Dave Ramsey Reacts To My $25 Million Dollar Investment

And there's my debt: uh, four million twenty thousand dollars. Uh, it's all five mortgages: 30-year fixed between 2.875 and 3.625. I mean, if you're willing to let that kind of money just evaporate, I personally don't do anything like that, so I never thought this would happen. But I was able to sit down with somebody who I've looked up to for almost a decade: Dave Ramsey.

Well, you don't know about how. Shut up! Don't spend more than you have! He's one of the world's most successful authorities on personal finance with the largest independently owned and operated radio talk show in the country, three New York Times best sellers, over a billion views on social media, and more than 600 million dollars worth of fully paid off real estate. And today, he is critiquing every single one of my investments. So, sit back, hit the like button, and subscribe if you want to see me react to all of his fully paid off investments!

And now, with that said, let's begin. So, as the personal finance expert, I would love for you to review my portfolio and give your honest thoughts about each of the properties I own, my stock market portfolio, and how you would improve it or what you think I could do to make it better. I have everything mapped out on this iPad here for you to start.

Cost: 59,500; renovation was 12,000. This is the first property I bought. At the time, I didn't have any credit. I had four years of income saved up, and I bought this one cash. I actually went wrong after that. I went to a bank, and no one would give me a loan because I didn't have a credit score. I thought that was ridiculous because I said I had never needed debt. I paid everything off in cash. I had a solid income. I had four years of tax returns, and the banks turned me down, which I thought was insane.

This is the second property that I am actually selling right now. These properties were all in California, so because I've left California, I want to begin selling off some of the holdings there.

Yeah, what are you going to do with them? Just drop them in 1031s and buy over in Vegas?

No, most likely not. I think for the value of these, I don't want to have to be on a time constraint of finding another property, and I think for the most part, I might just pay the tax on it. I'd roll them into a 1031. Worst case is you bail out of it and pay the taxes. I just did that on a piece of property; I had some lots associated with a house that I lived in, and I sold off those lots, and I made a bazillion dollars on them. So, I rolled it into a 1031. I'm not sure yet if I'm really gonna follow through on it. I may end up, but I've got that period of time to mess with it.

Yeah, which if I don't do that, then 100%, I'm locking in the tax to bill. This is the property that I think I put 20 or 25% down. I bought it for 780. I spent 60,000 renovating it, so it's out of pocket with my down payment: 210 thousand dollars. Now it's worth about 1,350, so there's about 900 and almost a million dollars of equity.

2017 is 585 thousand loan of 580. Good story with this one. So, I bought this for 585 thousand dollars; it needed a lot of work. So, my initial loan on that was, I think, 480, but I fixed it up. I spent 220,000 fixing it up, and then I got a refinance when it was valued at 900 and something thousand, and that's when I was able to pull out the 580.

And this is what I call the zero-dollar home because I was able to live here for free. I pulled out all of my down payment that I put in the property, got it back, so I was zero dollars in the property. The property cash flowed in between all the write-offs I got by using the garage as a studio, the rent from the other side, and living there. It was completely free.

Mostly, but you're leaving out opportunity costs. I mean, you could have put that cash in your pocket if you had a renter in there, and you were somewhere else.

Kind of, because I was able to use that to then buy this duplex, which was a few blocks away. It came up as a really good deal. They marketed this incorrectly, so I saw it come up, and they marketed it as a one bedroom, one and a half bathroom, but it looked so good in the pictures that I had to see it. So, I show up there, and I realize that, wait a second, if you just put up one wall, all of a sudden, it's a two bedroom on each side, and the price for a two bedroom would have been significantly more without one little change and just calling it a two bedroom! The rents increased by 50% just because of that one change, and the value went up significantly.

A sweet deal then! This is the first place that I bought for myself. I went from living in a duplex that was 800 square feet to this, but the cost was 2.1. I put almost a million dollars down on that just so I could have a low payment, but the loan I got was 2.875, 30-year fixed.

You know, you should do like a YouTube channel on this. You're kind of good at this.

I should! And then, after staying there for a year, I bought this place in Las Vegas, and this is where I live now. So basically, the left half of the house is all studio, and then you know the right half is all the living space.

That's cool! This is what I've really been working on for the last two years: diversifying into stocks. The majority of it is 80% S&P, 520 international, and then I do have some individual stocks, and those are the five largest holdings.

We tell folks not to have more than one percent of your net worth in single stocks because a lot of people get to play in single stocks and lose their butt. The numbers out there on both the individual buying and selling single stocks to build wealth are horrendously bad; they're really bad. I don't buy any single stocks because I don't track it; I don't want to spend the time on fooling with them. I would become obsessed with it; it would drive me nuts. But you know, you got a small percentage of your total net worth in this, and as long as it doesn't take up a large percentage of your time for that small percentage of your net worth to screw with those singles, then they're fine.

I don't—I mean, I don't have an opinion about Google or Apple or whatever because I don't even track them. We got 450 grand in crypto, and that's been highly volatile. I think at the peak, that was about a million; it's down to about 450. It's slightly below my cost basis now, so I have more invested overall than it's worth. But your basis really doesn't matter; what matters is the future. Harvard Investment Newsletter did a thing called sunk cost analysis. The class was taught to Yale if someone brought up their basis: sunk cost. Some costs don't matter.

I mean, if you're willing to let that kind of money just evaporate and just disappear, and you can emotionally accept that and your portfolio can accept that blow and you want to screw with it, that's fine. I personally don't do anything like that.

Good cash! This is actually something that I think is excessive, but for some reason, I've always felt like I feel better just having it.

The reason you feel like it's excessive is you're a real estate guy! Real estate people are notorious for not keeping enough cash because we—I'm a real estate guy too—we believe in real estate; we believe in it; we believe in how it works as an investment vehicle, and we always have a set of rose-colored glasses on how good it's going to be. The more cash you have, the more you lower your risk. And so that liquidity position, I just—I stack cash. You're getting a pinch on one of these properties; you know, that's your—that's your safety net.

Now, at what point do you begin to realize that maybe you're holding too much cash and it's better to deploy it somewhere?

You need— You've got a lot of properties; you need some cash position to protect yourself on those angel investments. So, these are spread throughout six fintech companies that I've been building up for the last two years. I'm not counting it in my net worth, but if I were to put a value on it today in terms of what someone might offer for it, I just threw that number there.

Yeah, that's just—you know, it's icing; it's play money! Sure, it's gravy on the biscuit.

So cool! Okay, so this is something that I've actually gotten really into because I love cars and watches, and my philosophy is that if you buy the right car at the right price, you should be able to drive and enjoy it for free.

So, these three cars for me—the Ford GT was something that I saw as a great value about a year and a half ago. So, I paid 300 for it, and that Ford GT, by the way, has been the best investment that I've made over the last probably a year and a half, two years. A Tesla Roadster was the other one.

Yeah, I think your watch is worth more than you think it is. And there's my debt: uh, four million twenty thousand dollars. Uh, it's all five mortgages: thirty-year fixed between 2.875 and 3.625 percent.

When I've been walking with people with ten million dollar net worth and greater—deca millionaires and greater—and spending time with them and studying them, first, I started studying millionaires just because I wanted to be one. And then I started studying deca millionaires; now I'm studying billionaires. The rich people always kind of like enamored me; like I thought they had some kind of special sauce or something, or they had a superpower—a superpower, that's it.

And there were some kind of secrets to the rich, and it's always disturbed me a little bit that there aren't any secrets.

Um, yeah, because I wanted there to be this thing that if you went hunting for it, you could find it. You know, it's not there; it's the iced coffee, by the way!

Yeah, that's the secret; that's it! So, uh, but what I found with them that kind of set me free to be me was that the vast majority of them don't do anything that's super sophisticated. As a matter of fact, it's kind of ridiculously primitive! I mean, your portfolio is very sophisticated compared to most people that I run into with a 20 million dollar net worth. You've got a lot of—you put a lot of thought into it.

I mean, you do this for a living; it's what you do. So, you obviously got some brainpower on it, but they find something that they like and that they understand and that they're good at, and they do it a lot. You know, so I'll find a guy that's a farmer, and he's just buying farmland.

Your giftings are much more in the real estate world than they are in analyzing stocks. You know, if we were going to put a portfolio together of your knowledge base, it would be 80% real estate, 20% stocks maybe—probably, you know, that kind of thing.

And so really, your portfolio—it's okay if your portfolio is real estate heavy. If I'm in your shoes—I'm a real estate guy; I grew up; mom and dad were in the real estate business. I got my license like you did when I was 18 years old; I sold on a lot of real estate, went broke in the business, started buying again. I've got, I don't know, probably 600 million worth right now, something like that—paid for!

Um, so I love real estate. My portfolio is way out of balance on real estate. Can I aggressively invest in mutual funds and put a lot of money in them? But my portfolio, once I gave myself permission to be me, is paid for real estate, the company that I own, and mutual funds. I don't own any high-risk anything, sure.

Um, and I'm okay with it growing a little slower and not being sexy or fancy and all of that. So that would parlay into, you know, number one: be you!

Uh, and you're really, really gifted in the real estate world—unusually gifted, so run with it, dude! You're going to make more money there than you'll ever make in stocks or mutual funds.

Now, what are your thoughts of keeping that much cash though and not paying off the mortgages?

I have never met a wealthy person, even if they made some money using leverage, which you have done successfully, that regretted having no debt once they got there. So, I've met a lot of people that did what you did, and then they said, "You know what? It served its purpose. I'm paying it off."

My net worth is exactly the same on the balance sheet; you know, it's just a switch on the P right? And you will feel it leave your body; you'll feel your body change. It's whacked!

Can you explain that feeling to me? Because I look at that logically, and I think paying off a 2.875 mortgage on, let's say, a rental property in California—that's a write-off against the income below inflation. I have such a hard time logically overcoming that barrier even though I have a feeling, uh, maybe mentally it might be relieving.

So, what you've got there is you've got a good set of logic and a good set of critical thinking that you're looking at that with. There's nothing wrong with that scenario except the math that you're using has zero mathematical representation of risk. Paid-for property has less risk than a property with any kind of debt.

Your magic sauce is not that. Your magic sauce is your ability to do deals that are strikingly awesome. That's where 90% of your net worth has come from or more. It truly is an esoteric, sure, theoretical discussion.

And we're still going to be friends if you keep it all! You know, if Dave Ramsey was to take over your portfolio and run it with the principles that I live my life by and I teach, I'd pay off the mortgages as quick as I can. You're going to sell a couple of them anyway?

Yeah, I'd roll some of those equities and pay off the others and I would 1031 and start moving towards some commercial over in there and use your giftings to find some real heavy cash flow commercial. And I—you know, I've got both in my portfolio, but the commercial has got better IRRs on it.

So, with that said, you guys, thank you so much for watching! Also, feel free to add me on Instagram, and don't forget that you could get all the way up to ten thousand dollars as a bonus when you sign up at public.com/graham using the link down below in the description depending on how much you transfer from another brokerage.

Enjoy! Thank you so much for watching, and until next time!