On September 18, the Federal Reserve reduced interest rates for the first time in four years and indicated that further cuts might follow. This development is seen as potentially beneficial for the real estate and housing markets in the near future, provided that significant purchases are approached wisely.
Bestselling personal finance author and radio host Dave Ramsey has issued a caution regarding a particular risky home-buying strategy.
Mortgage rates for 30-year fixed-rate loans are hovering near 6%, with expectations of a continued decline in the long term. Should rates fall below 6%, experts anticipate an increase in home buying and selling activities.
Additionally, if mortgage rates continue to decrease, refinancing activity is expected to rise. Historically, a favorable time to refinance is when mortgage rates drop by a couple of percentage points.
Ramsey advises homeowners to consider refinancing if they plan to reside in their homes for a long term. Refinancing from a 30-year to a 15-year loan could be particularly advantageous, allowing homeowners to pay off their mortgages more quickly and avoid 15 years of interest payments.
However, Ramsey strongly warns against one specific mortgage strategy.
### Ramsey’s Stance on House Flipping
Recently, a man named Alan inquired about buying a real estate property, flipping it, and using the proceeds as a down payment for a new home. Alan expressed difficulties in saving for a down payment due to high property costs on the West Coast and sought Ramsey’s advice on buying, renovating, and flipping a cheaper property elsewhere.
Ramsey responded with a straightforward critique about managing such a project remotely. He emphasized the necessity of overseeing every step of the renovation process, including monitoring the crew and ensuring all details are correctly handled.
The personal finance expert explained that professional house flippers often evaluate over 100 properties to identify a single viable option, highlighting that flipping houses is not an easy way to generate income and is especially challenging when attempted from a distance.
Ramsey concluded by advising against long-distance house flipping, underscoring that it is complicated enough to manage locally, let alone from afar. Instead, he recommended focusing on budgeting and saving to gather the required funds for a down payment. He also suggested taking on a part-time job to bolster savings for the house fund, asserting that this approach is far wiser than attempting to flip a house in a different state.