patrick.net

What's more, society could stop demonizing renters.

Owning a home has many advantages, but it's not for everyone. Our glorification of homeownership as the American dream has turned tenants into second-class citizens.
Obviously, this is not a quote from a Realtor(TM), but from Kathleen Pender's SFGate.com article "Why we shouldn't be bailing out subprime lenders or borrowers" that SP pointed out in the last thread. JBRs of the world unite...

One hedge fund manager who went back to our class reunion bragged shamelessly about his newly acquired $3.5M mansion. He also wrote a $50K check to the school's endowment fund. Well, just about a couple of months ago, thanks to the increasingly transparent info available on the web, we found out that he carries a $1.8M mortgage on his mansion, and his wife works for a non-profit organization.

And, they can still do this on the side when the wall flowers get bored and ignored.

LOL! What is your take on trophy hunting? My wife thinks it is too cruel.

We do have a mountain goat head on our living room wall, but it is a stuffed animal.

I don't too many new ridiculous realtor quotes to share that I haven't already posted (see my Quotes that will live in Infamy & Evil Buyers threads). Personally, I've been avoiding them like the plague for the past couple years. However, I can name my top 5 Orwellian Realtor re-definitions:

Debt accumulation = “equity liberation”
Toxic loan = “affordability product”
Fraudulent liar = “victim”
Reckless speculator = “genius investor”
Refinance = “debt forgiveness”*

*This one was also a recent thread.

OO,

If the wife is working for a nonprofit, I seriously doubt it is for the money. Just something to do all day.

And I wouldn't read too much into the $1.8M mortgage. Maybe the hedge fund guy just has better uses for his cash than paying down a mortgage. A 50% equity stake is still quite conservative. If he can do better than 6% or so on his investments, then it is probably better to take out the mortgage and invest the cash.

http://tinyurl.com/396cxe

“As subprime loans reset and real estate markets have cooled, a reformed FHA would be perfectly positioned to offer borrowers a safer mortgage alternative and help bring stability to local markets and local economies,” said Iona Harrison, a REALTOR® from Maryland who spoke on behalf of NAR.

NAR: Stronger FHA Vital

Increasing FHA mortgage loan limits would help first-time home buyers, minorities, and others who can’t qualify for conventional mortgages, NAR says. It also would help people living in high cost areas because the current low FHA limits make the program unusable.

“Increasing the loan limits can help firefighters, teachers and police officers buy a home in the communities they protect and educate,” Harrison said. Eliminating the 3 percent minimum down payment can also have positive results for many of these home buyers."

Eliminating the 3 percent minimum down? If you can't put down 3%, are you really ready to buy a house?

“Increasing the loan limits can help firefighters, teachers and police officers buy a home in the communities they protect and educate,”

If these people cannot buy, it is not the market that has failed them. It is NIBMYism that has failed the market.

Kurt,

Maybe counting is not too important in Zen Buddhism (though even there, the numbers are quite important symbolically), but I assure you that it is important in most forms of Buddhism. Non-attachment is not the goal of most Buddhist practitioners. The ledger accounting is built into a merit based belief system that believes in reincarnation. If you hadn't noticed the importance of numbers in Buddhism, you might try looking for it.

BTW, the most "devout" Mainland Chinese Buddhists are highly successful Communist cadres praying for specific things in this life and old ladies praying to be reborn as a male or for grandchildren or for money.

Of the 4 IB/VC/HF sorts we're family friends with, I'm pretty sure at least 3 of them have quite a bit of mortgage on their 3m+ homes, and the other has a wealth manager (the VC) so he may have a mortgage too.

As Glenn said, they can do better things with the money. Someone in an earlier thread said that _rich_ people don't use/have debt. That is categorically false. It would be better worded _rich_ people don't *need* debt. But they use it all the time as a portfolio balancing mechanism.

ie, If you're my North Bay hedge fund manager friend (who incidentally is from the Midwest also, met his wife in college, and is still happily married to her with 2 children sixteen years later) and you just bought a 3.5m-ish home in Tiburon, you _could_ have paid cash but you won't being that interest rates are so low and you're going to earn 3x the return on prepaid debt in arguably safer vehicles. But if you'd pull the records and see a $2m mortgage you'd be tempted to say "FB! FB!".

On a smaller scale this is why we bought my wife's Audi using 100% financing 2 years ago, on a 3 year loan @ 0.9%. When people are willing to _give me money_ for free, I'll take the cash and put it into a CD for 3 years.

@DP,

You are missing the point --Iona is our fiend, er, "friend". She is trying to get the FHA to start offering "affordability products" so everyone can share in the new "wealth".

GC,

How would you explain the celebutant phenomena. Those little Hiltons and Johnsons have had their money for quite a few generations.

I also knew people who took out the maximum in Stafford loans to pay for grad school, even though they either didn't need the money at all, or their company was reimbursing for tuition. They just took the student loans and stuck it into vehicles returning double the rate.

I also knew people who took out the maximum in Stafford loans to pay for grad school, even though they either didn’t need the money at all, or their company was reimbursing for tuition. They just took the student loans and stuck it into vehicles returning double the rate.

I don't know what Stafford's are offering these days, but back in Ancient Times (late 1980s), they were in the 8-9% range. Not too many "conservative" investments paying that kind of return these days.

GC,

Anybody who treats a couple million dollars carelessly won't be rich or even better off than you for very long.

GC

Someone worth $25m, which last I checked was rich and in the top sub-fractional percentile of the income distribution, might not wish to expose 20% of their net worth to a single building.

HARM

For a while there people were getting them between 2-2.5%

GC

His wife is quite attractive and in very good shape, and he can still beat kids half his age in Tennis.

Are you really asking me to drop you from my threads again? I still haven't forgotten who you are or what kind crap you stirred up last time you couldn't behave.

My understanding is that billionaires have even more bizarre ways to avoid paying taxes and arbitrage yield differences.

I don't know many people that are filthy rich but I have a close friend that is rich by inheritance. He has about 40 - 60 million in a trust fund and is supported by his VC parents. College degree; works in business development (glorified sales). He makes most of his money in "friends and family" VC investments. He usually puts down 200 - 300K per fund and will probably get back 10-15X his money in 5 years or less. Can we get into this type of investments, nope. Down to earth guy.

I once asked him why he doesn't own a house in LA Hills yet? He replied back " I'm not going to pay 6-8 million dollars for a shack". You must be crazy! He rents a large house today and puts all his money in different investments vehicles and real estate is not one of them.

Who here doesn't think $25m in _net_ assets "isn't much"?

The top 1.5% (note the placement of the decimal, and the '%' symbol) only have $250,000 *net worth*. Wow. That's a couple of orders of magnitude less than $25,000,000, the guys who "don't have much".

DP, in a typical VC fund, only 1 out of 10 deals turns out to be one of those home runs. The distribution goes something like this:

1 out of 10 is a home run
3 or so make a decent return
2 or so make some money
The remaining ones lose some or all of the investment

Malcom,

Sounds about right (if not on the generous side).

My guess would be he's getting in as an LP, not investing in the portfolio companies directly. If it's a top tier fund, he'd be getting 5x+ above market out per fund.

In the spirit of ridiculous realtor quotes, try this one from Victoria BC:

MOTIVATED SELLERS! TRY YOU OFFER! Not a single detail has been left untouched during the renovation of this 1912 character home locatyed Victoria's west-end. Featuring a galley kitchen with stainless steele appliances, all new cupboards. Original fir flrs have been redone, vaulted ceiling with its olde-style markings, looks brand new. New roof, gutters & exterior. Just a short walk to the local YMCA, as well as Banfield Park & schools. Available immediately!

This is not an area known for great schools. Motivated sellers and available immediately smack of desperation, final thing to note is the prive and the square footage:

House Asking Price: $327,000
House Size: 778 sqft
Lot Size: 2790 sqft

Link is here.

I know this isn't a California price, but there are one bedroom apartments with more square footage, and these type of prices here are still in real dollars in an environment where liar loans and neg-ams have not taken hold.

I presume that you exclude the houses.

This is not fair. A renter with 250K liquid assets will be considered richer than a homeowner with 1M house equity (and nothing else) that can be liberated at any moment. :)

tsusiat, we all know that British Columbia is the best place on earth. It is special.

That stat on millionaires is wrong. There are 300 million people in this country, and something like 2.5 million millionaires. Taking the children population out of that means the top 1% have a net worth of over 1 million.

There are actually almost 9 million households which have a 1 million dollar net worth or greater.

"DP, in a typical VC fund, only 1 out of 10 deals turns out to be one of those home runs."

You're correct. The VC is a well respected entity earning consistently high returns for the investors. They concentrate on Biotech/BioPharm. Most of their deals come from acquisitions even before product goes into last stage trials. Their goal is 10X. invest $20Mil, sell for $200-250M. Product must have positive data. If their portfolio companies go public, they get snatched up by bigger pharmas once Phase III is going smooth with great data. Typically around 1 - 2 Billion.

The figures can move around because some organizations exclude the primary residence paid for or not from the net worth calculation, others just go by a straight net worth of all assets minus liabilities.

The figures can move around because some organizations exclude the primary residence paid for or not from the net worth calculation, others just go by a straight net worth of all assets minus liabilities.

Net worth is a rather useless measure around 1M.

Yup, realizing the exit strategy is the make or break move in the VC model. It definitely has its drawbacks but it keeps things moving in this country.

How so Peter?

How so Peter?

Because it does not tell anything about financial well-being at all. When the average house is already selling at around 1M, it does not not give useful information such as purchasing power and spending behavior.

However, any net worth is still net worth though. It is just that low-end figures do not tell much.

Actually net worth is the best indicator for spending power as it is a true measure of wealth. IMO it is the truthiest. (joke, please no grammar correction)

I think that is why conservative institutions make you drop the house from the equation. Of course though, you can always max out your HELOC, move the funds to your savings account for the calculation, then just pay it back, that's why I believe you should include your house since you can work it in anyway.

I think that is why conservative institutions make you drop the house from the equation.

Yeah, liquid net work is a better measure.

Net worth is a better measure if used within the same demographics group.

In any case, it is also a valuable tool because when you compare your net worth at different times, it tells you precisely if you are going up or down.

In any case, it is also a valuable tool because when you compare your net worth at different times, it tells you precisely if you are going up or down.

True. It is a good measure to compare against yourself.

According to some insider info that I have wrt that hedggie guy, he doesn't have $1.8M sitting in other vehicle making higher return. He is counting on making the same bonus as 2004-2006 to make his mortgage payment. If he really knows what he is doing, he should not have bought a home in the last 3 years to begin with, he should have rented an upscale place, put all his savings and leverage that up in something betting on the housing bust. I also know what his investment portfolio was like since he bragged about it, he is betting on the economy sustaining itself for another 5 years.

People who bought $2M+ homes should be worth at least $10M. Middle classes take on mortgages because that is the only way we can buy a home. Rich guys who want to stay rich don't just allocate a big portion of their net worth in a home for self-occupation. Owner-occupied homes are not an investment, no matter how much my home is worth, I can hardly cash out on it, because I will need a place to live in ultimately.