Friday Flashback: “The last spaceship flight off a planet that’s about to explode”

Here’s one of my favorite pre-bursting-bubble gems. It’s an opinion piece that was published in the Seattle P-I on October 20, 2006, penned by guest columnist Sarah McCormic (her website even still features the article as a noteworthy sample of her work).

With friends who have also been lucky enough to land a Columbia City cottage or a Shoreline rambler, there’s a sense of shared joy and relief. I remember feeling like this in fifth grade when my best friend and I landed parts in the school play: “Thank God we both got in.” We toast our hefty mortgages and spend long evenings discussing hardwood floor finishes, crown moldings and our all-important soaring equity.

But with friends who have not yet “squeezed in” to the housing market, I am reminded of how I felt when I got accepted by my first choice for college and my best friend got nothing but rejections. What do you say to each other? I try to offer soothing assurances: “I hear there are still some great deals up north.” “600 square feet is plenty of room!”

But no matter what I say, I know we all feel like they have probably missed their chance, like they didn’t buy their ticket on the last spaceship flight off a planet that’s about to explode. I fear they’re doomed to move back to Missouri in order to afford more than a studio condo on the fringes of the city.

Got it? The renters were the ones that were doomed. Definitely not the people who took on hefty mortgages to squeeze into the housing market in 2006.

You can also read my 2006 thoughts on the piece.

The purpose of our Friday Flashback series is to remind people why it’s never a good idea to base your home purchase decisions on the word of someone with a vested financial interest in selling as many homes as possible for as much as possible, no matter what. If you’ve got a good example of local home salespeople or other industry shills on record making fools of themselves in the years before the bubble burst, shoot me an email.
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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

47 comments:

  1. 1
    Cheap South says:

    This Friday feature is getting better every week.

  2. 2
    HappyRenter says:

    I have the feeling that a lot of people have still not abandoned the “home ownership above all else mindset” yet. When my wife and me go to family parties we are always asked: “Where do you live? Do you own a big house?” Our answer: “We rent a 1 bedroom, 20 min. walk from our offices”. The reply: “Do you plan to buy a home soon?” Of course, I could come up with all the discussion that right now renting is cheaper than buying but I don’t always feel like. So, we just mumble: “In the future, not right now, waiting for prices to fall.” It seems that owning is a measure of success.

  3. 3
    Tom says:

    She was confident enough to double up her bet by buying a second house in 2007.

  4. 4
    CCG says:

    ‘I have the feeling that a lot of people have still not abandoned the “home ownership above all else mindset” yet.’

    Someone, I can’t remember who, described these people as “cargo cultists”.

    Anyway, great find. Hard to imagine how a paper could go under by publishing genius like that.

  5. 5
    Astro Kermit says:

    I find it interesting that she compares consoling renters with consoling her college reject friends. Write about it and poo on your friends. She went to Wesleyan University. I got accepted there too but it was not my top choice. Who cares?

  6. 6
    The Tim says:

    Oh and don’t fret about Ms. McCormic’s “all-important” equity. Since she bought her “little house in Ballard” in 2004 she’s probably still got some equity in there, though I don’t think she’ll be likely to describe it as “soaring” again any time soon.

  7. 7

    Political Correctness at Parties

    I own my own house and yet, I’m with all you previous bloggers at heart. I went to a Christmas party last December and a retired worker who switched to P/T real estate was there from Bellevue. He was bragging to another retiree about how his neighborhood saw sales increases. I mentioned to him if they were short sales or foreclosures and he gave me that vague smug smile, transmitting who are you to ask such a rude question with haughty homeowners in packs of denial. Then walked away from me without any comment, like I had malaria…LOL

  8. 8
    Dawn Glover says:

    Sadly, this mentality is what drives alot of people. Being in the in crowd was to brag that I bought this overpriced house, I spent a fortune on my kids education, look at this $600 purse. It’s becomming clear that there is no value in any of those things. The reality behind this nonsense is that most people couldn’t afford the purchases that they’ve made and now that we are contracting, it’s a big mess. I for one feel angry that I will have to pay for all of this in the long run…..I’m simplifying this, but generally there was a tremendous pressure to keep up. I don’t anticipate those second homes or cottages retaining their value over the next decade.

  9. 9
    Dawn Glover says:

    RE: HappyRenter @ 2 – I’m also a renter and 2 years ago I was the elephant in the room. No one that I met was renting. I too tried at first to defend my decisions but gave up because the discussion made the homeowners very uncomfortable. I am looking for my next rental, when questioned about renting or buying the reaction now is about half say “this is the best time to buy” and the other say “you are smart to rent” I’ve noticed a big change in attitude since I moved Eastside 2 years ago.

  10. 10
    Buy My House, Idiot Renters! says:

    I loved that piece – hip, cutting-edge RiotGirrrl becomes a slave to real estate at about the top of the market.

    “like they didn’t buy their ticket on the last spaceship flight off a planet that’s about to explode.”

    It just doesn’t get better than that!!!!

  11. 11
    Dave0 says:

    RE: The Tim @ 6
    She may still have equity left in her main home, but it doesn’t look as good for the duplex she bought as an investment in 2007: http://www5.kingcounty.gov/kcgisreports/property_report.aspx?PIN=2768100025

    According to the Assessor, she’s underwater, but according to zillow (http://www.zillow.com/homedetails/charts/48824086_zpid/) she is barely above water. We all know how accurate zillow is though…

  12. 12
    skibum1175 says:

    RE: The Tim @ 6
    If Tom@3 is right, hopefully her equity from her 2004 purchase offsets her 2007 purchase

    On another note, why do some people make themselves feel better by slamming on others? I was squirming while reading that 2006 article.

  13. 13
    akfish says:

    As much as I’d like to feel renters vindication, McCormic still isn’t doing too bad compared to renters.

    It’s not much from an appreciation standpoint (eyeballed conservatively @ 2% a year on the zillow graph, including loss due to commission if she were to sell now) — but with a 3.5% down payment of 10k, 50k gain is significant. Tack on the tiny amount of principal paid off in 6 years – about 25k, according to an amortization schedule. Sure, she has paid more a month than renting due to taxes, maintenance, closing costs, commission if she were to sell. But it’s discouraging to think that renters would have needed save roughly an additional 50k, or $750/month average for 6 years, just to buy prices back to 2004 levels.

    You could say that renters could have invested their money, but a “conservative” index tracking portfolio really hasn’t gained anything in 6 years either.

  14. 14
    HappyRenter says:

    RE: Dawn Glover @ 9
    I get those comments mainly from the older generation. It seems that the younger generation is more aware of what is happening in the market. I agree with you, a lot of people have also been changing their opinion about real estate. This is good, so I don’t need to argue too much at parties :)

  15. 15
    HappyRenter says:

    RE: akfish @ 13

    I don’t quite understand your point. You might have been able to rent the same house for 1500$. Assuming that she has been paying 2250$ each month on her mortgage, you have in fact saved 750$ each month by renting. That does not take into account maintenance, fees, time and energy spent in the house. I don’t think it’s that discouraging.

  16. 16
    Tom says:

    Of course, one never knows whether they ATM’d their primary residence to get the down payment for the investment property.

    Speculating on someone else’s finances is risky as well.

  17. 17
    PhinneyDawg says:

    I’m usually quick to point out to my guests asking about my house (and its value) that I’m probably a little underwater and that we were young and dumb buying a house in 2007. Sometimes I even talk about how much money I blow on upkeep that would be better used as an investment that would make me a higher profit/year. Haha.

    My only hope is to teach my friends about the potential downfalls of owning a home because no one ever told me about them when I was buying a home. I just own up to my mistake, make the payments, invest my money wisely, and hope for the best.

  18. 18
    PhinneyDawg says:

    By Tom @ 16:

    Of course, one never knows whether they ATM’d their primary residence to get the down payment for the investment property.

    Speculating on someone else’s finances is risky as well.

    Very true. You never know how a stranger finances their life/home and you could potentially look equally smug trying to talk about how screwed they are now.

  19. 19
    Scotsman says:

    She should sell while she still has a chance to get out at close to zero. Then she could write a smug article about how smart she was to bail while her friends all went down with the ship. I still believe this contraction is just getting warmed up . . .

    One benefit of all this may be that folks start to focus on issues that are more important to their lives than keeping up with the neighbors and friends.

  20. 20
    The Tim says:

    By PhinneyDawg @ 18:

    Very true. You never know how a stranger finances their life/home and you could potentially look equally smug trying to talk about how screwed they are now.

    That is why I kept Ms. McCormic’s personal finances out of the post and tried to focus on the whole pity party for renters aspect of her 2006 piece.

    That being said, Tom’s comment made me curious. I looked up the King Co. records on her Ballard house.

    Deeds of Trust

    • 06/09/2004, Homestreet Bank (original purchase)
    • 07/14/2005, JPMorgan Chase
    • 02/22/2006, Golf Savings Bank
    • 06/24/2008, US Bank

    Three refinances in four years, hmm. Since King County doesn’t show Deeds of Trust online, you can’t know (without going down to the office) whether these were were cash-out or just refinancing to get a lower rate, or what.

  21. 21
    Dave0 says:

    RE: The Tim @ 20 – I think a bunch of those have matching reconveyance deeds, which would indicate she paid off one as she took out another so it looks to me like she was just refinancing to get a lower rate.

  22. 22
    The Tim says:

    RE: Dave0 @ 21 – I’m not sure I follow your logic. Just because Mortgage A at Bank X was paid off when Mortgage B at Bank Y was taken at a different bank, how does that mean that Mortgage B wasn’t for a larger amount, with Bank Y giving cash out?

    I’m not a mortgage professional so it’s definitely possible I’m missing something here.

  23. 23
    Dave0 says:

    RE: The Tim @ 22 – There is no proof either way. I’m just saying that since mortgage A was paid off at the same time as mortgage B was taken out, it is likely that she used mortgage B to pay off mortgage A. You are right though, she may have just taken out a larger mortgage.

  24. 24
    EconE says:

    Soooooo many people just HAD to buy a second home.

    Yup.

    They wanted to rule the world. Lording over lowly renters.

    I wonder how many of them are going cap in hand to the bank, begging their banking masters for a break, so they may continue merrily along on their oh-so-profitable landlording adventures?

    I wonder how many of them really think they are really “playing chicken” with the bank and that the bank will be the first to blink?

    I doubt that the bank is gonna leave a single chip on the table.

  25. 25
    The_Dude_Abides says:

    RE: Dawn Glover @ 8

    Well said, Dawn.
    I was assigned to read a book and write a report in the mid 70s, while an economics student. It was called The Leisure Class by Thorstein Veblen. I think you’d enjoy it.

    I have been a renter since 2000, when I went to work for myself. I sold my Missouri(St. Louis) condo, just trying to keep in line with the thread. I just didn’t feel good about having debt when my income was unstable.

  26. 26
    Astro Kermit says:

    By The Tim @ 6:

    Oh and don’t fret about Ms. McCormic’s “all-important” equity. Since she bought her “little house in Ballard” in 2004 she’s probably still got some equity in there, though I don’t think she’ll be likely to describe it as “soaring” again any time soon.

    Wow.

    Thanks Tim for that link.

    I never tried using the King County records site to look up addresses.

    Using that site I looked up my home and was able to trace through all the people who lived and died in my home. Been trying to learn more about the ghosts who live here. I also looked up my neighbors because I would sometimes forget the name of a spouse or their last name. It was also a wakeup call of how many friends of mine here are trapped in Seattle because their homes are underwater. It is a horrible horrible situation =[

    This web site is crazy scary. Is there one for Snohomish and other nearby counties? Does anyone have one for counties in other states? What is the key term I should be looking for to Google so I can find this on my own? The King County site is really hard to navigate. I hit one button got lost and had to use Tim’s link to refind where I needed to go.

  27. 27
    The Tim says:

    By Astro Kermit @ 26:

    This web site is crazy scary. Is there one for Snohomish and other nearby counties? Does anyone have one for counties in other states? What is the key term I should be looking for?

    All of the parcel and record search pages for Seattle-area counties are listed here: Real Estate Resources. As for other states, I generally search for the county name and “public records search” or “parcel.”

  28. 28
    akfish says:

    By HappyRenter @ 15:

    RE: akfish @ 13

    I don’t quite understand your point. You might have been able to rent the same house for 1500$. Assuming that she has been paying 2250$ each month on her mortgage, you have in fact saved 750$ each month by renting. That does not take into account maintenance, fees, time and energy spent in the house. I don’t think it’s that discouraging.

    The discouraging part is from the perspective of the 2004-2010 renter who wants to become a buyer. Say the renter now decides to buy, reveling in renter’s frugality by putting down a hefty ~20% down payment (60k-> 10k, like both had in 2004, plus 50k from $750/month proudly saved by renting). However, in this particular case, that $750 savings is negated by the $750/month appreciation! Total principal, even after that responsible 20% down, is surprisingly close to what McCormic paid for the house.

    Of course, McCormic doesn’t come out with much extra in the end from selling, since the 25k principal paid off could easily have been required for maintenance.

    My point is that, in this case, appreciation is equal or close to the price difference between renting and buying. There are some advantages to renting (mobility, liquid cash) and some to owning (stability, small tax benefit for some, ability to modify the house, eventual ownership), but in this case, “net worth” is close to the same. It’s a lifestyle win/loss, depending on which you prefer, instead of a financial one.

  29. 29
    Astro Kermit says:

    RE: The Tim @ 27

    Thanks Tim!

  30. 30
    Choc Donut says:

    There is so much horse hooey on Channel 9 About the Money right now. Coldwell Banker’s shill comes on and says prices have stabilized and now’s the time. At least then they broke into ‘The market remains challenging, especially for sellers’. That’s an understatement. Homes are coming down everywhere, condos are a lousy buy because associations are shattering, and building quality is a complete unknown. There’s lots of signs this recession is not going away anytime soon because the right-wing morons want us to do exactly what prolonged the Great Depression – cut spending (except on the utterly wasteful military and big banks). No, the USA needs to get spanked some more, and don’t get between fate’s open hand and Uncle Sam’s rear. Wait another couple of years. Wait until after the earthquake that’s gonna ruin this area. Go to Vancouver and see what a real city is like.

  31. 31
    pfft says:

    If we have some serious inflation the housing market might come back faster than we realize. people could flee again into real assets.

    real home prices in the 70s didn’t stay depressed for long. the 70s had two declines in prices. the 80s had a slower bounce back and the 90s took forever to come back. must have been that the disinflationary mindset had taken hold.

    http://mysite.verizon.net/vzeqrguz/housingbubble/

  32. 32
    yo says:

    I was having a drink at a bar in Federal Way back in 2005, and I ran into a dude that I barely knew. He started to ask me questions, and when I told him I didn’t own a home, he said, “if a man at your age doesn’t own a house, that means something’s wrong with you.”
    Well, Ef You! Who’s laughing at who now? Hahahahaha….
    You are the one who caught the last spaceship flight off TO a planet that was about to crash, you dumb @#$!. I hope you foreclose your ass!

  33. 33
    HappyRenter says:

    RE: pfft @ 31

    The 70’s were different times, though. The US economy was growing and growing while Europe was in a severe crisis (and China was mostly rural, I guess). The US dollar against major European currencies was 4 times more value than today.

    Today, the US is faced with outsourcing. Eastern currencies are undervalued by their governments in order to keep production there. There will be inflation eventually but I doubt it will be in style of the 70’s. Didn’t Tim have a poll a while ago about how much inflation/deflation to expect?

  34. 34
    Civil Servant says:

    Akfish, you write above, “But it’s discouraging to think that renters would have needed save roughly an additional 50k, or $750/month average for 6 years, just to buy prices back to 2004 levels.”

    Are you any less discouraged if you stop assuming that those 2004 prices were reasonable (i.e., supported by economic fundamentals)? The real estate market was already getting frothy back then. I think it’s a mistake to use 2004-2010 Seattle appreciation as a benchmark for analysis, and I think you should *not* be discouraged.

  35. 35
    Jonness says:

    RE: akfish @ 13

    But it’s discouraging to think that renters would have needed save roughly an additional 50k, or $750/month average for 6 years, just to buy prices back to 2004 levels.

    In a roundabout way, that’s the point I keep making. These last few years have been the best time in our lives to save up a down payment. Typically, the amount you save each year gets wiped out by house price appreciation. Now-a-days, not only do we not get eaten alive with appreciation, we are making extra money off the depreciation.

    I think back to homes I was looking at in 2007 and shudder. Instead of paying tens of thousands of dollars per year in interest payments, I’ve been tacking the money on to my down payment. With a dual-income family, it really starts to add up fast.

    I’ve noticed a big change since I started saving. When I had little money and lots of debt, I had frequent urges to borrow money in order to make myself feel better. But once I started growing a savings account, I started getting a big thrill each time I put money in it. Now I’ve reached a point where I have a pretty good sized down payment, I don’t want to risk it in a bleak housing market. The difference between actually saving the money you are spending and simply borrowing your future away on a giddy impulse is night and day. When you borrow, you have no appreciation for how hard it is to save the money.

    People who bought prior to the bubble feel a sense of entitlement. They bought a house for little to nothing down at 3x their income, and they deserve to at least double their money when they sell a few years later. Contrast that to today’s buyer who must pay 5x income using a large down payment of hard-earned money and risk future depreciation wiping out his entire down payment. And that just ain’t that fun to brag about at fancy dinner parties. It’s much better to have a big load of liquid cash at a time when all your splurging friends are worried about losing everything and going back to 0.

    Times are changing. Long gone are the days of people who cannot control their impulses or take time out to exercise logic getting rich for simply breathing the air around them.

    When the banks won’t lend, you lose all your rich friends. And that brings me to a final point. Most people don’t own houses. The banks do. The people living in the banks’ homes service the debt and take care of the homes. And how do the banks get the money to lend these people? They simply enter a larger number into a computer.

  36. 36
    Jonness says:

    RE: akfish @ 28

    My point is that, in this case, appreciation is equal or close to the price difference between renting and buying. There are some advantages to renting (mobility, liquid cash) and some to owning (stability, small tax benefit for some, ability to modify the house, eventual ownership), but in this case, “net worth” is close to the same. It’s a lifestyle win/loss, depending on which you prefer, instead of a financial one.

    That’s assuming prices will continue to appreciate at the same average rate as from 2004 to now. However, we are amidst a heavy deleveraging cycle, so that’s not likely to be the case. How much did houses appreciate in 2008 and 2009? The cycles go both ways. Of course buying when the bubble is growing looks like a good investment. The problem is buying right now when the bubble is deflating is likely to provide the opposite result as before.

    I find it interesting that so many people still use the heat of the bubble as a historical measure as to whether buying a house is a good investment (not that this is your point, but it is for many who are weighing the decision of whether to buy or rent). In 2004 when she bought, an unemployed strawberry picker could get a $million house with zero down. Thus, credit money flooded the market and directly competed with cash driving up prices of finite assets. We currently have ~10% unemployment, and lending is continuing to shrink each passing month. We are in a WAY different environment than when she bought in 2004. In fact, the two economies are practically exact opposites.

  37. 37

    RE: Jonness @ 36

    Not exactly accurate. In 2004, in order to buy a million dollar home, a strawberry picker could not be unemployed. Well, OK, they could be unemployed, but they still needed to have a pulse.

  38. 38
    Mikal says:

    RE: Jonness @ 36 – Please show me how lending is shrinking.

  39. 39
    Game Hunter says:

    Ripping people who were overly-enthusiastic about RE two or three years ago is about as intelligent and civilized as the people who were overly-enthusiastic.Why stoop to their level? It’s like fighting with homeless people on the street, over nickels and dimes. So-called “civilized” people all around me act like wild animals every single day of my life. I care not to read about it, as well.

  40. 40
  41. 41
    Jonness says:

    By Mikal @ 38:

    RE: Jonness @ 36 – Please show me how lending is shrinking.

    OK.

    To sum this up, the world lending capacity has shrunk by about $3 trillion. This is an astounding sum. The slack has been picked up to some extent by all the Fed’s lending facilities like the TARP and the TALF etc. and other central banks as well.

    No wonder governments and central banks all over the world have been finding ways to offset this collapse in bank credit.

    http://seekingalpha.com/article/186041-u-s-bank-lending-will-contraction-continue

    You can’t have an economy with record unemployment and ongoing credit contraction and expect asset prices to rise at the same rate they did during the wild ride of 2004/2005 when my house was appreciating at 25%/yr. It just does not work that way unless you can work in some hyper-inflation. But hyper-inflation is tough to get when a country is amidst a necessary deleveraging cycle. We might get it eventually, but the greatest risk over the next couple of years is deflationary pressure, which will result in continued slow growth. Most of this growth will result from the government taking on record amounts of debt to offset consumer and private sector deleveraging; thus, we cannot consider it sustainable until we see a real increase in jobs.

    In truth, the only reason home loans are being made at all, is because the taxpayer is taking all the risk. So although home loan lending is essentially flat year over year, commercial and credit cards are taking a substantial hit. And now we see the Fed pulling out of its MBS purchase program, which provides major support for keeping home loans flowing.

    Let’s look a little deeper under the covers. Credit card lending is plummeting.

    http://www.mybudget360.com/631-million-credit-cards-for-113-million-households-%E2%80%93-credit-card-excess-contracting-for-first-time-in-40-years-how-plastic-hid-middle-class-financial-decay/

    Commercial RE is starting to take its much anticipated multi-year hit; thus, loans to businesses are contracting at an extremely rapid pace.

    http://online.wsj.com/article/BT-CO-20100310-708840.html?mod=WSJ_World_MIDDLEHeadlinesEurope

    The problem is, we are a consumer economy that is kept alive by borrowing increasingly larger amounts of money. As long as we borrow more next year than this year, everything goes smoothly. But when we borrow less next year, the economy takes a direct hit because there isn’t as much money out there to purchase goods and services as before. When the amount of credit available increases, it drives finite asset prices higher. When the amount of credit out there contracts, it drives finite asset classes lower.

    It’s important to note, at the time of purchase, credit money is the same as paper money, but when overall debt per person of a nation gets too high, resulting in too much income being devoted to interest payments, we experience the braking effect currently being seen all around us.

    I’m not a perma-bear. I believe we will come out of this mess. It’s just that I don’t think the underlying economic fundamentals support a rapid recovery at this point in time. Eventually, buying a house will make good sense again. As far as I’m concerned, that will be when most of the risk to the downside subsides, and the numbers look fundamentally healthy again. In the meantime, my advice to people in the market to buy now is to keep an eye out for foreclosures that have been well-maintained. They represent the best deals and help mitigate downside risk. But be careful of foreclosures in poor condition. They can cost you way more in the long run.

  42. 42
    pfft says:

    By HappyRenter @ 33:

    RE: pfft @ 31

    The 70’s were different times, though. The US economy was growing and growing while Europe was in a severe crisis (and China was mostly rural, I guess). The US dollar against major European currencies was 4 times more value than today.

    Today, the US is faced with outsourcing. Eastern currencies are undervalued by their governments in order to keep production there. There will be inflation eventually but I doubt it will be in style of the 70’s. Didn’t Tim have a poll a while ago about how much inflation/deflation to expect?

    europe was in no more crisis than the US was. europe and the US have mostly moved in sync for centuries.

    today the US is not facing outsourcing. the weaker dollar has started to revive exports and so-called “onshoring.”

    Caterpillar Joins ‘Onshoring’ Trend
    by Kris Maher and Bob Tita
    Friday, March 12, 2010
    http://finance.yahoo.com/career-work/article/109067/caterpillar-joins-onshoring-trend;_ylt=AjyKcfLv6xeb9FC7gRKY5GZO7sMF;_ylu=X3oDMTFhczc3a2NwBHBvcwMzBHNlYwNzcGVjaWFsRmVhdHVyZXMEc2xrA2NhdGVycGlsbGFyag–?mod=career-leadership

    that is exactly what you would expect from a falling currency.

  43. 43
    OldGuy says:

    RE: The Tim @ 20
    Aren’t there fees involved in refinancing, what are the typical costs to refinance a mortage? Aren’t the fees usually added into the loan value, reducing the equity?

  44. 44

    RE: OldGuy @ 43
    Absolutely. There’s often loan origination, appraisal, and other fees, and on top of the that, the beginning payments of a new loan are almost all towards interest, so even if you’re refinancing at a lower rate it could ultimately cost more, especially if you’re adding years to the term.

  45. 45
    GV says:

    Someone in this thread found that the author bought a duplex. Be careful with criticism of that. Buying a duplex is a decent investment. I have one. Granted, I purchased it post-bubble but prices fell further after I purchased it. In any case, banks now pay only 1% interest on deposits. My duplex, purchased with about 50% cash, is paying me over 8% on the money I put into it. That is taking into consideration that each month my tenants pay toward the loan balance $300. I get net $300 each month in rental revenue also (exceeding my bank obligation). In addition, there are significant tax benefits. If I had another $150,000 I’d purchase a second duplex. It’s been the best investment I’ve ever made, as I’ve dabbled in the stock market and had miserable long term returns there.

    I don’t intend to sell my duplex, the cash flow is so nice and it’s a step toward comfortable retirement. I’d also like to save more, sell the duplex, and get into a four-plex. My current tenants have college educations and good jobs, but horrible credit thus they won’t be buying any time soon. It’s a perfect scenario for me, they take good care of the duplex and I seem to get a great deal of benefit.

  46. 46
    Tom says:

    No, buying a duplex *may* be a decent investment. It depends upon purchase price and tenant rents, doesn’t it? You can pay too much for any ‘investment’.

  47. 47
    LT says:

    Surfing around this website, years after this was posted, I found it interesting to look at what happened to the duplex next:

    2004: sold $400,000
    2007: sold $401,000 – foreclosure. So, she didn’t do well.
    2011: sold $245,000
    2012: sold $399,000
    2015: listed $625,000, sold for $670,000.

    What a crazy cycle. Wonder if she’s kicking herself now.

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