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

NEW -> Contingent Buyer Assistance Program
AllisonC_IHB

AllisonC_IHB

New member
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.



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.

He thinks I am an idiot paying for someone else's mortgage.

He thinks I am an idiot for not taking advantage of the interest only mortgages. He still thinks so now.

He thinks I am an idiot not to be able to take advantage of all the tax breaks for owning.



Needless to say, I am more than PO. I don't think I am an idiot, and I think he paid too much for all his properties.

Is he under water but just too proud to admit it?

Does making $200k a year mean it's "more ok" for him to make investments like these?



<u>I would like to hear what the smart contributors of IHB</u> think.

Was I really an idiot for not doing what my cousin has been doing and missed out on the five trips they took to Europe and the two-car garages full of toys and the shopping sprees to South Coast Plaza?
 
is it possible to find out what his terms are on those 2 Phoenix properties are? Is he on a fixed rate mortage, or is he on interest only on all 3? What his payment vs. the rental income he has bringing in.



I think it pretty clear, hes underwater on those Phoenix ones given his neighbors isnt selling for 166k.





I think once you actualy check the numbers, it will be pretty clear. I also wouldn't be surprised if he doesn't give you those numbers.



What city is he purchasing the 4th one in?
 
[quote author="24inIrvine" date=1225848536]is it possible to find out what his terms are on those 2 Phoenix properties are? Is he on a fixed rate mortage, or is he on interest only on all 3? What his payment vs. the rental income he has bringing in.



I think it pretty clear, hes underwater on those Phoenix ones given his neighbors isnt selling for 166k.





I think once you actualy check the numbers, it will be pretty clear. I also wouldn't be surprised if he doesn't give you those numbers.



What city is he purchasing the 4th one in?</blockquote>


Fullerton



For his current home, he is on traditional 30 yr. Phoenix, last I heard, interest only. He wouldn't say how much he's renting them out for, but the wife did say it does not cover the payments.

I am just p*ssed because they think they are the financial gurus, bragging their properties in my face every chance they get. and he has just crossed the line with the name calling.
 
[quote author="Allison C." date=1225848841][quote author="24inIrvine" date=1225848536]is it possible to find out what his terms are on those 2 Phoenix properties are? Is he on a fixed rate mortage, or is he on interest only on all 3? What his payment vs. the rental income he has bringing in.



I think it pretty clear, hes underwater on those Phoenix ones given his neighbors isnt selling for 166k.





I think once you actualy check the numbers, it will be pretty clear. I also wouldn't be surprised if he doesn't give you those numbers.



What city is he purchasing the 4th one in?</blockquote>


Fullerton



For his current home, he is on traditional 30 yr. Phoenix, last I heard, interest only. He wouldn't say how much he's renting them out for, but the wife did say it does not cover the payments.

I am just p*ssed because they think they are the financial gurus, bragging their properties in my face every chance they get. and he has just crossed the line with the name calling.</blockquote>


House in Fullerton has come down a lot. He is lucky he bought in 2001, but given time it would come down more. "not cover the payments" is the key here.
 
Depends how nasty you wanna get, but it's probably best to just ignore him.



I believe the saying is: <strong>Don't argue w/stupid people; they'll bring you down to their level and beat you with experience.

</strong>

If the wife did say that it doesn't cover the payments, ask her what's going to happen when the payments go up? Or is he signing up for a massive bailout ..
 
If the rent doesn't cover the payments, could he already be skimming the rent and have plans to ditch those houses? I think it's interesting that his wife admitted the rent doesn't cover what they owe each month. The male ego is a fragile thing. By getting hostile and telling you what an idiot you are, it seems maybe he is feeling insecure about his choices. <em>People often project how they feel about themselves onto others.

</em>
 
Yeah so the Fullerton is his place of residency. Nothing really worth arguing there since alot of that is emotion for some people anyway.





However, take a look at those other 2 and its pretty clear



Rental Income does not provide positive cashflow, and it sounds like it provides nothing but losses.

The Loan to Value is probably greater than 100% and he is on an interest only loan. So therefore his payment is due to reset and his cashflow will even get worse.



I think talking to his wife makes more sense than talking to him.
 
[quote author="Allison C." date=1225848153]



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.

He thinks I am an idiot paying for someone else's mortgage.

He thinks I am an idiot for not taking advantage of the interest only mortgages. He still thinks so now.

He thinks I am an idiot not to be able to take advantage of all the tax breaks for owning.



</blockquote>


Does he really "have" any properties, though? Sounds like the only thing he is paying principal towards is the Fullerton property. Trust me, I've been to the Phoenix area a couple times this year, it is hurting. He's underwater on that property a whole lot. And for $285K that place should have been a palatial estate.



Hey, he might be able to swing it. Even financial ignoramuses get dumb luck. And besides, is it your goal to have a "real estate empire" or just have a home you can afford and are happy with?
 
Sounds like your cousin is going to learn a very expensive lesson.



My grandmother likes to say, in cases like this, the smart thing to do is "put on the duct tape" (over your mouth). Her take is that when friends/family ask for your opinion, they are really asking only that you tell them what they <em>want</em> to hear. That's when it's best to tape your mouth shut, and withhold your true opinion, lest you destroy the relationship. Sounds like your cousin may be looking for reassurance that he's a real man of genius, and that his wife knows the real story.



You're not an idiot. Visit IHB for reassurance. Rinse. Repeat.
 
[quote author="k.o." date=1225851738][quote author="Allison C." date=1225848153]



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.

He thinks I am an idiot paying for someone else's mortgage.

He thinks I am an idiot for not taking advantage of the interest only mortgages. He still thinks so now.

He thinks I am an idiot not to be able to take advantage of all the tax breaks for owning.



</blockquote>


Does he really "have" any properties, though? Sounds like the only thing he is paying principal towards is the Fullerton property. Trust me, I've been to the Phoenix area a couple times this year, it is hurting. He's underwater on that property a whole lot. And for $285K that place should have been a palatial estate.



Hey, he might be able to swing it. Even financial ignoramuses get dumb luck. And besides, is it your goal to have a "real estate empire" or just have a home you can afford and are happy with?</blockquote>


I concur, Phoenix is big time in the crapper. A number of my employees there bought properties in 2005 and 2006. The peak buyers are down 40-50% from purchase price. The price action there is much like the IE. Do the math Allison. You will see how much he has "lost" on paper. Those properties are costing him cashflow every month and won't get back to break-even for potentially decades..
 
You are only an idiot if you let the fool get to you.



Stay strong! Keep hope alive!



Hugs and kisses, no_vaseline.



(p.s. my landlord has exchanged $40,000 in rent for $325,000 in capital depreciation over the past two and a half years. I paid his mortgage, and he gave me $285K that I would of lost had I been an idiot and bought it instead. Who's the moron now.)
 
Not only that the money you put down for down payment could have earned you interest.



For example, the house that I'm renting was worth $800K when I moved in, I paid $2300/month. If I put down $200K for down payment, I would loose $8000/year in interest. That is $666/month. So effectively I only paid $1700 for 3BD/2BR with a huge yard. One of the biggest in Irvine. I also don't have to worry about paying HOA, property tax, etc.. For a better pool, I signed my family up to the best sport club in OC.
 
The peer pressure during a financial mania is intense. That is how so many people get sucked in. When you did not participate and he did, he really did think you were foolish. Now that his financial empire is crashing around him, he is merely projecting his insecurities on to you. If you were to buy now, it would give him some denial and allow him to believe he was not an idiot. Since you probably are not going to buy, and since he will be the one who looks stupid when this is all over, your cousin will hide his head in shame and pray that you never bring it up again. If you value the relationship, do not say a word. If you don't, wait until he has lost everything and then give him a huge "I told you so."
 
Ok, i'm going to say this ...

he's and idiot. And you are letting some bozo get to you. Stay the course and be yourself. I have a few properties and I STILL rent. Renting is by far CHEAPER than purchasing right now. If he has not put any money back into the property he is FOOLING HIMSELF. You MUST pay down that debt not matter how little it may be. That is just common sense. good luck

-bix
 
wait till he lose his job. 4 properties is like 4 mouths to feed. it could all come crashing down fast. no house payment=no worries or less worries. Especially in this economy where everyone and their mom is losing their job.
 
[quote author="jbatzmaru" date=1225874369]wait till he lose his job. 4 properties is like 4 mouths to feed. it could all come crashing down fast. no house payment=no worries or less worries. Especially in this economy where everyone and their mom is losing their job.</blockquote>


Yeap, one of my relatives just lost her job. She was thinking of buying before she lost her job. Hopeful she will be able to find a job soon.
 
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.
 
You must log in or register to reply here.
Back
Top