Paying Cash for Property? Why Dave Ramsey’s Advice Will Hold You Back

Tired of being told you need to pay cash for your first rental? We put that myth on trial and lay out a clearer path for building a portfolio without waiting a decade. From the cockpit to closings, we share a working investor’s view on how time, inflation, and smart leverage actually move the needle.

We start by breaking down the traditional cash-only narrative and why it fit the 70s and 80s better than today’s market. Wages have drifted from housing costs, and saving the full purchase price often means missing years of equity growth. We explain the true cost of the time lag, then show how fixed-rate debt lets you benefit from appreciation on the full property value while inflation quietly pays down your loan in cheaper dollars. The takeaway is simple: leverage is a tool, not a vice, and used well, it accelerates outcomes without gambling your future.

You’ll hear candid stories of wins and mistakes: hard money used as a bridge, seller credits that erase fees, and the painful lessons that come from underestimating rehab timelines. We map a practical starter plan—target 20 percent down, build a relationship with a strong bank or credit union, and buy in steady, cash-flowing markets in the Midwest and Rust Belt. We also draw a bright line between good debt and predatory lenders, with tips to stress test deals for vacancy, capex, taxes, and insurance so your numbers hold up in real life.

If you’re ready to trade waiting for doing, hit play. Subscribe, share this with a friend who’s stuck saving for “someday,” and drop a comment with your first market or your toughest lending question—we’ll pull ideas for future episodes straight from your notes.

Transcript

Host Catch-Up And Schedule

SPEAKER_01 0:00

What is up, everybody? My name is Cole. I'm a part-time real estate investor, full-time legacy airline pilot, and a part-time military instructor pilot. I was gone for a couple weeks, no videos, no nothing. I was focused on the military stuff, and then I rolled right into an airline trip to try to remember how to fly the jet again. I transitioned back and forth between the two pretty quickly, and my sister got married in the midst of all that. So it was pretty busy a couple weeks. Didn't have the ability to make a video. This is like a hobby for me at this point. I gotta prioritize what pays the bills. So that's what happened there. Did a bunch of flying, it was a really good time. The airline trip I just did was awesome too. Got it reassigned, which it means you get taken off your normal schedule and put on something else, but they pay you time and a half for that. So it was a really lucrative four-day trip. So I was pumped all around, but I wasn't able to make any videos, so bear with me. This is gonna be sporadic from time to time when I'm busy with other stuff, but I gotta pay the bills. Today's topic is all about the things that I think is wrong with Dave Ramsey for a real estate investor. If you're just trying to pay your bills and stay debt-free and follow his baby steps that he talks about, definitely continue to follow his advice and stick with that. But if you're here because you want to try to build a rental portfolio, I think there's some major flaws with Dave Ramsey and the other people that spew a lot of the same things that he talks about. I think his information is outdated, and I think that it's really gonna handicap you if you want to become a real estate investor. So I'm gonna talk about some of the things through my lens, what I've used and what I've done in my own personal career, and we'll overlay that on this video that I just saw of him recently, and I'll talk through some of the things that I think are wrong with it. So I'll throw up the clip here, we'll play it, and then we'll cut back.

SPEAKER_00 1:32

When I got enough in an in an index fund is what I use, an SP 500 index fund. When I it took me about five years to buy my first income-producing property, I paid cash for it. And then I took all of those rents net of expenses and any other money I could, and I threw it in an index fund until I had enough to buy another property. And then I took all the rents from the two properties and any money I could scrape together from anywhere else, book royalties or whatever else, and I bought another property for cash. And every time I bought another property for cash, I had more cash flow to buy another property faster.

Why That Playbook Is Outdated

The Cost Of Time Lag

Leverage Beats Cash On Growth

Inflation, Risk, And Market Choice

How Debt Works In Your Favor

Real-World Leverage Tactics

Good Debt Vs Bad Debt

Lessons From Mistakes And Fees

Practical Starter Plan And Cautions

Closing Thoughts And Community CTA

SPEAKER_01 2:04

So in that video, Dave talks about how he used index funds to harbor his money until he saved up a bunch and he was able to go buy a property in cash. And then he did the same thing over and over again while adding the rental income as a benefit and a way to continue to grow that index fund money up, and then he could use it to buy another property and just fed itself. He grew a little snowball, basically. And inherently that's not a terrible idea, but you have to look it through the lens that he's looking at it through. He did this stuff in the 70s and 80s, and so his mind, I think he really believes that's what it's like for buyers these days. And anybody here that has lived through the last couple of years knows that that's not even close to true, especially in a post-COVID world, wages and the cost of housing are totally divergent right now. And if you're hoping to be able to pay cash for a house just based off your earned income, more than likely it's not going to work unless you have a really high-paying job. So I think his information there to start is really outdated. But then I also think there's just fundamental flaws with using his philosophy of no debt, paying cash for everything, and trying to build a portfolio because this existence that we have called life does not go on forever, right? There's a time limit. Everybody has one, no one makes it out of this alive. So when you're looking at not using debt, that means that it's going to take you a lot longer to get your first, second, third property. And that time is limiting you from experiencing all the benefits that you would have with through compounding interest, debt pay down, equity growth. And you're really not getting the benefits of one of the biggest things that real estate offers, which is inflation protection. And anybody that's been around the last couple of years knows all about inflation. We're not going to get too far ahead of ourselves. We'll come back and we're just going to go step by step some of the things that I think are wrong with Dave Ramsey's philosophy and why I would absolutely not recommend it to anybody that's trying to build a real estate portfolio. So let's take it from the top. So the first thing that I'm looking at is the time lag, right? So when you look at what it costs back in his day to buy a property, it was significantly less than these days. If you want to say the average house, let's say is$200,000, how long is it going to take you to save up or invest and grow$200,000? Even if you put it in an SPY or maybe Apple, Amazon, some of the magnificent seven, if you invested in those companies and you just let it sit, how long is it realistically going to take you to save up, let's say$200,000 to buy your first property in cash? It's going to take you a while, right? For most people. Because while you might be making$200,000 a year, you're obviously not saving all that. The government's coming after at least a third of it, probably closer to a half of it. And then whatever's left over using to pay for all your living expenses, like we all know. So what's actually left over to save? Maybe it's$10,000, maybe it's$20,000. Let's say it's$20,000. You could be looking at 10 years just to try to get your foot in the door with your first property. And meanwhile, people like me that are using leverage in a smart and effective way have already bought probably dozens or maybe hundreds of properties in that time. So you're really hamstering yourself. And the other thing to think about too is that's$200,000 in today's dollars. That's not looking ahead at what properties are going to cost 10 years from now. I think that's a really big flaw. If you're just going to pay cash for everything, cars and your credit card paying off that kind of debt, sure. I don't really see a huge problem with that. But when we're talking about real estate investing and trying to build a portfolio, debt is one of the biggest things that you can use to help grow your personal net worth and your portfolio. So I think choosing not to, even if you're saving, let's say$50,000 a year, which is really unrealistic for a lot of people. For the average American, that's almost unthinkable because that's probably the most of the money that they're getting post-tax. So let's just say you could do that. It's still going to take you four years, four years of idle time just putting in an index fund or some sort of money market or whatever to try to grow it. I think losing that time is so detrimental to growing a portfolio and you're going to be way behind the power curve. And the other thing to think about is that life does not go on forever. So this ride does come to an end. So if you're just going to continue to kick the can down the road, kick the can down the road, you're missing out on so much of the benefit along the way. So that's the first issue I have. The next problem that I have is if you pay$200,000 cash for this first property that you get, like we mentioned in the last scenario, that means that you're getting no acceleration of your money. In most cases, you can put 20% down. So$500,000 could buy you north of$2 million worth of property. It had you use leverage. And the reason that I think that that's so critical is when inflation impacts the market, inflation doesn't just look at what you put into the deal, it looks at the value of the entire property, right? Just because I put 20% down on a property doesn't mean that I'm only getting the benefit of inflation or just equity growth in general on that 20% down. You're getting it on the entire value of the property. So if you were to buy a property for$200,000 cash, as that property, let's say it's going five, four or five, six percent a year as far as the inflation goes, you're getting the benefit of that on two hundred thousand dollars, basically. If you're to use leverage, then you'd be able to see that over in the case of$200,000, I could get you north of a million dollars worth of property. And that same inflation number, let's say four or five percent on a million dollars instead of just the two hundred thousand, because you're getting the entire portfolio is growing. It's not just the down payment that you put down. Now that obviously works in reverse, it could go down too. You could expose yourself to some risk if the market takes a turn, and that's why I stay away from the cyclical markets like the LAs, the New York City, Miami. Some of these big ticket markets often have really big climbs, but they also have really big descents. In the Midwest, where I'm at, the rest belt, it's steady, easy. Every single year it's a couple percent. For years, it was nothing. From 2008 to probably 2014, there was very limited growth in the Midwest, and it's steadily risen since then because people are getting squeezed and need to find a cheaper place to live. But that's one of the reasons why I love the Midwest is because it's not gonna get you those big climbs, but it's also not gonna take you down and get rid of your equity overnight. To me, that means more to me, especially if you're trying to last long. I wanna I want to be in this game for life. I care more about the 10, 20, 30, 40 year picture instead of the next two, three, four years. Let's say the next issue I have is that inflation is totally taking you for a ride if you pay cash for your property. If you pay just your little down payment to get your property instead of paying cash for it, inflation's working to your advantage because as inflation continues, you're paying back your debt with cheaper dollars, right? Because the dollars are worth less. That's what inflation is, right? So when you pay cash for a property, though, the inflation benefit that you're getting from having your debt locked in on a 30-year fixed rate mortgage or any fixed rate mortgage is negated because the inflation is only really working against the value of the property. You don't have any debt associated with it, so you're not paying anything back with cheaper dollars. And in some ways that could be a good thing, but in most ways, I look at it as a bad thing because if you also extrapolate this out and say inflation is impacting this$200,000 property I paid cash for or a million dollar portfolio that I use with leverage, inflation, obviously, like I said before, is affecting the entire portfolio. So that 4% a year, 5% a year, 6% a year, whatever the number may be, is in fact affecting a lot more dollars than if you had just paid cash. I already mentioned this briefly, but I go back also to what it costs back then to what it costs now. In a lot of markets, you can't touch a duplex for less than two, three, four hundred thousand dollars. So saving up that kind of money in cash when wages had not nearly kept up with that is really hard to sell to somebody. And when you look at it and you say, Oh, you just need to keep saving. Dave Ramsey's been rich for much longer than I've been alive. So he doesn't even really realize what it's like for the working class person. He owns a big company, sure, he has employees, but what does that even mean? He is paying people's wages, but he doesn't know what it's like to live off of those wages. And I think he likes to think that he's still one of the commoners, one of the people, but he's clearly strayed from that and he's he's not one of us anymore. I would really take what he says with a grain of salt. If you're just trying to pay your bills, you're just trying to keep your head over water, that's one thing. But if you're trying to build a portfolio using leverage, you have I think it's a necessity, honestly. I think it's a non-negotiable. If you want to build something big, and maybe if you just want a couple duplexes, sure, you can pay cash for them, no big deal. But if you want to build something big, debt is your friend. And the people that got me started on this have been using debt for decades now, and it's worked amazingly for them. I'm trying to replicate the same thing on a much smaller scale, but I'm hoping to grow. And the only way I can grow quickly is with debt. The big reasons that I'm a proponent of debt is because I'm getting a larger amount of dollars exposed to the market. And in my case, I think right now being exposed to the market is a good thing in a lot of ways. If you buy right, if you buy at the right prices, I think that it makes a lot of sense, but it also opens up opportunities that you wouldn't otherwise have. I just closed another two deals with hard money while I was going out training, and that means I had basically no money in the deal because I got a seller credit that washed out most of the funding fee. So I'm in most of these properties for very little money. And high leverage is dangerous if you don't buy right, but if you're paying decent prices for properties, it's not a big deal. And my plan is to basically take all these properties I bought with hard money, wrap them up into one big loan, and ship it off to a bigger bank for a long-term lending solution and hopefully not have to put any more down on them. So I can get in and out of these properties with very little exposure because I was able to basically take my down payment and eradicate that by using hard money, using seller credits to pay down the funding fees from the hard money lender. And then when it comes to the repairs, I'm using rental income to pay for the repairs. So it's not coming out of my pocket, it's coming out of the bottom line for the business, but it's all feeding the business, right? The four or five, six thousand dollars I'm spending on repairs is gonna equate to 10, 20, 30, 40,$50,000 worth of equity in that property. So it's a price I'm willing to pay. And if you can extrapolate that out, you keep doing that. The little numbers turn into big numbers and the business starts feeding itself. So I really would strongly advise you to get smart about leverage. Not all leverage is good leverage, right? There's certainly bad lenders out there. There's people that are going to take you for a ride with all these fees to fund the loan. We are joking. I joke with my buddy, we call it the lending hut. The lending hut is just a generic term for crappy lenders that will just lend anybody money because they're charging such high fees. The place, the lending hut, will give you money no matter what. And that's a shout out to Tim Dillon. He'll never watch this, but he's a guy that mentions that in one of his videos about working at subprime mortgages. And so the lending hut, those type of places, they'll lend to you no matter what. You don't want a place like that necessarily. Sometimes it's a necessary evil, but you don't want to make that your standard practice. Not all debt is created equal. Some debt is good, some debt is bad. You need to get yourself educated on that stuff. And it doesn't take much these days. You can sit and watch YouTube videos, you can go on Chat GPT, you can Google around, and you can understand, okay, some of the bigger banks have less fees, but they're a little bit harder to get loans from because you have to show that you're a credit-worthy borrower. Some of the smaller banks or some of the more like obscure banks, they're more willing to give out money, but they're going to charge a lot more fees. And you have to balance that and understand, okay, is it really worth it to pay a$5,000 fee to this bank, or should I try to take it to a larger bank or a credit union and try to work something out with them so I don't have to pay those fees? And as time goes on, you'll start to get the ebb and flow of things. You get to meet people, you can build relationships, and you can use those to your advantage and get educated by working with people. Some of this is just trial and error. I've made so many mistakes, I've left so much money on the table for making it doing things wrong or not understanding what I'm doing right away. And I learned a lot in that process. I wouldn't prefer to learn that way. Losing money is never the way that I would like to learn, but sometimes it's a necessary evil. And I've definitely taken a lot of those lessons and moved forward with them. Sometimes lessons that I learn are most well taught when it's affecting my bottom line. When I see$10,000,$20,000,$30,000 losses because of issues that I had with choosing the wrong lender, getting the wrong type of financing for the deal. When I see that happen, I'm going to internalize that. I'm going to learn, I'm going to move on and be better because of it, because it's affecting me like directly. If you read about it in a book or you look at it on somebody's Wikipedia page or a YouTube video, sometimes it doesn't have the same effect because you're talking about somebody else's issue, it's not your own, right? So when it directly affects you, that can change things. But um, it's kind of just a quick down and dirty. I just think Dave Ramsey's information is a little outdated these days, and I wanted to address it because I saw this video and I was just like, man, if you're a new investor, it's really gonna take the wind out of your sales because you're thinking now you need a half a million dollars to even just get started, when in reality you really don't. I started with like three or four thousand dollars. That was my down payment for my first house, and it just snowballed from there. And it the thing is it takes a long time. The thing that Dave's talking about is good in a way because it's gonna show people that this is a long game. It's not gonna happen overnight, it's not even gonna happen in 10 years, probably. So you have to be willing to stick with it. But at the same time, his vision of what you should do, I think is pretty unrealistic for the modern borrower, for the modern investor, for the young people that are coming into this. And if you want to get started with it, I think the best way to do it is to get a good relationship with a good bank, a larger bank, maybe a credit union is what I usually use, and then try to develop things from there and save up that 20% down payment. Don't go the hard money route right away unless you really need to or you have a deal that's worth doing it, because those places can get really slippery really fast if you underestimate your cost to fix a property or you underestimate your time to get a new loan on it. Now you're paying extension fees and more interest-only payments that are usually double digits, and it just gets messy. So I'd recommend save up to 20% down payment for something that you think is in the ballpark of what you would want. You know, say$200,000, you're gonna need about$40,000 down. Save that money up and then go strike. You can look at properties and you can window shop along the way. I don't think that's a bad idea. That's how you learn the market. But until you have that nest egg built up, there's not a whole lot you can do. And for most people that aren't in the Rust Belt, finding properties that are under$100,000 is rare. If you're in Milwaukee, you can find them all day long. So that's a little bit different scenario. But anyways, not to rant too much. That's my thoughts for today. I think Dave Ramsey is old school, I think he's out of touch with the modern borrower. And uh, if you're trying to build a real estate portfolio, keep watching these videos. I'll try to put out some stuff that could be helpful for you. If you have any thoughts about this or anything else, please comment, subscribe. Really, the comments are what gives me the oxygen because I get ideas for videos from those and I love interacting with everybody. So shout out to all you guys that have left comments before. I truly appreciate it. And I'll talk to you soon. See ya.