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December 14, 2005
Talk about being leveraged to the eyeballs...
This article in one of the San Francisco newspapers talks about a single mother of three, who following a divorce, decided that investing in real estate would be her ticket out of her troubles. She bought one fixer-upper, then a second and...today she has eight vacation rental properties that have enabled her to make $1.3 million in equity since she began. But now she has $2.3 million in mortgage debt and negative cash flow that ranges from $5,000 to $15,000 monthly depending on the season. Sorry, I don't have the stomach for this...
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This is THE reason why home affordability in California has dropped to 12%. So many speculators have bought multiple homes with money borrowed off equity from other homes that far fewer homes are available to residential buyers. The supply-reduction created by speculators has sent prices through the ceiling.
This is a problem created almost exclusively by a banking system that is allowed to make extremely risky loans while transferring the risk to a 3rd party. And this has been done with the approval of the federal government and it's relaxation of reasonable loan requirements.
When this house-of-cards falls, the U.S. taxpayer will again be asked to bail out banks and save them from their greedy, irresponsible loan practices.
Posted by: unlawflcombatnt at December 14, 2005 08:15 PM
What a heartwarming story! Only in America could such a rags-to-riches scenario occur. If word gets out that she is using her equity gains for income, then watch out! If this trend catches on, then nobody will ever have to work again. We, as a society, will have finally attained that elusive Utopian state we have sought for so long.
Thanks for brightening our holiday season with this tale of entreprenueral triumph.
Posted by: sarcastic1 at December 14, 2005 08:49 PM