Am I Really An Idiot? (AKA: The Thank You Thread)

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<em>His Phoenix neighbor? house has been for sale for 7 months at $166k, same model.



He thinks I am an idiot for not listening to him since he has three properties already (4th one on the way) and I have zero.</em>

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I am a bit confused. Why do you think he owns property? If I am reading correctly, it appears all he owns is debt. And a lot of it. Since he is so free with his advice for your life, and is so free with telling you of his situation, maybe you should ask how much equity he has in each property.



Most posters who know me from here will say I am a cynic, but something tells me he borrowed any and all equity out of his personal residence to purchase the other properties and now has negative equity. And in order to validate his state of denial, he is trying to get you to board his Titanic. If someone else is willing to get on the ship, it can't really be sinking.



If you want to buy a home, buy a home, but don't delude yourself into thinking that it will do anything but depreciate for the next few years.

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<em>Does making $200k a year mean it?s ?more ok? for him to make investments like these?</em>

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His $200,000 annual salary just enables him to pay some of the negative cash flow he has every month.
 
[quote author="graphrix" date=1225875334]The only one who is the idiot is the one who read Rich Dad, Poor Dad and failed to understand the basic concept of positive cash flow. People who "invest" in a depreciating rental property with negative cash flow are idiots. Actually... that makes them a full blown idiotic moron.</blockquote>


I think the only time it makes sense is to rent is you bought it really low and lived in it and you have to move. But it does not make sense to buy in this market and rent out.
 
I feel soooo loved! thanks to all who assured me I am not an idiot!

It is just so hard to stick to what I believe in, the wait is hard, the living below my means is hard, dealing with comments like "Why are you renting? Why don't you get a bimmer? Where are your Tod's flats and True Religion jeans?Where is your Chanel bag? Eewww, who dyes their own hair? ......" is HARD!

But every time I feel that way, I read the posts, you guys are my shrink. :kiss:

BTW, cousin's wife left a message on my cell, apologizing for his rude behavior (sort of). Also mentioned they are considering selling their Fullerton house for $550k! Or else they will rent it out when they purchase their fourth property.

Now, tell me how will they come out a winner in this?

Can anyone tell me is it in any way possible, let's say in X years, that they have made the right decision?
 
If they gamble on not paying / borderline rent skimming in order to get bailed out and have the loans modified .. and win. Pretty risky.
 
[quote author="Allison C." date=1225883940]It is just so hard to stick to what I believe in, the wait is hard, the living below my means is hard, dealing with comments like "Why are you renting? Why don't you get a bimmer? Where are your Tod's flats and True Religion jeans?Where is your Chanel bag? Eewww, who dyes their own hair? ......" is HARD!

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My wife drives a 2000 Volvo station wagon. I do not know what Tod's flats are. We rent, after having sold in 2005. She wears whatever jeans she finds on sale. I do not know what type of bag she has, but it does not have a name or insignia on it. I dye her hair for her. And she can afford whatever she wants. Really, she can afford any bag, car, or hair stylist, but saves for her dream home, and a few other important future outlays. I think you may need to surround yourself with some different support than your cousin.
 
[quote author="Allison C." date=1225883940]

Can anyone tell me is it in any way possible, let's say in X years, that they have made the right decision?</blockquote>


If x>40 maybe.
 
[quote author="Allison C." date=1225883940]I feel soooo loved! thanks to all who assured me I am not an idiot!

It is just so hard to stick to what I believe in, the wait is hard, the living below my means is hard, dealing with comments like "Why are you renting? Why don't you get a bimmer? Where are your Tod's flats and True Religion jeans?Where is your Chanel bag? Eewww, who dyes their own hair? ......" is HARD!

But every time I feel that way, I read the posts, you guys are my shrink. :kiss:

BTW, cousin's wife left a message on my cell, apologizing for his rude behavior (sort of). Also mentioned they are considering selling their Fullerton house for $550k! Or else they will rent it out when they purchase their fourth property.

Now, tell me how will they come out a winner in this?

Can anyone tell me is it in any way possible, let's say in X years, that they have made the right decision?</blockquote>


Maybe you just need new friends?



I'm sort of joking, but sort of not. If your values are what they are, why are your "friends" trying to talk you out of them? Shouldn't they just accept you as you are?



I do get where you are coming from, though. I see friends and family with all kinds of toys and luxuries and I can't help but think, "I know I make more money than you do and I can't spend like this. What the heck?!?" At the same time, I also know that my husband and I have no fights over money and no stress about it either. As my Mom always tells me, "You can have anything you want, but not everything you want."



I would also suggest that you not deprive yourself completely. You're trying to save, not be a martyr.



And Awgee, I think that's totally sweet that you dye your wife's hair. :)
 
Does he already have his loan approved for the new property he is buying in Fullerton? Those Phoenix properties are seriously affecting his assets/reserves. And if they aren't even getting enough rent to cover their costs, those are going to affect his debt to income ratio as the banks only consider 75% of the rent for income and count ALL of the costs of owning including taxes and insurance.
 
[quote author="Allison C." date=1225883940]I feel soooo loved! thanks to all who assured me I am not an idiot!

It is just so hard to stick to what I believe in, the wait is hard, the living below my means is hard, dealing with comments like "Why are you renting? Why don't you get a bimmer? Where are your Tod's flats and True Religion jeans?Where is your Chanel bag? Eewww, who dyes their own hair? ......" is HARD!

</blockquote>


I don?t understand the living below my means concept.

There?s nothing wrong with having or wanting any of those things as long as you can afford it.

Can?t afford a 6-Series, why not drive an M3?

Chanel bag too expensive, go with D&B or Coach.
 
I have lived below my means for quite a while now. Maybe its because i'm cheap or easily amused with low cost things. :lol:

You do have to surround yourself with positive reinforcement though. If you have a business you can lease a car if you wanted.... (this is what i've done....)



Anyways good luck

-bix
 
[quote author="Allison C." date=1225848153]I spoke to my cousin last week. He is looking for foreclosed properties (2,000sf +) in Fullerton to live in since his wife's expecting. He thinks I should buy now too, and is stupid to have been waiting for this long.

He bought his current house in Fullerton in late 2001 for 350k - 1,020 sf. 1950's structure that required lots of TLC. (10% down borrowed against his 401k)

He then bought two properties in the Phoenix area in late 2006 for $285k each - 1600sf. which he is renting out. (0% down)



His Fullerton neighbor's house is on the market for $650k - 3000sf. remodeled with pool.

His Phoenix neighbor' house has been for sale for 7 months at $166k, same model.

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The Fullerton property was a good buy, the Phoenix ones are not.



I bought properties from 1998-2002 and made $$ selling in 2004-2006.



Obviously, the Phoenix properties are income properties, and not generating positive cash flow. There's a right time and wrong time to buy investment properties.



Primary residence, or "home" is not an income property and should be treated differently. If you can afford it, you buy a home that makes you feel good and enjoy living in, regardless of its income potential.



Now that RE is in down cycle, you have an opportunity to start looking, and maybe find good income properties to buy over the next few years.
 
[quote author="EvaLSeraphim" date=1225931649][quote author="Allison C." date=1225883940]I feel soooo loved! thanks to all who assured me I am not an idiot!

It is just so hard to stick to what I believe in, the wait is hard, the living below my means is hard, dealing with comments like "Why are you renting? Why don't you get a bimmer? Where are your Tod's flats and True Religion jeans?Where is your Chanel bag? Eewww, who dyes their own hair? ......" is HARD!

But every time I feel that way, I read the posts, you guys are my shrink. :kiss:

BTW, cousin's wife left a message on my cell, apologizing for his rude behavior (sort of). Also mentioned they are considering selling their Fullerton house for $550k! Or else they will rent it out when they purchase their fourth property.

Now, tell me how will they come out a winner in this?

Can anyone tell me is it in any way possible, let's say in X years, that they have made the right decision?</blockquote>


I do get where you are coming from, though. I see friends and family with all kinds of toys and luxuries and I can't help but think, "I know I make more money than you do and I can't spend like this. What the heck?!?" At the same time, I also know that my husband and I have no fights over money and no stress about it either. As my Mom always tells me, "You can have anything you want, but not everything you want."



I would also suggest that you not deprive yourself completely. You're trying to save, not be a martyr.



And Awgee, I think that's totally sweet that you dye your wife's hair. :)</blockquote>


Thanks to all the positive reinforcement again. I am so touched!

Fortunately, the people who made those "Why don't you ...." comments are not my friends, they are usually co-workers, acquaintances or annoying neighbors. Ah, yes, my financial guru cousin too. I really want to tell them the exact same things you mentioned. I wanna tell them "My bank account is bigger than yours!" >:(

I have been driving the same car for the past 8 years, 90% of my wardrobe are from Target or Kohl's or Mervyn's or Macy's sales racks. I am not stingy, just frugal. I don't see the need to pay that much for sth. as long as it suits my needs. I look for bargains at markets, sales at stores, coupons in the mail. I bring my own lunch to work. I brew my own coffee in the morning. I donate 1/4 of my income because I think there are so many unfortunate people in the world, and here are these st*pid people maxing out credit cards to buy a handbag that will feed a family for months!

I have even offended an acquaitance when I started to refuse her "generosity" of leaving second hand clothes and food items and household items on my doorstep. She thinks I am poor because I don't dress like her, wears no jewelry, and don't drive an European car.



And thanks, stepping_up for the valuable info.

And Awgee, my dad used to dye my mom's hair before he passed away unexpectedly. She still misses it....sob... treasure the moment.
 
Allison,



My father in law was trying to talk us into buying a house in 2006, if you can believe that! He suggested interest only loan and implied that we could buy without a down payment. Little did he know how big our DP fund was. We ended up buying a foreclosure up in Paso Robles last Nov with 20% down on a 30 yr fixed, which surprised the heck out of them.



It probably wasn't the best decision we ever made, but we figured that we wouldn't ever be able to afford a SFR in OC. It is still worth considerably more than we paid for it, but that is because it's in the desirable west side walking distance to the square and the reason we jumped on it was the fantastic price. We rent it out, but it is cash flow negative. With the tax break, the rent we net doesn't quite make the mortgage payment and then we have the property taxes and insurance. We hope to move up there one day, but in the meantime, we have a cash flow negative house that the pros would admonish us for.



We then decided to catch a knife and buy a house here in Costa Mesa. Our mortgage is very affordable and with the tax break, actually equal to cost of renting, but if we had waited longer our principal balance would have been a lot less. The rate we got then makes the payment about the same as if he had bought it today at a lower price, but we owe more than we would have had we waited.



Being frugal is how we saved up the money for downpayments and qualified for them. The less other debt you have, the more you can borrow for a house. I do think there are going to be opportunities in real estate that people who didn't buy at the peak will be able to take advantage of. Your cousin doesn't sound like the sharpest tool in the shed with those Phoenix properties.
 
You know Allison, I think one simple way to handle these folks is by letting out a self depreciating laugh and saying, "I guess I'm old fashioned. I like to keep my money in the bank for a rainy day." It sounds to me like you have your head screwed on right. Have you read IR's "Southern California Pathology" piece on the main blog?
 
[quote author="EvaLSeraphim" date=1226018002]You know Allison, I think one simple way to handle these folks is by letting out a self depreciating laugh and saying, "I guess I'm old fashioned. I like to keep my money in the bank for a rainy day." It sounds to me like you have your head screwed on right. Have you read IR's "Southern California Pathology" piece on the main blog?</blockquote>


Yes, I read this evertime I get the urge to go out and purchase something. So far I have resisted.

goodluck

-bix
 
:) Here I go again... giving thanks. :)



Thanks to stepping_up for sharing your experience here.



I was very hesitant to give out so many thanks, I know... but this is really the LEAST I can do to show you how much I appreciate all your HONEST advice and opinion. For a stranger like me, who knows nothing about investing besides putting my money in the bank and 401k, a lot of you took the time to help not just me, but many others too, is simply amazing! ;-) I can only wish that one day I can start giving some constructive advice to others too!



Thank you IR for setting up this forum. (not brown nosing you)



And will I get in trouble if I do/don't give thanks to Roo??
 
Just for fun, heres a quick list of the people Allison C. did NOT thank in this thread: :)



1. 24inIrvine (but was thanked in a later reply)

2. WestparkRenter (also thanked in later reply) however, he was also skipped again in a later reply...and again...and again

3. jbatzmaru

4. tenmagnet

5. Roo

6. Biscuitninja, was thanked earlier but not later
 
[quote author="24inIrvine" date=1226026485]Just for fun, heres a quick list of the people Allison C. did NOT thank in this thread: :)



1. 24inIrvine (but was thanked in a later reply)

2. WestparkRenter (also thanked in later reply) however, he was also skipped again in a later reply...and again...and again

3. jbatzmaru

4. tenmagnet

5. Roo

6. Biscuitninja, was thanked earlier but not later</blockquote>


Hey, are you poking fun at the newbie? :red: ;-)
 
[quote author="Allison C." date=1226025051]:) Here I go again... giving thanks. :)



Thanks to stepping_up for sharing your experience here.



I was very hesitant to give out so many thanks, I know... but this is really the LEAST I can do to show you how much I appreciate all your HONEST advice and opinion. For a stranger like me, who knows nothing about investing besides putting my money in the bank and 401k, a lot of you took the time to help not just me, but many others too, is simply amazing! ;-) I can only wish that one day I can start giving some constructive advice to others too!



Thank you IR for setting up this forum. (not brown nosing you)



And will I get in trouble if I do/don't give thanks to Roo??</blockquote>


click the thanks button really fast several times on Roo :)
 
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