Wednesday, September 13, 2006

David Lereah @ Peak Bubble

"If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress."

He called it "very unsophisticated." (Los Angeles Times Aug 28th, 2005)


At 10:08 AM, Blogger babywithanatombomb said...

Kiss my butt, David.

I paid cash for my beautiful 14 acre country spread ten years ago and have not regretted it. Ever.

During that time, the place has appreciated by $300k. It has also provided me with an estimated $350k in pretax mortage/rent savings. Plus all the enjoyment of a country place with a front-porch view of a national park skyline.

It has also meant that out family needs only 1 job between us. No stressed out two-career lifestyle for us.

So who's the fool, David?

PS Forgot to mention that we get all our heating fuel off our own property. Try $20/year for all winter heating needs.

At 7:24 PM, Blogger David said...


10 years ago there was no bubble

At 10:37 PM, Blogger Bob Frey said...

If you think as an investor you would have been wiser to buy multiple properties and leverage your money rather than to pay off your mortgage in the early 2000's. You could put 10% down ($30K) on a property costing $300K would have made you an average of $60K annually (appreciation) in many parts of the country (more in some areas). You could have rented the property to help cover the holding costs, but the reality is that you could have left them vacant and you would have still done very well. Even if you didn't sell at the peak (Aug/Sept 2005) you still would be in wonderful shape today in the current market. All it takes is to be $5k less than the competing homes to sell it. Buying three $300K properties in 2002 would have made you $180K annually from the three of them ($60K each). Subtract the holding costs if you let it remain vacant maybe you only make $100K-$110K annually. Even so after three years that would have been over $300K profit. Now sell, payoff your existing mortgage from the funds you used as your downpayment and take the remaining $300K, pay your capital gains taxes and put about $225K in the bank as post tax profit and collect the 5% interest which makes you over $11,000 interest income per year as you wait for the next cylcle to begin. Real estate builds wealth. 500+ billionaires in the world all agree on one thing. You cannot time the real estate market. 92% of all the worlds billionaires either made their money in real estate or put their money in real estate. I have done very well with it.


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