Yahoo Finance ‘It’s going to be emotional for you’: This Miami man’s mom passed away just 2 weeks after he got married — now he wants to rent out the house he grew up in. Here’s why Dave Ramsey disagrees
It’s hard enough to cope with the death of a loved one. But it can be even harder to manage a loved one’s estate after they have passed.
Dylan, 22, found himself in this situation recently and called in to The Ramsey Show for some financial advice.
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“It’s going to be emotional for you,” Dave Ramsey warned during the episode, as Dylan considered his next steps after his mother passed away and left him a sizable estate. Ramsey’s surprising recommendations could hold lessons for others in a similar situation.
Becoming a reluctant landlord
Dylan’s mother left him $300,000 in an individual retirement account (IRA) and a house worth between $250,000 to $300,000. He also received $90,000 from a life insurance policy and is considering using that money to pay off the $60,000 balance on his late mother’s mortgage.
From there, Dylan is considering the most traditional option: putting the house up for rent. But he isn’t sure if this is the best course of action. And he isn’t alone: 23% of women and 12% of men who expect an inheritance said they felt uncomfortable managing the estate, according to New York Life’s Wealth Watch survey.
Among adults who expect an inheritance, 43% said they anticipated receiving property such as a family house. Only 26% expected to preserve the estate to pass it down to future generations.
Ramsey isn’t keen on Dylan renting out the property to generate passive income. “Renting a property as a landlord is not passive income,” he says. “That’s humorous, that’s crap from TikTok. Because there’s nothing passive about dealing with renters.”
Mom-and-pop landlords often have to deal with tenant complaints, maintenance costs, vacancies, evictions and higher insurance costs, according to Avail, part of the Realtor.com network. These costs and complications can make rental properties less of a passive income stream and more of an active business.
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Ramsey speaks from experience. He has an extensive real estate portfolio, including the house where he raised his family. He claims he hasn’t lived in that home for more than 20 years, but when he visits the property the experience is unpleasant. “It is weird to go over to that house with other people’s crap in it.”
He believes Dylan might have to face a similar situation if he decides to accept tenants in his late mother’s house. There’s also the fact that Dylan lives in Miami, which is far from where the property is located in central Florida. “I don’t like long-distance landlording,” Ramsey tells him.
If he decides to become a landlord, Ramsey advises using the cash received from the life insurance policy to pay off the mortgage first. However, he also recommends a better alternative.
To rent or to sell?
Selling the house should allow Dylan and his wife to buy a property in Miami. That would change the couple’s financial situation. Dylan says they earn between $70,000 to $80,000 a year, are renting and don’t have debt. Buying a house or apartment in Miami could give them a robust financial base.
Assuming the house sells for $300,000, as Dylan estimates, the couple could net roughly $240,000 after clearing the mortgage.
That’s enough to put a down payment on a nice home in Miami, where the average home price sits at $553,419 as of Nov. 30, 2023, according to Zillow.
Doing so would put Dylan in an exclusive club of young homeowners. As of 2022, only 18% of Americans under the age of 25 owned a home, according to data from the Federal Reserve Bank of St. Louis. Ramsey suggests joining this club, but recommends taking it slow.
“Two weeks after you got married and your mom dies, that’s very harsh for me to say [sell the house],” he says. “It’s hard for you to even hear that and think about that. But five years from today, you having this as a rental property versus you and your new wife having a new home to live in — that’s a much better, wiser decision.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
