As the stock market faces worrisome uncertainty, it is worth noting a positive development: Mortgage rates have now fallen below 6.5% for the first time since May of 2023.
People considering buying a home and other real estate transactions are seeking advice. And personal finance radio host Dave Ramsey, no surprise, seems prepared and eager to offer an opinion.
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According to a recent email sent to TheStreet from Ramsey Solutions, a man identifying himself as Randall had one specific homebuying thought on his mind, and he wanted to hear the personal finance coach's thoughts on the subject.
"Dear Dave," Randall wrote. "How do you feel about someone buying a vacation home, then renting it out when they're not there?"
Ramsey had a positive reaction to the idea, but with a few conditions. He also mentioned some realities related to these types of real estate ventures.
"As long as you're debt-free and buying with cash, I'm cool with it," Ramsey wrote. "A vacation home is a really nice 'extra' as you start building wealth. It's still basically a very large, very expensive toy. Still, it could become something of a money maker for you if you play your cards right."
"But here's another side to vacation home rentals that most folks don't consider," Ramsey continued. "You might make some money, but there will almost always be several weeks during a year when it sits there empty. Chances are you won't get rich renting it out, but if you're talking about something that's more of a plan to offset the annual costs of your toy, I don't think you'll be disappointed."
Dave Ramsey offers advice on another real estate reality
The Ramsey Show host had an additional word of warning on the vacation home before fielding another real estate question from a different advice-seeker.
"Be ready to deal with lots of spills on the carpet and damage from your guests, along with general maintenance and repairs," Ramsey wrote. "There's always something that needs attention when you own a property. But if you can handle all that financially and emotionally, I think you'll be fine."
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A man calling himself Jon had an entirely different question for Ramsey about a real estate transaction he was considering — one that involved his business.
"How do you know when the time is right to buy a place and stop leasing?" he asked. "I've operated my own small business for three years, and in that time, I have leased the building that houses my company."
Ramsey approached this subject with what appeared to be a word of caution.
"I'm a big fan of leasing the first few years after starting your own business," he wrote. "Now, it's even better if you can work out of your home when just starting out. But I understand that depending on the type of business you're running, that route's not always possible."
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There are important real estate mistakes to avoid, Ramsey says
The personal finance coach clarified a few things of which to be wary when making the leap from leasing a piece of property to buying it.
"You should only buy a building when you have a really good idea exactly what your building needs will be, based on a solid track record," he said. "Growth in business is a good thing. But in some cases, you may want to hold off buying a building if you're growing too rapidly."
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Ramsey emphasized the importance of focusing on the most important goals of a business enterprise.
"Don't make the mistake of focusing too much on real estate, and not on generating revenue and managing your growth wisely," he wrote. "You'd also want to make sure you're going to be in anything you buy for a while, because you don't want to be stuck with a residual value — the remaining value of an asset after it has been fully depreciated."
Ramsey explained his belief that, if possible, it's best not to make too big of a financial commitment in real estate during the initial few years a business is operating.
"In the first three to five years of starting your business, it's always a good idea to lease," Ramsey wrote. "After that, and once your company has a proven record of success, you can think about leasing with an option to buy, or — in the right situation — buying a building."
"Debt-free, of course!"
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