Dear Dave,
I have cousins who are thinking about moving back to Connecticut from Virginia. They’ll be renting for a while, and I have an unoccupied rental house. Do you think renting to family is a bad idea?
Katherine
Dear Katherine,
Renting to family can work out just fine, as long as there are clearly understood rules and boundaries in place ahead of time. Both parties should understand there must be a landlord and tenant relationship with regards to all aspects of the rental agreement.
Tenants have the right to expect a landlord to make needed repairs promptly, pay the taxes and insurance on a property on time, and do all the other things a landlord should do as outlined in the rental agreement. As a landlord, you have the right to expect the rent to be paid early or on time, and for the tenant to respect the property and guidelines in the rental agreement. A landlord also has the right to evict a tenant through fair, legal process if they violate the terms of the agreement.
When it comes to these business dealings, you’re wearing the landlord cap, and they’re wearing the renter’s cap. At Thanksgiving, Christmas, and other family events, the caps come off and you’re family. But you don’t get to play the cousin card as a way to keep from paying rent, and you don’t get to play that game to avoid your duties as a landlord.
Phrases like, “Well, I just thought because you’re my cousin” have no place in these situations. Make plans to have a full-blown, in-depth conversation about every aspect of the rental agreement and relationship before anything is signed. If you don’t, there’s a possibility someone will develop a sense of entitlement about something.
And that’s no good in any type of relationship!
—Dave
*Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey.
Dear Dave,
Do you have a guideline ratio for mortgage debt to income?
Levon
Dear Levon,
When it comes to buying a home, I always tell people to get a 15-year, fixed rate mortgage, with monthly payments that are no more than 25 percent of their take home pay. This type of mortgage is the only debt I don’t beat up people for having. Still, I urge folks to pay off these loans in less than 15 years.
The average person following my plan pays off this type of loan in about seven or eight years. That’s a pretty big deal in terms of your financial security. And paying extra on your mortgage doesn’t have to be a strain. You can start by simply rounding up your payments. If the payment is $770, make it $800 instead, and apply the extra to the principal balance. If you want to get more intense, you could make an extra house payment each quarter, or go the route of bi-weekly payments. To do this, simply make half a monthly payment every two weeks. By the end of the year you’ll have made 13 payments instead of 12. This will knock years off the length of your loan.
Remember, your income is your largest wealth building tool. It’s so much easier to save, invest, and give when all your money isn’t flying out the door to make payments!
—Dave
Dear Dave,
Do you recommend having gold and silver as part of your investment portfolio?
Don
Dear Don,
No, I do not. I also don’t recommend oil or corn futures. All of these are examples of commodities, and the commodities market is extremely volatile. In addition to the market being wildly volatile, the prices on commodities isn’t based on actual production. It’s based largely on a supply and demand curve. If there’s a shortage on one of them, the price shoots up.
For example, when you’re talking about gold and silver, there’s more demand than supply when the economy is bad. In this kind of scenario, people are fearful and lots of them run to buy gold. This drives up the price to unrealistically high levels.
Again, the price on a commodity isn’t based on anything other than fear or greed, and a supply and demand curve. The prices aren’t based on an actual production of income, like it is with stocks or real estate. I don’t buy commodities at all, especially gold and silver. I don’t recommend you buy them, either.
—Dave
* Dave Ramsey is CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 13 million listeners each week on 585 radio stations and multiple digital platforms. Follow Dave on the web at daveramsey.com and on Twitter at @DaveRamsey-30-
