Friday, 07 December 2012 00:51

Flipping Houses

Written by  Dave Ramsey
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Question: My wife and I want to do a live-in/flip real estate purchase. The idea is to buy a fixer-upper and rent out the basement to help with the mortgage payments. What do you think about the idea?

 

A.I love real estate. I’ve flipped a few houses in my day too. But the particulars of the deal make me a little nervous.

In a situation like this you need to do a basic business analysis. You’ve got to have a plan and figure out the worst case scenario. Part of this is determining whether or not 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 if this happens, so to me it’s not an option.

Honestly, I think you’ve got 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 end up in a big mess. But if you and your wife are willing to accept the possibility of things not working out like you planned—and the fact that you might have to take additional jobs for an unknown period of time just to make ends meet—then it might be a play. Me? I don’t like putting myself into skin-of-my-teeth positions intentionally. When I wore a younger man’s clothes, I was willing to do stuff and ignore the risk involved. Going broke years ago knocked that 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!

 

Q.  I just turned 57 and have been researching long-term care policies. Is there a point where you can self-insure for long-term care needs without a policy?

 

A.  Mathematically, I’d say you could safely self-insure if you have the resources available to support your care in a nursing home or other facility for 25 years. Of course, if you’re married you have to think about your spouse and make sure she has enough to live on comfortably at the same time. That’s a lot of money. In my mind, it’s a large enough bill that it makes sense to transfer the risk to a long-term care insurance policy.

The simple truth is most people won’t have enough money to self-insure for that kind of thing when the time comes. If you have $20 million liquid sitting around, then you could easily set aside $2 to $3 million for long-term care and still be in great shape. But I advise virtually everyone to have good, long-term care coverage in place by age 60. For many folks, it can make the difference between living with dignity and having to depend on the government. And that’s not something I ever want to do for anything—especially not my healthcare!

 

 

 

 

 

 

Last modified on Friday, 07 December 2012 00:53
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