why you will never be rich
This is a very funny place that I have stumbled upon. Don't ask me how, but I ended up here and spent the last few hours reading "The Tim's" posts and the copy-cat comments that always follow. High comedy. The "impending housing implosion of doom" couldn't come soon enough for the bitter old ladies around here.
Besides mocking you, I do have one other purpose in the form of a question/comment:
There seem to be a fair number of reasonably logical (maybe overly so) people around here. Also, a few people that know something about finance and a little about statistics. Also, a really amazingly heavy-handed approach to personal finance. All that being given, why aren't more people on this blog taking advantage of the current situation in Seattle? Banks are basically falling over themselves to hand out money (the recent sub-prime snafu not-withstanding - posters here don't seem to be the sub-prime type, more the type to make fun of the sub-prime type). This is a prefect opportunity to use your good credit, your burgeoning nest egg, your steady income, your "saver" mentality to take advantage of the banking industry's ridiculous appetite to loan good money to people with solid financial footing. This is an opportunity that you could actually leverage, because you are so whiz-bang smart, and turn into real wealth. In fact, this is how wealthy people become wealthy! Wealth isn't built by taking a pay check home every month and putting it in the bank. Wealth is about investments and leverage, whether it be investing in yourself, your ideas, the stock market, real estate, or, in this case, investing in the currently insane condition of the housing market.
I will give you a small example: In 2004 I had about $10k cash in the bank and some student loan debt (I had graduated with my computer science degree one year earlier), and had a job as a C++ programmer at a local .com. My wife and I decided to take the plunge and bought a nice house that we in no uncertain terms could not afford for $409k in the Central district. Mortgaged to the hilt (80/20, 5 yr ARM, interest only payments), we put $0 down (the $10k cash went to closing, if only Redfin had been around back then). Fast forward three years, we just sold that house for $650k, and will likely end up putting 20% down on a $1.0 million dollar house in, probably, Lecshi, Madrona or Mt. Baker.
See, that is how you do it. You take advantage of the banks willing to give a guy with $10k cash in the bank $409k and you turn that into very solid financial footing in one of Seattle's nicest neighborhoods.
And because you sat around complaining about the situation instead of taking advantage of it, you will never be rich.
fj
Besides mocking you, I do have one other purpose in the form of a question/comment:
There seem to be a fair number of reasonably logical (maybe overly so) people around here. Also, a few people that know something about finance and a little about statistics. Also, a really amazingly heavy-handed approach to personal finance. All that being given, why aren't more people on this blog taking advantage of the current situation in Seattle? Banks are basically falling over themselves to hand out money (the recent sub-prime snafu not-withstanding - posters here don't seem to be the sub-prime type, more the type to make fun of the sub-prime type). This is a prefect opportunity to use your good credit, your burgeoning nest egg, your steady income, your "saver" mentality to take advantage of the banking industry's ridiculous appetite to loan good money to people with solid financial footing. This is an opportunity that you could actually leverage, because you are so whiz-bang smart, and turn into real wealth. In fact, this is how wealthy people become wealthy! Wealth isn't built by taking a pay check home every month and putting it in the bank. Wealth is about investments and leverage, whether it be investing in yourself, your ideas, the stock market, real estate, or, in this case, investing in the currently insane condition of the housing market.
I will give you a small example: In 2004 I had about $10k cash in the bank and some student loan debt (I had graduated with my computer science degree one year earlier), and had a job as a C++ programmer at a local .com. My wife and I decided to take the plunge and bought a nice house that we in no uncertain terms could not afford for $409k in the Central district. Mortgaged to the hilt (80/20, 5 yr ARM, interest only payments), we put $0 down (the $10k cash went to closing, if only Redfin had been around back then). Fast forward three years, we just sold that house for $650k, and will likely end up putting 20% down on a $1.0 million dollar house in, probably, Lecshi, Madrona or Mt. Baker.
See, that is how you do it. You take advantage of the banks willing to give a guy with $10k cash in the bank $409k and you turn that into very solid financial footing in one of Seattle's nicest neighborhoods.
And because you sat around complaining about the situation instead of taking advantage of it, you will never be rich.
fj
Comments
It is theoretically possible that you found a greater fool to relieve you of "your" house and you came away with a 231K profit. Quite a few have benefited from the bubble, even though yours (if true) and many others' were due to dumb luck, since houses already were a bit overpriced in 2004 and thus could have fallen instead (but obviously did not).
I recommend that you buy that $1.0 million house IMMEDIATELY and claim your just reward. Don't be surprised if you lose all of your prior profit after three years, though. 23% down seems conceivable to me. Shiller is predicting worse.
I for one believe in buying low and selling high, or AT LEAST buying at a fair valuation, so at this point in time am watching and waiting. If I wanted to, I could buy a house (or two) tomorrow without the help of a bank.
If not, I'd seriously reevaluate the risk that you're taking. Luxury homes take much longer to sell than entry-level homes, so if you ever need to sell, you might end up taking quite a bath.
I think it's funny that you graduated from college in 2004, so you're probably about 25, and think yourself a financial genius. And this is coming from someone who graduated in 2002, and also bought a property in 2003 (which I'm now in the process of selling). But at least I don't think I've stumbled upon some wealth-secret just because the mortgage industry has a screw loose! An economy that allows 3-years-graduated 20-somethings to own million dollar houses just reeks of dot.com unsustainability.
Usually I'm firmly in the unresponsive "don't feed the trolls" camp, but I can't leave this hanging waiting for some gullible reader.
-J
Anyway, the New York Times has a handy rent/buy calculator to help you figure out how rich you will be.
Just for fun I tried it. As a home buyer you would come out $160,000 in the hole after 30 years compared to renting.
Figured 6% return on your house, compared to a rental for $3000/month, and also tweaked the advanced function on the right: since you say you know something about investing, figure 11 percent, right?
NYT Rent vs Buy Calculator
See, this is the root of the problem right here. Who do you guys think you're really taking advantage of? The banks? My God, how short-sighted you both are. This whole scheme reeks of pure evil.
Shame on you, meshugy. Shame on you.
Now its my turn to mock you
Your balance sheet
Equity: $200k
Debt: $800k
You're a regular warren buffet.
[/quote]
Go ahead and buy that $1M house, full speed ahead man. It's people like you that are keeping our economy going right now.
But be sure and let us know the details of your refinancing efforts in 4.5 years. Oh wait, no worries, mate! By then, your house will have appreciated 15-20% per year, and your salary will have gone up a lot as well.
Oh, and enjoy paying property taxes on your new digs too (somebody's gotta pay for Ron Sims' mansion, eh?). Let's see, ought to be around $10-12K per year, or rough figures, about $1K per month. JUST for the taxes!
I want to know what to target in a few years when I go to move up. I will guarantee, GUARANTEE! you 60 cents on the dollar, sight unseen.
You can take that guarantee to the bank when you go to negotiate the short sale.
She just closed on a $700K magnolia view home. She got there by buying a $200K condo in 2003, refinancing it 4 times and then selling it for $260K in 2005. Then, she bought a $450K townhome, refinanced it 7 times and is attempting to sell it for $539K. She didn't sit back and wait for a sale on her current residence before moving up, and neither should you.
This lady now owns a $700K home AND a $539K townhome. Your aspiration to own only a $1M home is rather conservative in comparison.
(Note, by "actress" I mean someone that does community theater, not someone famous from LA buying a second home here)
fj
Great strategy during an appreciating market. You were lucky with your timing. Be sure to check in with us again when you are upside down with your million dollar house.
..
Here's my free tips for you. Rent a nice house with lake view for about $2500, put your 230k+ into CD, HSBC offshore saving account (Euro/Yen/Swiss Franc), Buy gold, oil, railroad, Chinese stocks. In 2 or 3 years, put a 20% down on the same $1 million house that is going to cost $650k by then and still have the money for retirement, college saving fund, and vacation. You can thank me later.
Using your "leverage" to buy high is not a good plan for getting rich. It's a good plan for feeling rich, which is different.
I'll never be rich because I'll either have or adopt about 8 children and perpetually give a lot to charity. My unwillingness to buy a house in the current Seattle market has nothing to do with it.
Given meshugy's smarmy interjection in the thread, I would not be shocked if they are one and the same character. BTW, upon reading postings here for some time, I am quite sure meshugy works in or at least for the real estate industry, probably in marketing.
Thanks for more entertaining conspiracy theories guys! Reading these is like watching a cat chase it's own tail!
fj - 71.231.64.156 (Comcast)
meshugy - 24.19.35.240 (Comcast)
Well, I think the general theory seems to be that Troll=Meshugy. If you're happy with that, more power to you.
edit:
here's a quote from that Wikipedia article. See if it describes anyone you know