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Short Summary
Main recommendation: Dave Ramsey advises Christian to sell his Facebook stock, sell his current home and rental rather than doing a cash-out refinance, and move to a state where he wants to live, buying a home and a rental outright with cash. Ramsey's reasoning is to avoid long-distance landlording, debt, and high-risk single-stock exposure. The call also shows that Christian's net worth is roughly $1.2 million (not counting retirement accounts), which Ramsey treats as enough to make this plan work.
Key Points
- Christian is 53 and a half, his wife is 52, and they plan to stop working in two to three years, around ages 55 or 56, after 32 years with his company.
- They own a primary home worth about $1 million with a $570,000 loan, and a rental worth about $875,000 with $143,000 owed on a 3 percent, 15-year loan with six years left.
- Ramsey advises against a cash-out refinance on the rental, because it would add debt and keep him as a long-distance landlord.
- Ramsey argues that political conditions in a state affect local real estate economics, so a rental should be near where you live and in an area you believe in.
- Ramsey counsels against holding $120,000 in a single stock such as Facebook, calling it high risk.
Details Worth Noting
- Concrete instructions:
- Sell the Facebook stock, then invest the proceeds in diversified mutual funds rather than individual stocks.
- Do not do a cash-out refinance on the rental property to fund a move.
- Pick a state based on the political and economic climate you believe in, and buy the rental near where you will live.
- Use the net proceeds from selling the current home and rental, plus cash on hand, to buy a home to live in and a rental property outright, with no mortgage.
- Keep some money invested in mutual funds for diversification, and let rental income provide extra cash since there is no house payment.
- Ramsey asked whether the wife is moving too, and joked about Florida. The ocean preference was mentioned as a factor in choosing a location.
- Christian's own estimate was that a half-million-dollar home and a two- or three-hundred-thousand-dollar rental would still leave money for mutual funds.
- Ramsey said people shouldn't necessarily put their feet up and quit completely in their 50s, but should create some income for fun, since they're too young to just golf or fish all the time.
Bottom Line
Ramsey's answer is to sell the risky stock, avoid new debt and long-distance rentals, and relocate by buying outright in a place you actually want to live, rather than funding the move with a refinance on the existing rental.
