Dave Ramsey’s Approach To Debt & Why Real Estate Investors Should Think Differently

Dave Ramsey media pundit, author, speaker, and investment guru— very early on in his career, went broke in real estate. Subsequently, he developed an extremely conservative outlook; sharing words of caution to clients regarding real estate investing and leveraging debt. So conservative is his approach, that some argue that this is like the market ‘over-correcting.’ There is no question that Ramsey has commissioned solid research and written great tips on getting out of ‘bad’ debt, but many find it difficult to impossible to blend his approach to money with what actually works when it comes to investing in real estate.

The Dave Dilemma

Ramsey’s main philosophy is that ALL debt is bad and that one must get out of borrowing ASAP;  using only all cash going forward. The advice to use ‘cash-in-hand’ is what he teaches the clients who attend one of his very expensive and exclusive events— events so exclusive in fact, that ticket purchases are not available online and one must utilize a phone call sales pitch to discover pricing.

His style has worked for many over the years helping those with ‘bad’ debt decrease high credit card balances, minimize student loans, and pay-off car payments, but when applied to real estate investing, the theories wane in their advantageous ability. At times, aspiring real estate investors have found Ramsey’s thoughts on money confusing and stressful, as witnessed in a recent debate on the BiggerPockets Forums. First, it is worth noting that many overlook the fact that he actually does say it is OK to use mortgage loans to buy real estate. He even promotes for a mortgage company. Still, this particular piece of advice is geared towards buying the property as a home versus a investment.

Leverage To Your Advantage

One aspect that makes real estate so powerful is the use of leverage— ‘good’ debt paid by others. When using debt correctly, one can speed up the process and lessen debt faster, while simultaneously building up wealth and passive income for retirement.

Even good debt can be a gift and a curse depending on whether used correctly or incorrectly, but used wisely, it does wonders. Choosing to buy a multifamily property could be an example of the amazing potential of leveraging the real estate market. As a buyer, you could pay $1M in cash for the property, or if you were thinking on a larger scale, make a $250,000 deposit. Then, leverage the remainder of the price tag and use the $750,000 you have in the bank to buy three additional properties.

Would you rather earn appreciation and income on a single $1M worth of property or $4M worth of property in a portfolio?

Leverage To Decrease Risk

Having all cash in a deal for a single investor is highly risky due to exposure. That’s why sophisticated homeowners and investors typically take out mortgages, even when they don’t need them. I mean do you think Mark Zuckerberg really needed a loan to buy his home?


Ramsey’s approach to money can be frustrating and make many other methods of investing impotent when applied incorrectly. If you have piles of cash, you can use his methods, but that isn’t to say it will be the best choice. At the very least, it will make your process extremely slow if you’re trying to save to buy buildings for cash. Of course, purchasing cash still holds a risk. Good leverage can be very good and safe if used wisely. If you are determined to get into investing without borrowing a penny, you can start generating income via debt and equity partnerships, crowdfunding, or even wholesaling real estate.