REAL ESTATE INVESTMENT
I Can’t Decide Which of My Two Friends Made Worse Real Estate Decisions
Whether you buy, or not… then what?
I have two friends who made polar opposite real estate moves. One bought a house and the other one didn’t. But in the end, both of their decisions were bad. I just can’t decide which one is worse. Can you?
The story of Mr. X
My friend, Mr. X, bought a house in the burbs of San Diego in 2000. It is on nearly half an acre and has very permissive zoning… commercial, industrial, ADU, multi-family. In other words, he could do a lot with the property if he had the money and the initiative to do so. Unfortunately, he had not much of either.
He paid $135,000 for the house and sold it 21 years later for $726,000. Sounds great right? The house more than quadrupled. On the surface, it looks like he got to walk away with about $600,000 ($726,000-$135,000-realtor commissions-capital gains+mortgage paydown… an oversimplification, I know). Except that when he sold it he still owed $400,000… on the house that he bought for $135,000. Let that sink in for a moment.
What? Why? How? WTF?
Mr. X used his house as a piggy bank. He kept withdrawing the equity to buy fun things. A BMW…
