Mar 9, 2026
A Colorado man called into The Ramsey Show for advice about whether he should take a loan from a family member to buy an investment property, and he didn’t get the answer he was hoping for (1).
Matthew from Denver said that he and his wife had been offered a deal to buy a $900,000 rental property, and that his plan was to use $100,000 of his own money and borrow $100,000 of his father’s money.
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Cohosts Rachel Cruze and George Kamel were not on board from the get-go.
“Not super excited about this,” was Cruze’s blunt assessment.
A deal with several issues
Matthew said the seller of the property was offering to sell the eight–unit rental property at 3% interest, owner financed. The owner was offering $100,000 of “in-kind” money over the next 10 years for repairs to the property, and also to mentor Matthew and his wife for two years on how to manage the property. He said that the owner wants out of the property because her husband is sick and they are planning to move to Arizona.
The kicker on this deal is that after 10 years, Matthew and his wife would owe a balloon payment on the property.
Matthew and his wife have no debt other than a $190,000 mortgage on their primary residence, and they have a combined income of about $135,000 a year. In addition to the $100,000 that they had planned to use for this investment property, they also have about $250,000 in savings that’s invested in the stock market.
Cruze and Kamel judged that this deal was a no-go for two reasons: the terms of the deal itself, and the fact that Matthew was planning to borrow money from family.
“I just see 85 ways this could go sideways,” Cruze said.
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Rental property rules
Kamel told Matthew that he should start with two Ramsey rules when it comes to real estate investment:
- Pay off your primary residence first before buying an investment property.
- Never borrow money to buy an investment property.
Cruze said that the way the deal was structured, with a balloon payment, was “not worth it.” She also said that while Matthew and his wife have previous experience with one rental property that they owned, starting a rental property business with an eight-unit building was not a good idea.
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“Don’t start with a million-dollar, eight-unit property, because you’re about to take on all those [tenants] … Start small and then start to work your way up, which is not as flashy, not as exciting, but it is peace,” she said.
“That is a peaceful way to do this, and not create chaos, because you guys are setting yourself up for chaos. And maybe ruin a relationship with your dad if this goes bad, too.”
Cruze and Kamel’s advice highlights the fact that real estate investment is not a risk-free game. That’s why they recommend saving up and buying with cash, as opposed to borrowing money to invest, which raises the risks.
Managing rental properties is also a labor-intensive endeavor.
Whether you manage your properties yourself, or pay a property manager, there will be constant repairs, upkeep and tenant issues. Cruze and Kamel pointed out that for this property, Matthew would have eight tenants, which raises the risk of multiple parties getting behind on rent.
There’s also the risk that the property decreases in value, or that major repairs could come up.
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There are several factors that real estate investors use to calculate whether a property has the potential to be profitable, such as internal rate of return, capitalization rate, sales comparison approach and value per gross rent multiplier (2).
A simple 2% rule — a property will generate at least 2% of its purchase price in cash flow every month (2) — can help prospective real estate investors calculate whether it’s worth it.
Is it ever a good idea to borrow from family?
The other aspect of the deal that gave Cruze and Kamel pause was that Matthew was planning to borrow money from his father.
“We always tell people, never borrow money from family,” Kamel said.
Borrowing money from family can mean putting not only your finances in a risky situation, but also your relationship.
If you do decide to borrow money from your family, it is important to draw up an agreement that details the loan, interest and repayment terms.
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Cruze and Kamel brought up scenarios that could happen if Matthew borrowed from his father, in addition to the financial risk that the investment itself was.
“I’ve rarely seen it where [someone says], ‘Yeah, I borrowed money from dad. It worked out perfectly. Paid him back, and he was happy, I was happy,’” Kamel said.
“Usually, it becomes, ‘Well, dad wants a piece of the pie now. He wants his money back because he needs to retire, which means I need to sell the property. Oh, and he wants appreciation.’ And so he wants that, too, on top of his $100,000, on top of interest.”
“Or he gets sick, and he needs [his] $100,000 back,” Cruze added.
While real estate investments may often seem low- or no-risk, with high reward, there can be a lot of risk involved, especially if you borrow money to invest.
Taking a slower approach that involves saving up, doing extensive research on the property you’re buying and preparing for the additional work of being a landlord are all smart ways to make sure your dreams of real estate investment don’t turn into a nightmare.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
The Ramsey Show Highlights/YouTube (1); University of San Diego (2)
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Rebecca Payne has more than a decade of experience editing and producing both local and national daily newspapers. She's worked on the Toronto Star, the Globe and Mail, Metro, Canada's National Observer, the Virginian-Pilot and Daily Press.
