Ask Dave Ramsey: Is houseflipping a good idea or do you have house fever?
Buying a fixer-upper and renting out the basement is what a lot of people try to do, but it isn’t always the best idea, writes financial expert Dave Ramsey
My husband and I want to do a live-in and flip real estate purchase. The idea is to buy a fixer-upper and rent out the basement to help with the mortgage payments. How do you feel about ideas like this?
In a situation like this, you need to do a basic business analysis. You’ve got to have a plan in place, and you’ve got to figure out the worst-case scenario. Part of this is determining whether 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. So to me, it’s not an option.
“You’ve got to have a plan in place, and you’ve got to figure out the worst-case scenario,” wrote Dave Ramsey. “Part of this is determining whether you can survive if things fall apart.”
Want my honest opinion? I think you’ve both got a case of 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 wound up in a big mess. I love real estate. I mean I really love real estate. And I’ve flipped more than a few houses in my day. But the particulars of this deal make me a little nervous. If you and your husband are willing to accept the possibility of things not working out like you planned — and the fact you might have to take additional jobs for an unknown length of time just to make ends meet — then it might be a play. But for me? Nope. I don’t like putting myself into these kinds of situations.
When I was much younger, I was willing to do all kinds of dangerous stuff and ignore the risk. But going broke decades ago knocked that kind of thinking 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, Erin.