DAVE RAMSEY

Dave Ramsey says: Pay off mortgage with proceeds from rental property sale

Apr 2, 2023, 5:45 AM

(Unsplash Photo)...

(Unsplash Photo)

(Unsplash Photo)

Dear Dave,

I’m going to sell a rental cabin I own, and the sale should bring me about $388,000.

Should I take the proceeds from the sale and use it to pay off my home and other debt or use the money to buy another, similar rental property where I could collect about $1,500 per month in rent?

Right now, I owe $200,000 on my home, and I have just under $50,000 in miscellaneous debt.

Valerie

Dear Valerie,

Let me start by asking you a question. If your home were paid for and you didn’t have a mortgage at all, would you take out a loan against your home to buy a rental property? Let me give you a hint. The answer should be a big, fat no.

The shortest distance between where you are right now and a high-quality financial life — including wealth building — is getting your home and other debt paid off. Then, use the cash flow that’s freed up, and the increased peace of mind, to rapidly pile up a bunch of money and buy another rental property.

There’s nothing wrong with owning rental properties and other kinds of real estate, Valerie. I love real estate, and today, I have several rental properties of my own.

The difference is I bought all of mine with cash. I didn’t go into debt for them. I learned my lesson about debt the hard way over 30 years ago, and I don’t want you to take a chance on suffering through all that crap too.

Use the money from the sale of the cabin to pay off your home and other debt, and to make sure you’ve got a solid emergency fund of 3–6 months of expenses set aside.

After that, if you want to start saving aggressively for another rental, go for it. Just make sure it’s a smart buy when the time comes and that you pay for it in cash!

— Dave

Dave Ramsey

(Pexels Photo)...

Dave Ramsey

Dave Ramsey says: It’s not a joint venture, it’s a marriage

A marriage isn't a business partnership, and it definitely shouldn't feel that way either. Here's how to attack finances together.

16 hours ago

(Pexels Photo)...

Dave Ramsey

Dave Ramsey says: When the financial drama queen comes out, relax

Everyone has a financial drama queen living in their head, but the sooner you come to terms with it, the easier dealing with stress will be.

8 days ago

(Pexels Photo)...

Dave Ramsey

Dave Ramsey says: Invest wisely, don’t overpay for your home

Unexpected fees can come along with being a homeowner, but always invest wisely and never overpay for something no one won't want to take off your hands.

15 days ago

(AP Photo/Elise Amendola, File)...

Dave Ramsey

Dave Ramsey says: Stand firm, the dollar isn’t going anywhere

While there may be talk about other countries getting together to develop a single currency, the U.S. dollar isn't going anywhere.

22 days ago

(Pexels Photo)...

Dave Ramsey

Dave Ramsey says: This is why you should work with multiple banks

There are multiple reasons why you should consider working with various banks, and none of them have to do with what happened at Silicon Valley Bank.

24 days ago

(Photo by Jemal Countess/Getty Images for Peter G. Peterson Foundation)...

Dave Ramsey

Dave Ramsey says: Don’t stress about national debt, just focus on personal finances

Though the national debt crisis is daunting, Dave Ramsey says focus on yourself, your family and your life. The rest politicians can solve.

29 days ago

Sponsored Articles

...

OCD & Anxiety Treatment Center

5 mental health myths you didn’t know were made up

Helping individuals understand mental health diagnoses like obsessive compulsive spectrum disorder or generalized anxiety disorder isn’t always an easy undertaking. After all, our society tends to spread misconceptions about mental health like wildfire. This is why being mindful about how we talk about mental health is so important. We can either perpetuate misinformation about already […]

...

SANDERSON FORD

Thank you to Al McCoy for 51 years as voice of the Phoenix Suns

Sanderson Ford wants to share its thanks to Al McCoy for the impact he made in the Valley for more than a half-decade.

(Photo by Michael Matthey/picture alliance via Getty Images)...

Cox Communications

Valley Boys & Girls Club uses esports to help kids make healthy choices

KTAR’s Community Spotlight focuses on the Boys & Girls Club of the Valley and the work to incorporate esports into children's lives.

Dave Ramsey says: Pay off mortgage with proceeds from rental property sale