Who got rich from the housing bubble

momopi · Post by **momopi** » April 28th, 2010, 9:30 am

Yesterday I found a great example of what people did to abuse the system during the housing bubble. You can read about the HELOC abuse here:
http://www.irvinehousingblog.com/blog/c ... t-time-fo/

Here we have someone who bought a house for $350k in 1997.

From 2000 to 2006, the home buyer withdrew $771,900 in mortgage equity, TAX FREE. Yes, that's $772K, TAX FREE, into his pockets during the 6-7 year span.

Now he owes $1 million debt on the property, what does he do?

Stop paying.

And he's going to get away with it.

But, wait, there's more! He gets to live there for 18+ months free while the home goes under foreclosure, and all he has to do is wait 2 years before he can buy another house and wait for the next rally!

Who gets to pay for his $772k spending-spree? Not him, and not the bank (and its shareholders) that made the easy loans to him -- they just cry to the government and ask for a bail-out. So you and I, end up paying for it from our tax dollars.

There's nothing we can do about it either. We demanded the government to "help" and the consequence is that we reward people for being financially irresponsible, or even abusing the system for financial gain.

globetrotter · Post by **globetrotter** » April 28th, 2010, 10:32 am

The REALLY smart people owned before 2002. They rode the bubble and either flipped many houses or sold theirs in 2005 and at huge profit to The Greater Fool who bought at the top. When they saw the Time 'Housing' cover and the housing doomer bloggers startup they sold, bolted and are sitting on a beach or in Buenos Aires. I was saving for a down payment in 2003-2005. I looked around and realised that things were f***ed up. I did not buy.

This saved me about $350,000 and being tied to a house. Sure I could live rent free, not pay my mortgage, rent rooms to suckers, but I would be stuck in Los Angeles. Nope, better for me to be free and clear.

Contrarian Expatriate · April 29th, 2010, 2:19 pm

I bought my portfolio of properties between 2000 and 2003. I sold half of it in 2006 at a big profit, but two more remain.

Had I sold them late in the bubble, I would have been a genius, but I now have them rented out with modest positive cash flow so I'm in no hurry to sell.

Some of the money in the profit (20 percent) I lost in a vulture fund for distressed real estate, but the final verdict is still out on that since I'm obligated until 2014.

Real estate is timing and a bunch of other things. Never get too greedy and get in and out before the rushes.

momopi · Post by **momopi** » April 29th, 2010, 4:53 pm

Here's another lesson that I learned: if you flipped properties and made out like a bandit during RE highs, hold on to your money in CASH and wait for the crash. After the bubble goes pop, CASH is KING. Don't "park" the money in stocks or mutual funds. Just CASH. Stocks are way cheaper post-crash. ;p

I made the mistake of "money burning a hole in pocket" syndrome and ended up losing a chunk of money. Of all the stupid things that could happen, the transport company dropped a CNC machine that I paid for and wrecked it. I might see some insurance money any years now, yeah... right.

I had dreams about making my own gun parts. So much for that idea. LoL.

http://www.homegunsmith.com/

FuzzX · Post by **FuzzX** » April 30th, 2010, 3:42 am

sorry to hear that momopi... I bought Tshirt + Hat Presses and Button Makers... I think business equipment is always a wise investment. Anyway, my cousin thought he`d play the housing market and bought a big beautiful house when he started his `career`in the factory. He and his loving girlfriend and their 2 dogs all lived happily until he started to have some mental problems from too many years on the factory floor. Unfortunately, he couldn`t afford to quit his job as the payments for the house were just too much. Not long after his girl left him and stuck him with the 2 huge dogs... both dogs completely ruined the insides of the house and now he`s trying to get rid of it. More than likely he will be selling at a huge loss + debt trying to fix it up.

I don`t see real estate for the majority being a good investment, most people are not responsible enough to take care of their most important assets.

Momopi: Have you thought about going to Shenzhen to look for another machine(question mark)

momopi · Post by **momopi** » April 30th, 2010, 8:39 am

FuzzX wrote:sorry to hear that momopi... I bought Tshirt + Hat Presses and Button Makers... I think business equipment is always a wise investment. Anyway, my cousin thought he`d play the housing market and bought a big beautiful house when he started his `career`in the factory. He and his loving girlfriend and their 2 dogs all lived happily until he started to have some mental problems from too many years on the factory floor. Unfortunately, he couldn`t afford to quit his job as the payments for the house were just too much. Not long after his girl left him and stuck him with the 2 huge dogs... both dogs completely ruined the insides of the house and now he`s trying to get rid of it. More than likely he will be selling at a huge loss + debt trying to fix it up.

I don`t see real estate for the majority being a good investment, most people are not responsible enough to take care of their most important assets.

Momopi: Have you thought about going to Shenzhen to look for another machine(question mark)

Sorry to hear about your cousin. If he's upside down on the house and looking to exit, tell him to read "Irvine Housing Blog" for some ideas. They call it "strategic defaulting". >_<

If his job is making him feel ill, it's time to quit and do something else.

I haven't thought about buying manufacturing equipment in Shenzhen... after the last fiasco I think I'm done for a while, lol.