Debt Divide: Podcasters Graham Stephan And Dave Ramsey Battle Over Financial Strategy

Real estate investor Graham Stephan challenged financial guru Dave Ramsey's staunch anti-debt stance on the podcast "The Iced Coffee Hour."

Stephan questioned how Ramsey could reconcile his debt-free philosophy with the reality of the real estate market, where leveraging debt is often essential for building wealth.

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Ramsey countered by emphasizing the hidden dangers of debt, even for experienced investors. While both Ramsey and Stephan agree on the perils of consumer debt, their views diverge on the role of debt in wealth accumulation.

As Ramsey once said on his show, "People get credit cards for mainly one reason: so they can buy crap they don't have money to buy."

Stephan echoed the sentiment in a Substack post, advising readers to avoid debt unless it directly generates income.

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Stephan and Ramsey diverge sharply on the concept of "good debt." Stephan advocates for using debt strategically, arguing that borrowing to invest in appreciating assets can be a sound financial move. In 2022, Stephan held $4 million in debt, primarily in mortgages on rental properties and his primary residence. He justifies the debt, saying real estate is a proven wealth-building asset.

Ramsey, on the other hand, maintains a strict anti-debt stance. He contends that leveraging debt might accelerate wealth growth but significantly amplifies risk.

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"More debt is more risk, period," Ramsey said.

You can avoid that risk through crowdfunding platforms, which offer a debt-free path to invest in real estate. Pooling funds with other investors allows you to share the rewards without taking on personal loans.

Ramsey speaks from his own experience with debt, which caused him to lose everything and file for bankruptcy.

"I had never lost money on a flip," Ramsey told Stephan. "I was not behind on the loans. They just called them. They had the ability to do that because it was commercial paper; it wasn't traditional mortgages."

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Commercial property loans often come with stricter terms than traditional home mortgages. These loans typically require higher credit scores, larger down payments and shorter repayment periods. Lenders also may include provisions allowing them to call the loan, meaning they can demand repayment early.

To sidestep these complexities, consider platforms like Arrived, a service offering a simplified real estate investment approach. These platforms allow you to buy shares in rental and vacation homes without the hassles of property management and ownership. They select properties with strong appreciation and income potential, making it easy to invest as little as $100.

Although Ramsey has continued to invest in real estate since then, he advocates for debt-free ownership and encourages his listeners to purchase properties outright whenever possible. Ramsey recognizes that not everyone has the financial means to do that, so he includes mortgage payoff as a later step in his "baby steps" financial plan.

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