then second one man i'm up to i got a bunch of real estate and my real estate buys more real estate very quickly you know what i'm saying because i don't have any payments and it's all just pure cash flow and it snowballs it snowballs in a positive way later but let's get your house paid off first and then let's pay cash for your rentals one at a time as they go and then that what you're going to see as you're doing that these slight little changes that i just made are taking the off the table any little stress points

that would be there and you're down into just candy land and the game of life and you're just passing go and collecting 200 and passing go and collect the 200 you're just going to go win win win you know it's monopoly and you're winning and know, when you get in a zone like that, that's where you're getting ready to be. You're very close to having that feeling. Knock that house out as soon as you get the 15% going into retirement and get that emergency fund up to about 30 to 40. So good job, man. Good job.

Thank you for being a new listener. We're honored to have you. Wow, I'm talking to some people killing it today. Sometimes I talk to people who are broken and broke. I've been both. I've killed it and had good times and I've had bad times. I bet you have too. I bet you have too.

There's a lot of stuff you can do with this. But the thing is, most people overcomplicate things. They make things more difficult than they really are. Some of the most profound, life-changing things you'll ever learn are very easy to understand but hard to do. overcomplicate things. They make things more difficult than they really are. Some of the most profound, life-changing things you'll ever learn are very easy to understand but hard to do. Love your neighbor. Yeah, but he's a jerk. It's hard to do, but I know what I'm supposed to do.

Live on less than you make. Yeah, it's hard. This is The Dave Ramsey Show. Our scripture of the day, Proverbs 14, 23, All hard work brings a profit, but mere talk leads only to poverty. Franklin D. Roosevelt said, There are many ways of going forward, but only one way of standing still. Sharon is with us in Amarillo, Texas. Hi, Sharon.

How are you? Hi, Dave. I'm well, thank you. And thank you for taking my call. My situation is that I own a house in another state. And in order to sell that house and avoid the get the capital gains exemption, I would have to move back there and live in it for two years, which is not my preference because I've been gone from there working for eight years now. a charitable remainder trust or a charitable gift annuity or whatever the terminology is for something like that to get a monthly income while I still live. And then obviously the rest goes to the charity.

I called AFA about it, but they don't have anybody in the area where the house is that could deal with that. I would not do that. I would not do that. I would not do that. What is your net worth? Net worth? Yeah. How much money do you have and stuff do you have?

Do I have to say it here? Well, I mean, are you worth $10 million or over a million dollars? Oh, heavens no. No, no, no, no. Are you worth over a million dollars? Probably. Okay. Good. Good. no, no. Are you worth over a million dollars? Probably. Okay, good. And so what's this house worth?

Zillow, which you mentioned a while ago, says $300,000. Okay, good. And how long have you had it? 25, 26 years. So you paid $60,000 for it or $70,000? It was $80,000. $70? It was $80. $80, good guess. Okay. And have you depreciated it and written it off on your taxes while you were renting it?

I haven't rented it. Oh, you haven't rented it. Okay. So your gain would be $300 minus $80. So let's just rough it out after expenses and say your gain is $200,000. This is going to cost you $30,000 in taxes. That's what your tax bill is. And also, your AGI goes up that year that you sell it, so that makes your Medicare Part B go from $135,000 up to like $400,000 and something.

And that goes on for two years. And then your Social Security is 85% taxed. And there's just so many other financial ramifications. Are you sure it's going to pop over the AGI? You're positive? Well, how could it not? If you make $200,000 profit on selling a house, how could it not affect your AGI? Yeah, you're probably right.

You're probably right. Okay. All of that added up, though, doesn't add up to $40,000 total, including the $30,000 tax bill. It's just not a deal breaker. And what you're getting ready to enter into is going to be so cumbersome. And it's just not the right tool for what you're talking about. Now, would you consider owning real estate in your state

and make an income off of that? The state where I'm living now? Yeah. Would I consider it? Well, yes. Okay, what if we did a 1031 tax-deferred exchange, and let's just sell the house and buy another piece of property, and there's no gain on it at all, and no AGI hit?

Wow. house and buy another piece of property and there's no gain on it at all and no agi hit wow i knew i should call you that's something that's something i've never considered actually i've never even heard of it okay you know in the old days if you traded a rental property for another rental property you roll your equity and your capital gain into the new property. You remember that? Does that ring a bell? Well, I never had rental property. Okay, well, that's what's called a 1031. It's your trading property, and it's under Section 1031 in the IRS Code. And so you're trading this house for a house in Amarillo or two houses in Amarillo.

So you can trade the $300,000 house for $250,000 houses and have you two nice little rentals sitting there that are paid for that you just take the rental income off of those and there's no capital gains at all because you roll your capital gain into those deals. You roll your old basis into those deals. Now, you don't have to actually, in the old days, you used to have to select the property in Amarillo and get the guy selling that to take your property over in that other state as a trade. And that was impossible, right?

So you don't have to do that now. Now the IRS has a guideline with some of the title companies. And you just need to get with a good real estate agent that knows their stuff. And you sell the property into a title company escrow account that has a 1031 certification with the IRS. And then you're allowed to use that money to buy the other two properties. You have to select them and close on them within 180 days, okay, from selling that property into this escrow account. So you sell the property, you put the money in a savings account

with the title company, and you use that money to close on the deal, on the next deal. That's called a 1031. And your tax person will know what that is and a high quality real estate person will know what that is and so that that's what i would do in a heartbeat well so i need to have a couple places lined up that i would want to buy no you can you got six months to pick them out from the time your other property sells okay so but i'll be looking in neighborhoods and have a have a good idea where i'm going to land No, you've got six months to pick them out from the time your other property sells. Okay. But I'd be looking at neighborhoods and have a good idea where I'm going to land and what I would do. And, you know, decide something that's what you want is something that's going to be easy to manage.

You don't, you know, see you want a good quality property because that way you get a good quality tenant. But not so super expensive where it's hard to rent, you know. And $300,000 in Amarillo, that's a pretty big house. So you might do two $150,000s or something like that. And that doesn't trigger a tax bill? None at all. It's 100% tax-free, so long as you do an even trade, meaning you spend all the money you got.

Now, if you take the $300,000, put it in escrow, and you only bought $200,000 worth of property, you'd trigger taxes on the other $100,000, right? Mm-hmm. That kind of a thing. But you've only got a $200,000 gain. You don't have a $300,000 gain. But the house is paid for, so you're going to have $300,000 in cash. Okay.

So I have to spend the gain. I wouldn't have to necessarily spend. Exactly. You've got to roll your gain spend the gain. I wouldn't have to necessarily spend. You've got to roll your gain. You've got to roll your gain into the next. So get with your tax person and get the guideline on it. It's called a 1031 tax deferred exchange. You need to know about that,

and you need to use an escrow company that has the IRS qualification because you can't just go do this up in thin air and make it up. It has to go through a certain process, and the closing is $1,500, probably more expensive than a traditional closing. You're going to pay a little more to close a 1031. But it's worth it because you're saving $40,000 here or so, give or take, all the different things and all the bother and the hassle and all that. But the charitable remainder is not a good plan in this situation.

You're not in a situation. The main thing a charitable remainder trust is used for is to avoid state taxes when you're up over your limits on estate taxes, and you're not over those limits. You know, you don't have an estate over $11 million, and you've got to have an estate over $11 million to be having a tax problem right now

on federal estate taxes. So good job. Way to go. That was fun to talk about. That was fun to talk about. That was a good day. Hey, you people are smart out there. See how dialed in she was? She pinned me the wall. I almost had her popping that AGI up.

She'd already figured that out. That was a smart one right there. She's good. I like it. I just about screwed that part up, but good for her. Well done. Well done. Good stuff.

They were trying to follow the house payment less 25% guidance. Should that include taxes, insurance, and HOA? I just say PITI, principal interest taxes and insurance, 25% of your take-home pay. And that's a guideline because I meet people with 50% of their take-home pay, and I'm trying to keep you from being house poor. I want your house to be a blessing and not a curse. We don't want the house eating your lunch blessing and not a curse we don't want the house eating your lunch eating you alive we don't want to do that so let's not go that way that's

the point of the whole thing it's you know if you go at 25.2 you're not going to go broke i mean it's not this is not an exact dialed in thing the point is have a conservative house payment leaving margin and disposable income in your budget to build wealth with. That's the point. And so I don't have HOA calculated into that. No, just PITI. That's all. And I hate HOAs. I'm in a bunch of them, but I hate them.

I detest them. They're generally run by people who need to go get a life doing something else. Barney Fife is always in charge of the HOA. I had a dream the other night that I retired and I became that guy. That puts this hour of the Dave Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. If you would like to do your debt-free scream live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to Nashville and tell Dave your story.