We thought we’d make $100,000 without batting an eye

[PerryChase]

cnn article

http://money.cnn.com/2007/05/22/magazines/moneymag/retirement_interrupted.moneymag/index.htm

To supplement their retirement savings of $260,000, they figured they’d buy fixer-upper homes to renovate, then sell at a profit in the state’s hot housing market. “We thought we’d make $100,000 without batting an eye,” says Carol.

But when the housing bubble burst, so did their dreams of a real-estate funded retirement. The properties have been on the market for nine months without a serious offer, and the carrying costs are killer: The Daimlers pay more than $65,000 a year on their mortgages (including loans for their primary residence and a vacation house in North Carolina), plus tens of thousands more for property taxes, insurance and maintenance.

The couple are pulling out $15,000 a month from savings to cover their expenses, and they’ve already run through more than half of their nest egg. The irony: On paper they seem to be in great shape, with a net worth of $1.6 million. But since most of that money is tied up in real estate – assets they can’t easily sell – it doesn’t ease their current cash crunch.

[kewp]

Good example of why one shouldn’t over-leverage oneself in illiquid assets.

[kewp]

Good example of why one shouldn’t over-leverage oneself in illiquid assets.

[Reality]

Imbeciles.

[Reality]

Imbeciles.

[Coronita]

Actually, this couple isn't in that bad of shape. The solution for them is just to sell their vacation home. ($550kish profit, if I read correctly- discounted by $100k of what the article quoted) The issue is that the wife seems to be pigheaded and doesn't want to get rid of the vacation home, and rather stop taking his/her medication. That's imho stupid. Stop taking medicine, get a heart attack,die and not enjoy the vacation home anyway, or sell your vacation home and stop the financial bleeding. Seems like a no brainer to me. What I don't understand is that with there assets, why oh why would they assume such a big risk over just a measely $100k possible profit….Particularly at their age. at 60-61, you should be converting your assets into cash, not the other way around.

 

Possibly the worst advice yet:

The Daimlers have too much of their net worth tied up in real estate and low-growth cash investments, Cirino says. He suggests creating a more balanced portfolio by shifting most of the money left in their retirement account out of money markets and into stock and bond funds. The planner urges the couple to pay off their credit cards and start rebuilding their savings as soon as Steve starts working.

Uh..So at 60-61, they should "invest" in the stock market…Uh, yeah, that's the logical thing for them to do. I'm pretty bullish about the stock market these days, but I can take a hit if it happens because I got like 30 years ahead before I retire. These folks are already retired, and won’t have other income sources LEFT.

 

Another thing I don’t understand about the couple. They have credit card debt of $31k at probably some ridiculous apr (15-18%), and yet they bought investment property?????? Doesn’t make any sense to me. So stereotypical.

[Coronita]

Actually, this couple isn't in that bad of shape. The solution for them is just to sell their vacation home. ($550kish profit, if I read correctly- discounted by $100k of what the article quoted) The issue is that the wife seems to be pigheaded and doesn't want to get rid of the vacation home, and rather stop taking his/her medication. That's imho stupid. Stop taking medicine, get a heart attack,die and not enjoy the vacation home anyway, or sell your vacation home and stop the financial bleeding. Seems like a no brainer to me. What I don't understand is that with there assets, why oh why would they assume such a big risk over just a measely $100k possible profit….Particularly at their age. at 60-61, you should be converting your assets into cash, not the other way around.

 

Possibly the worst advice yet:

The Daimlers have too much of their net worth tied up in real estate and low-growth cash investments, Cirino says. He suggests creating a more balanced portfolio by shifting most of the money left in their retirement account out of money markets and into stock and bond funds. The planner urges the couple to pay off their credit cards and start rebuilding their savings as soon as Steve starts working.

Uh..So at 60-61, they should "invest" in the stock market…Uh, yeah, that's the logical thing for them to do. I'm pretty bullish about the stock market these days, but I can take a hit if it happens because I got like 30 years ahead before I retire. These folks are already retired, and won’t have other income sources LEFT.

 

Another thing I don’t understand about the couple. They have credit card debt of $31k at probably some ridiculous apr (15-18%), and yet they bought investment property?????? Doesn’t make any sense to me. So stereotypical.

[LookoutBelow]

Hahahahaaaa !!!

 

I hope nobody wonders where all those old Wal-Mart greeters come from !!

They pissed away their retirement ! hahahahahaaa…now they will work until they die….fools

[LookoutBelow]

Hahahahaaaa !!!

 

I hope nobody wonders where all those old Wal-Mart greeters come from !!

They pissed away their retirement ! hahahahahaaa…now they will work until they die….fools

[Coronita]

Hahahahaaaa !!! I hope nobody wonders where all those old Wal-Mart greeters come from !! They pissed away their retirement ! hahahahahaaa…now they will work until they die….fools

 

Wow, that's mean. Actually what are you doing shopping at Walmart to begin with 🙂 ? Second, this couple isn't in exactly dire financial shape. Read the article again. They are choosing to bleed because they don't want to sell their vacation home, which they should be able to pocket about $500k from.  

[Coronita]

Hahahahaaaa !!! I hope nobody wonders where all those old Wal-Mart greeters come from !! They pissed away their retirement ! hahahahahaaa…now they will work until they die….fools

 

Wow, that's mean. Actually what are you doing shopping at Walmart to begin with 🙂 ? Second, this couple isn't in exactly dire financial shape. Read the article again. They are choosing to bleed because they don't want to sell their vacation home, which they should be able to pocket about $500k from.  

[PerryChase]

I think this article illustrates several points.

1) The couple featured in the story were not the only investors doing this. There are plenty of solidly middle class folks in that boat. Expect to see must-sell properties from those investors hitting the market next year.

2) They have not even taken a loss on the investment properties yet. However, the holding costs are killing them. How long can investors ride out a bad market. Even this couple believe that things will get better and would be looking to invest more in real estate if it weren’t for these bad deals.

Most investors will not last in a protracted downturn. Their staying power will vanish and must-sell properties will hit the market.

3) Do you think that their daughter who is also a real estate agent is also in the same boat? After all, it’s the daughter who found those investment properties and they all thought they could make an easy $100k. What about other friends and relatives of this family? They are most likely real estate investors as well.

Yeah, this couple still have the equity in the vacation house to bail them out. But what about the investors who thought that the could be buying vacation homes from the profits of real estate?

4) These people are real estate agents so they can be considered “professionals.” Do you think that other agents throughout the country have invested in real estate as well? You betcha.

5) This couple have real money tied up in the investment houses so they’ll do their best to recoup it. But what about the investors who are 90% – 100% financed? They are likely to walk away from their real estate.

The subprime buyers are causing the foreclosures now but the investors will cause even more foreclosures later.

6) Greed causes otherwise reasonable folks to throw caution out the window. Unfortunately, when things go south, they don’t come back to reality but keep thinking positive for a come back later. I’m waiting ’til 2008/2009 to see where those type investors stand on their properties.

[PerryChase]

I think this article illustrates several points.

1) The couple featured in the story were not the only investors doing this. There are plenty of solidly middle class folks in that boat. Expect to see must-sell properties from those investors hitting the market next year.

2) They have not even taken a loss on the investment properties yet. However, the holding costs are killing them. How long can investors ride out a bad market. Even this couple believe that things will get better and would be looking to invest more in real estate if it weren’t for these bad deals.

Most investors will not last in a protracted downturn. Their staying power will vanish and must-sell properties will hit the market.

3) Do you think that their daughter who is also a real estate agent is also in the same boat? After all, it’s the daughter who found those investment properties and they all thought they could make an easy $100k. What about other friends and relatives of this family? They are most likely real estate investors as well.

Yeah, this couple still have the equity in the vacation house to bail them out. But what about the investors who thought that the could be buying vacation homes from the profits of real estate?

4) These people are real estate agents so they can be considered “professionals.” Do you think that other agents throughout the country have invested in real estate as well? You betcha.

5) This couple have real money tied up in the investment houses so they’ll do their best to recoup it. But what about the investors who are 90% – 100% financed? They are likely to walk away from their real estate.

The subprime buyers are causing the foreclosures now but the investors will cause even more foreclosures later.

6) Greed causes otherwise reasonable folks to throw caution out the window. Unfortunately, when things go south, they don’t come back to reality but keep thinking positive for a come back later. I’m waiting ’til 2008/2009 to see where those type investors stand on their properties.

[AK]

Boo hoo hoo. They retired early with a mere $260K in retirement savings, yet they wanted multiple McMansions in resort areas, and they wanted to get filthy rich on top of that. Now they’re so poor they can’t go on cruises or join a country club.

But to me these quotes really stand out:

“We knew prices wouldn’t keep going up like they had been,” says Steve. “But we figured with demand from baby boomers retiring, homes in Florida would keep appreciating.”

Sounds like a case of the “we thought things were different here” disease.

The properties have been on the market for nine months without a serious offer, and the carrying costs are killer … They’re determined to unload their investment properties, even if it means taking a loss.

They were holding out for a profit all this time?!?!?!? Methinks they deserve to lose their money.

[AK]

Boo hoo hoo. They retired early with a mere $260K in retirement savings, yet they wanted multiple McMansions in resort areas, and they wanted to get filthy rich on top of that. Now they’re so poor they can’t go on cruises or join a country club.

But to me these quotes really stand out:

“We knew prices wouldn’t keep going up like they had been,” says Steve. “But we figured with demand from baby boomers retiring, homes in Florida would keep appreciating.”

Sounds like a case of the “we thought things were different here” disease.

The properties have been on the market for nine months without a serious offer, and the carrying costs are killer … They’re determined to unload their investment properties, even if it means taking a loss.

They were holding out for a profit all this time?!?!?!? Methinks they deserve to lose their money.

[Author]

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