Discuss Latest WCI Blog Post: Raising Rent: Is Dave Ramsey Wrong?

[The White Coat Investor]

Dave Ramsey is getting flack for his viewpoint on raising rent on tenants. Here's an explanation for why he might be right or wrong.

The post Raising Rent: Is Dave Ramsey Wrong? appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.



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[dennis]

The stones being thrown are by people who know nothing about the real estate business. He should have pointed out the costs of the business are always increasing and rents are not increasing as fast as the property taxes and insurance rates. You can raise rent but you still fall behind the rate on increase in costs. I have property whose valuation rose by 40% in a year. There's no way you can increase rent 40% in a year without emptying it. Every year insurance goes up 10-20%. No one expects other businesses to eat all their costs without passing a good portion onto the consumer. It's called inflation.

[Turf Doc]

Not sure capitalism and Christianity really mixes that well unrelated to rents and real estate, tbh…

[Tangler]

Not sure capitalism and Christianity really mixes that well unrelated to rents and real estate, tbh…

Communism didn’t mix so well with Christianity either.

Communism & Socialism sound nice and appeal emotionally but never work as intended.

You can be a capitalist without being a jerk.

I would argue that the golden rule is something every business owner should use.

Many do and it creates a loyal customer following, and it genuinely makes life better.

If your costs increase (inflation) and you need to raise prices, ok.

If your costs increase and you don’t mind losing $ and can afford it and you don’t increase prices, ok.

Dave is not perfect, but he does help people.

He has helped a lot of people and he does way more good than bad.

He helped me tremendously in 2005 when i was in too much debt and did not have a plan or understand how dangerous debt can be. There was no WCI. I had 300k in student loans consolidated at 6% and just bought a house i did not need (another 300k of debt at 5.5% for 30 years) and was unfocused, disorganized and had no direction.

He gave me a plan. Not a perfect plan, but a simple plan that made sense and it was needed.

His investing advice is suboptimal (he should recommend a bogleheads 3 fund portfolio based on age and risk tolerance in my opinion) but he is a good guy IMO.

I know he gets a lot of hate.

He will get a lot of hate here (just watch) but overall two things:
1. He really helped me. Huge!
2. He does way more good than bad.

[White.Beard.Doc]

I never carried credit card debt because I knew better. So I never needed Dave Ramsey’s advice.

But half of our fellow citizens don’t have a clue about how to build a healthy financial foundation for life. Dave has helped many of them find a path out of debt.

[Tangler]

I never carried credit card debt because I knew better. So I never needed Dave Ramsey’s advice.

But half of our fellow citizens don’t have a clue about how to build a healthy financial foundation for life. Dave has helped many of them find a path out of debt.

True.

He got me on the path.

I never had CC debt but I had about 600k in debt at 6% (this was back when the government expected students to pay back student loans and interest rates were a real thing).

My debt to income ratio was 3:1 and (like many dumb Americans) I was clueless and just looking at the monthly payments.

Those attending pay checks seemed gigantic and I was young vigorous and clueless.

No one was taught anything about personal finance. WCI was a kid.

I don't know how long it will last, but now it is a different world. There is PSLF. Covid has made loans 0% for several years. Interest rates are near zero. Also, we have had a relentless bull market with returns >10% for years.

Right now it seems (and might be) logical to borrow a lot of money at 2% and put it into VTSAX for 30 years.

Back when I was dealing with my 600k in debt at 6%, there was a housing bubble building and I needed a wake up call.

My income was 215k gross. I paid too much for a house I did not need and I felt rich. Dumpster fire.

When I found Dave, I got focused. Took extra calls. Realized how much money I was wasting.

Simple plan. Life changing.

Many Americans spend too much and borrow too much. Most WCI forum members are not his audience.

In 2005 I think this forum would have told me to pay off my debt and it was the right move.

[blippi]

i think if you live in the u.s. and consider yourself a christian and capitalist there is an inherent tension that needs to be reconciled, imo often by rationalizing it away. wasn’t there some deal about jesus giving merchants and money lenders a hard time? weren’t christians not allowed to charge interest for centuries? why is it now okay? is there really a greater good from market efficiency alone (i say no) and doesn’t scarcity and lumpiness in rental property markets make them inefficient to the advantage of owners?

colonial exploitation was rationalized as elevating the savages and saving them with religion. cortes was catholic.

all well and good to say you are going to be a christian capitalist with a heart, but how many of your profitable acts are situated in rationalizations rather than the golden rule? open question.

[blippi]

and prop 13 has certainly has its issues, but more recent propositions do allow for mobility.

[jz-]

why is it now okay?

WRT @blippi's important questions above, In the 1500s aspiring bishops and popes needed to borrow from big guys like Jacob Fugger to purchase their positions.




This normalized borrowing + paying interest within the church.

[Eyemd356]

Business is business
Charity is charity
dont mix the 2

rents should be market for all the reasons wci mentions( with the caveat that an existing tenant might get a slight “break “ because that saves you the costs of turning Over the property).

[Kamban]

Business is business
Charity is charity
dont mix the 2

And I would add religion is religion. Don't mix any one with the other. BTW, one can do charity without any belief in religion.

[burritos]

What does this have to do with Christianity?

[Anne]

What does this have to do with Christianity?

It really has nothing to do with it. But Dave Ramsey uses Christianity as his primary marketing tool.

[dennis]

The basic premise behind all the questions: Is it Christian to be a capitalist and make a profit? To me it is a resounding YES. Capitalism has produced more wealth and brought more people out of poverty than any other economic system ever created. Socialism and communism has universally failed. Why do you think our borders are being crashed? It's not because we are socialist.

[JBME]

It really has nothing to do with it. But Dave Ramsey uses Christianity as his primary marketing tool.

I think WCI is missing the point on why people were upset with Dave Ramsey, nor do I think Dave Ramsey is really capable of understanding why he's getting hammered by this (maybe he doesn't even know). As multiple people here have pointed out, religion is religion and an economic system is an economic system and a form of government is a form of government. Christianity (or any other religion) doesn't mix with capitalism (or socialism or any other sort of governmental or economic system).

The issue is Ramsey is using religion in part as a way to say "no it's okay to raise the rent, God would be okay with that." Well for one thing, Ramsey and no one else really knows what God would be okay with. If he had just stuck with the market system and said you should raise the rent if the rental economic market dictates it, then I think Ramsey is on much more solid ground and wouldn't get so much blowback.