Dave Ramsey rarely minces words, and when a 65-year-old investor called in with a $2.2 million real estate portfolio and a question about DSCR loans, Ramsey’s answer was immediate: don’t do it.
“I don’t teach people to borrow money, Jimmy, because I have found that the fastest way to wealth is to get out of debt and stay out of debt,” Ramsey said on The Ramsey Show on March 26, 2026.
What Jimmy Actually Has
The caller, Jimmy from Atlanta, painted a clear picture. He had just turned 65, owned five rental properties outright except for his personal residence, which carried a $175,000 mortgage at 4.25%. His rental income ran about $100,000 per year, separate from other income. He had just under $400,000 in a money market account, down from roughly $700,000 after funding cash purchases and renovations.
His strategy had been working: he paid $120,000 for one property and $150,000 for another, both now worth $400,000 each. The question was whether to take out a DSCR loan at 6.75% to fund the next renovation rather than drawing down his cash reserves.
Why DSCR Loans Cost More Than They Look
A DSCR loan (Debt Service Coverage Ratio loan) is a mortgage product designed for real estate investors. Lenders qualify borrowers based on whether the property’s rental income covers the loan payment, rather than on personal income or tax returns. That makes them popular with self-employed landlords who have complex income pictures.
The tradeoff is price. The 10-year Treasury yield sits at 4.33% as of March 25, 2026. A conventional investment property loan typically prices at a spread above that benchmark. A DSCR loan adds another premium for the looser underwriting standards. Jimmy’s quoted rate of 6.75% reflects that stacked risk pricing.
Ramsey made the comparison explicit: “Even if you were going to go into debt, the DSCR loan is not a good loan because it’s a higher interest rate. Than a standard loan.” Then he asked the sharper question: “Why are you wanting to pay a subprime rate to borrow money when you have the cash in the bank to do the job? Absolutely not. I wouldn’t do that.”
The Fed funds rate currently sits at 3.75%, but borrowing costs for investment real estate have not fallen proportionally. Paying 6.75% on a renovation loan when you hold $400,000 in a money market earning far less is a straightforward wealth transfer from your account to a lender’s.
The Math on a 6.75% Loan
On a $150,000 DSCR loan at 6.75% over 30 years, the interest cost alone runs well into six figures, before accounting for origination fees, points, and the higher reserve requirements lenders impose on DSCR products.
Ramsey’s point about net worth holds: “Your net worth didn’t go down. Your net worth went up because the value of the property went up because you remodeled it by more than the cost of the remodel.” Paying cash for the renovation captures that entire gain. Borrowing at 6.75% to fund the same renovation hands a portion of that gain to the lender.
Ramsey practices what he preaches here. “I own several hundred million dollars worth of real estate and 100% of it is paid for and we remodel 100% of it with cash or we don’t do it,” he said. Rachel Cruze added a practical sequencing note: “Just pause on buying a new property and use that to remodel and up the other ones.”
Who This Advice Fits
Ramsey’s framework works cleanly for investors who match Jimmy’s profile: retirement age or near it, substantial equity already built, reliable rental income, and enough liquid assets to self-fund the next project without gutting emergency reserves.
A 35-year-old investor with $80,000 in savings and a high-income W-2 job faces a different calculation. Leverage can accelerate portfolio growth when time horizons are long and income is stable. At 65, with $100,000 in annual rental income and a portfolio valued at $2.2 million, the risk-reward of borrowing at 6.75% tilts decisively against the loan. Consumer sentiment has remained in pessimistic territory throughout 2025 and into early 2026, well below the 80-point neutral threshold. That backdrop makes conservative capital management more defensible.
The Step Jimmy Should Take Next
Run a simple comparison before touching the DSCR application. Take the renovation budget, calculate total interest cost at 6.75% over your expected hold period, then compare that figure to the opportunity cost of drawing down the money market. If the cash account yields less than 6.75%, every dollar borrowed costs more than every dollar spent from savings.
For Jimmy, the answer is already clear. He built a $2.2 million portfolio by buying distressed properties with cash and remodeling them without leverage. Introducing a high-rate loan at 65 to preserve a cash cushion that earns less than the loan costs contradicts the strategy that built his $2.2 million portfolio.
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