New Castle News

Money: Dave Ramsey

November 23, 2012

Dave Ramsey: Putting your family in jeopardy over houses is flippin’ crazy!

NEW CASTLE — Dear Dave: My wife and I want to do a live-in/flip real estate purchase. The idea is to buy a fixer-upper and rent out the basement to help with the mortgage payments. What do you think about the idea? — Brian

Dear Brian: I love real estate. I’ve flipped a few houses in my day too. But the particulars of the deal make me a little nervous. In a situation like this you need to do a basic business analysis. You’ve got to have a plan and figure out the worst case scenario. Part of this is determining whether or not you can survive if things fall apart. In this case, the worst case is that you can’t get a renter and the house doesn’t sell. It puts your family in jeopardy if this happens, so to me it’s not an option. Honestly, I think you’ve got house fever right now. The possibility I just mentioned isn’t a rare occurrence. Lots of people have had the same idea, with the best of intentions, and still end up in a big mess. But if you and your wife are willing to accept the possibility of things not working out like you planned—and the fact that you might have to take additional jobs for an unknown period of time just to make ends meet — then it might be a play. Me? I don’t like putting myself into skin-of-my-teeth positions intentionally. When I wore a younger man’s clothes, I was willing to do stuff and ignore the risk involved. Going broke years ago knocked that out of me in a hurry. Any deal that runs the risk of leaving you bankrupt, or the victim of a foreclosure, just isn’t worth it.  — Dave

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