Dave Ramsey has clear words about a “nightmare” home buying choice

Not only did the Federal Reserve cut interest rates on September 18 for the first time in four years, but it also hinted that more cuts would follow. This looks to be great news for the property and real estate markets in the near future, but only if major purchases are managed smartly.

For example, bestselling personal finance author and radio host Dave Ramsey has a word of caution for people who might be considering a risky home buying strategy.

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The mortgage rate on 30-year fixed-rate loans fell by nearly 6%, and many expect them to continue a long-term downward trend. If rates fall below 6%, many experts predict an increase in home buying and selling.

Refinancing activity is also expected to pick up if mortgage rates continue to fall. History tells us that a good time to refinance is when those mortgage rates drop a few percentage points.

Ramsey recommends refinancing a home if you plan to stay in it for a long time. And this can be especially profitable for homeowners if they can switch from a 30-year loan to a 15-year loan. This allows you to pay off your mortgage at a faster rate and skip 15 years of interest rate payments.

But there’s one mortgage move that Ramsey strongly advises against.

Ramsey says flipping a house involves hands-on involvement

A man recently asked Ramsey how he felt about buying real estate and flipping it for the money he needed to make a down payment on his own new home.

“Dear Dave,” the man, identifying himself as Alan, wrote in an email provided by Ramsey Solutions to TheStreet. “I’m following your advice and living on a budget, but it’s really hard to save for a down payment on a house because property is so expensive on the West Coast. My family thinks I should buy a cheaper property back home, fix it up. and return it to get the extra money I need. How do you feel about that?”

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Ramsey answered the question with a direct assessment of accomplishing such a task from a remote location.

“When you take this kind of job, you have to watch what’s going on every step of the way,” Ramsey wrote. “You go into the details, keeping an eye on the crew and it’s all up to you to make sure everything is done right.”

The personal finance coach then explained how home flipping professionals often approach the complex real estate endeavor.

A man is seen standing in front of a house in a row of them. Personal finance coach Dave Ramsey says flipping a house to make money in real estate remotely is a difficult task.

David McNew/Getty Images

Ramsey explains why a long-distance real estate flip is a bad idea

The Personal Finance Coach shed some light on the complicated nature of successfully turning homes into personal income.

“It’s not uncommon for professional flippers to look at 100 or more properties to buy just one,” Ramsey wrote. “It’s not an easy way to make money, and it’s certainly not something to consider doing remotely.”

“Having said all that, can you guess what my answer will be?” he asked. “Fixing and flipping properties in the area you live in is pretty hard work. Trying to do it from hundreds of miles away would be a nightmare. There’s no way I’m signing up for something like that.”

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Ramsey concluded his advice on the topic with what he believes is a smarter way to raise enough money for a down payment.

“Keep working on your budget and start saving as much money as you can,” Ramsey wrote. “You might even consider getting a part-time job for a while to bring in some extra cash for your home equity.”

“But waiting and saving is a lot smarter than trying to fix and flip a house in another state.”

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