Market Conditions: Crain’s Reports that the Ritz Carlton Has Booked 3 Sales in 2010
Crain’s reported yesterday on the recent sales at the new Ritz Carlton development at 644 N. Michigan in River North (or is this the Gold Coast? I’m calling it River North since it’s on the west side of Michigan Avenue.)
You know the market is bad when it is “news” to report that the Ritz has put 3 units under contract so far in 2010.
There are 88 units in the building ranging in price from $1.25 million for a 1-bedroom to $12 million for a penthouse. There are no plans, apparently, to cut prices.
Despite the uptick, Prism Development Co. faces an uphill battle to meet its goal of getting 66 units, or 75%, under contract by late 2011, when construction is scheduled to be completed on the $242-million project at 664 N. Michigan Ave.
“Many people can’t sell their (existing) homes,” says Tere Proctor, a sales associate at Koenig & Strey Real Living, who isn’t involved with Ritz-Carlton Residences. “That’s going to slow their (Prism’s) ability to sell the units.”
Prism Principal Bruce Schultz acknowledges that sales have been slower than expected but says he’s encouraged by the recent activity.
The three recent sales are the only agreements Prism has signed this year, he says. He declined to say exactly how many units are under contract, other than to say the development is about half sold.
Ritz-Carlton got off to a fast start after sales opened in February 2006, with buyers snapping up 29 units, or nearly 33%, by the end of that year, according to data from Appraisal Research Counselors, a Chicago-based consulting firm.
Since then it’s been a struggle.
“It could always be better,” Mr. Schultz says. “But we anticipate sales will pick up as construction progresses.”
At this sales rate, it could take years to even reach the 75% sold rate, let alone “sold-out” status.
Residential: Ritz-Carlton Residences books 3 recent sales [Crain’s Chicago Business, Andrew Schroedter, September 21, 2010]
We debated its location last time! I think we called it a draw and decided to just call it “Mag Mile location.” Haha
I’m not sold on it being in RN
I am not so sure that they will have trouble selling out. There are tons of people out there w/ a lot of money – they just need to feel a little more confidence in the economy before they start spending it again. Also, these are probably NOT going to be primary residences for most. The biggest downside I see to the building/development is that it is right on Michigan Avenue on a block that is always REALLY REALLY crowded w/ tourists and regular folk – usually rich people want a tiny bit of privacy (think E. LSD, the Elysian, and even the Park Hyatt and Palmolive which are steps away from Michigan ave but still afford some shielding). That being said, who knows…
If this isn’t River North, I don’t know what is. Also, there are going to be very few closures of units with this housing market. Many of the supposed sales are going to be dropped since people are just going to walk away from their downpayment.
“At this sales rate, it could take years to even reach the 75% sold rate, let alone “sold-out” status”
uhh – they are already half sold (44 units) – do you really think it is going to take “years” to find 22 people to buy a place in the Ritz on Michigan ave? Of course not!!! Chicago/suburbs are FULL of people with a TON of money – I just don’t understand why people on this site refuse to understand/believe this. I personally know dozens of people with net worths over 10 million. I am acquaintances with hundreds of people w/ this net worth (my neighbors in the city and suburbs). The question is whether these people want to buy in the city – which brings me back to the point in the earlier post – all they need is to feel a little more confident. Oh – and most of these morons also like gimmicks (ie free brunch/dinner at the Ritz every weekend or a free hotel stay every month for guests, etc.) – make them feel like they are getting a unique deal and they may bite!!! I know, because I am one of these morons!!!
What millionaire needs more than a handful of million dollar condos?
“What millionaire needs more than a handful of million dollar condos?”
They don’t – but SEVERAL have multimillion dollar houses in the burbs and would like a million dollar+ in-town (seriously, just look at what is on the market in Lake Forest, Kenilworth, Winnetka, Oak Brook, Hinsdale, Highland Park, Barrington for just a small example of the types of houses and people that live in these areas – there are THOUSANDS of multimillionaires in the suburbs – all the Ritz needs to do is attract 44 !!).
Clio- don’t forget- there are hundreds of million dollar condos also for sale in Chicago (not just in this building.) Most aren’t selling. So clearly there is a disconnect between supply and demand. If there were so many multi-millionaires looking downtown, why are there units in the Palmolive on the market for years? (and some in short sale?) Look at Trump Tower as well. Not even close to a sell-out.
It’s a very small market of buyers for a $1.25 million 1-bedroom condo in Chicago.
“uhh – they are already half sold (44 units) – do you really think it is going to take “years” to find 22 people to buy a place in the Ritz on Michigan ave?”
If you read the article- a bunch of those pre-sales happened in 2006 before the bust. Many of those likely won’t close.
They are selling 3 a year, apparently. Let’s just say they sell 5 this year. Seems to me it’s going to take many years just to get to 75% at that sales rate.
“It’s a very small market of buyers for a $1.25 million 1-bedroom condo in Chicago.”
especially for about 1150-1200 SF (i’m being extremely generous on square footage based on the floor plan. and a good portion of even that number is in the WIC and powder room)
como se dice, price drop?
I agree 100% with Clio. The building will eventually sell out (it won’t really be ready for closings for almost 18months-2 yrs) and the location is the only draw back.
Palmolive is nice but overrated and by no means new construction.
Besides, to say you live in the “Palmolive” building to a stranger typically yields funny comments referencing soap. To say “I live in the Ritz on Michigan Ave” gives “I live at Trump tower” a run for its money.
You can call the location “catholic charities east” if you want…
Less is more
““I live in the Ritz on Michigan Ave” gives “I live at Trump tower” a run for its money”
You can’t compare Trump to the Ritz – it is like comparing East Lake Shore Drive with @@@@$%#( insert some neighborhood that embodies everything nouveau riche)
(The Ritz being ELSD)
“Clio- don’t forget- there are hundreds of million dollar condos also for sale in Chicago (not just in this building.) Most aren’t selling”
Agree – but most don’t have a prestigious name associated with them and most aren’t new construction. The ritz has a “leg up” on these other units. They really SHOULD consider marketing gimmicks (25% off anything at the Ritz, complimentary stays at the Ritzs around the world, or something that will make millionaires choose this place)
“Chicago/suburbs are FULL of people with a TON of money – I just don’t understand why people on this site refuse to understand/believe this. I personally know dozens of people with net worths over 10 million. I am acquaintances with hundreds of people w/ this net worth (my neighbors in the city and suburbs). ”
Hahahaha thanks for the continued entertainment value, clio. Its always a pleasure to hear your stories about eNetworth on here. Unfortunately you can’t buy these places with eCash.
Lets not forget that there is no hotel at this new Ritz location. Doesn’t seem fair to compare living here versus Trump or Elysian. Some may prefer the amenities of the hotel at your finger tips others wont. What does one get for the premium of living in this Ritz branded product? Concierge staff?
“Besides, to say you live in the “Palmolive” building to a stranger typically yields funny comments referencing soap. To say “I live in the Ritz on Michigan Ave” gives “I live at Trump tower” a run for its money.”
How often do you approach strangers and tell them where you live? Is this really much of an amenity outside of your head?
Hey Bob, I brag that I live in a nice 2 bedroom apartment for less than a grand a month and that I’m saving over $1,000 a month compared to a mortgage (plus I’m saving on HOA fees too).
I try not to brag to FB’s because it makes them not like you. In the real world you must be sympathetic, but on crib chatter, I can call out all FB’s.
I feel that karma is with me. All that negative equity from the FB’s is migrating it’s way into my bank account. My balance grows exponentially with all the savings from renting!
“Besides, to say you live in the “Palmolive” building to a stranger typically yields funny comments referencing soap. To say “I live in the Ritz on Michigan Ave” gives “I live at Trump tower” a run for its money.”
How often do you approach strangers and tell them where you live? Is this really much of an amenity outside of your head?
Maybe C can wear one of the signs that says “I live at the Ritz” and stroll the streets of the real southside.
She’ll be ok as long as she stays off Western…
“I try not to brag to FB’s because it makes them not like you. In the real world you must be sympathetic, but on crib chatter, I can call out all FB’s. ”
C’mon: do you really believe clio is who he says he is? I rather doubt it. Far too many outlandish statements to be believable.
I rather suspect he is a troll, stirring the pot and laughing at all of the vitriolic reactions he receives here on CC when he makes statements like I quoted above. In fact there likely aren’t that many HNWI’s in all of Chicagoland for the threshold he quoted, much less him knowing all of them and them being his neighbors. Clio is a facade that some trollster like’s to use. Nothing more.
But what about the school district?
Heh.
Ahh more on the school debate…….. I hear if you live at the Ritz you have a leg up on the competition when applying to Harvard.
Probably Wells community high school (same one my kids will go to, LOL NOT)
Although they’ll be ok until high school
1.25 million for a one bedroom? Even if you have hundreds of millions of dollars, why would you buy this? If Lamborghini made a version of the SmartCar, would they sell?
“C’mon: do you really believe clio is who he says he is? I rather doubt it. Far too many outlandish statements to be believable.”
Bob, Bob, Bob… where to begin….
1. I’ve already given everyone enough information for anyone who wanted to confirm my stories to verify them without difficulty – some have and have posted that I AM telling the truth.
2. You are the master of outlandish statements – I can’t compare.
3. You really have no right to be commenting on anything. First of all, you are a little kid (29-31?) who likely doesn’t have much exposure to anything (hence your narrow-minded views). Second of all, you rent a place – how does this compare to someone like westloop or me (who own over a dozen houses/condos) and have been in real estate for over 15 years? You really need to take a good look in the mirror and check yourself before you open your mouth!!
Now go get your whittle bottle and take your nap before baby bob gets too crabby!! Let the adults have our discussion.
“1.25 million for a one bedroom? Even if you have hundreds of millions of dollars, why would you buy this? ”
At least in these 1-bedrooms you can fit a dining room table in the Living/Dining Area, unlike some of the other ultra-luxury buildings (i.e. Trump)
“But what about the school district?
Heh.”
“Ahh more on the school debate…….. I hear if you live at the Ritz you have a leg up on the competition when applying to Harvard.”
There are two posts about schools in this thread (now plus this meta-one) and both by people annoyed by talking about schools.
Funny!
While there are ppl with a good amount of money, they are NOT investing in ‘luzury’ brands like the Ritz now or anytime in the near future. As was brought up earlier, there will be no Ritz Hotel in the building so why would they do ‘gimmicks’ to attract this moneyed set?…like ‘gimmicks’ work with that level of wealth.
That just does not make sense and is the latest clue our clio is BS. Although I did get a good solid laugh at him saying he knows HUNDREDS of multi-millionaires in Chicago.
“I personally know dozens of people with net worths over 10 million. I am acquaintances with hundreds of people w/ this net worth (my neighbors in the city and suburbs).”
If a person, in this economy truly is worth 10 mil, they would dare not spend a mil+ to buy a condo in a building that will not be complete for another 2+ years. I too think this claim of having only 44 units left is an exaggeration.
I have been told many many times to buy in buildings as exclusive as this one (Trump, Aqua, etc) because they were nearly ‘sold out’ only to hear later there are many combinable units left.
Yes, many will walk away from this building as not all of the claimed sold units are truly sold.
I just do not see the attraction (other than the name associated) with this building. The floorplans are largely unusable space and if you like windows, as you should in a high rise in this location, you will be disappointed to see how small most are. That is one huge bonus with the Trump…floor to ceiling views in every direction. Still fantasize about that floor throught penthouse….
“That just does not make sense and is the latest clue our clio is BS.”
*sarcasm inserted clio*
…I believe you are who you say you are and I think a number of ppl here do as well. ‘
Just don’t continue to defend yourself as the more you do, the more ammo the detractors have to use against you.
been there, done that, still posting
“I believe you are who you say you are and I think a number of ppl here do as well.”
Agreed. (w/ the caveat that could be someone who knows the real person pretty well–people do strange things on the intertubez).
“Although I did get a good solid laugh at him saying he knows HUNDREDS of multi-millionaires in Chicago”
OK – I am not defending myself (no need to do so) but I DO need to defend my statements. There ARE thousands of people with net worths of 10 million +. Seriously, who do you think live in all of the 3million+ houses throughout Oak Brook, Hinsdale, Lake Forest, Kenilworth, Winnetka, Gold Coast, and other communities? Do you really think that the majority of these people are living paycheck to paycheck?!! On East Lake Shore Drive alone, there are probably 1000 people w/ net worths over 10 million. You people just don’t have any clue as to the wealth out there.
Second of all, westloop, gimmicks DO often work w/ the wealthy. Just go ask my friend, the owner of Gold Coast Lamborghini. Why else would so many rich people fall for buying things they really don’t need. I know, because it happens to me all the time!!!
Clio,
I don’t anyone here is debating that there are many rich people out there. The real question is does supply for ultra luxury units exceed demand….. simple economics here.
“The real question is does supply for ultra luxury units exceed demand….. simple economics here”
Vlasko, thanks – I understand. But I DO think that the Ritz brand may be more attractive than the “Trump” or “Aqua” name. They should really play it up some more = as sabrina stated earlier, there are many 1million plus priced condos out there – this building NEEDS to do something to stand out. They have the Ritz name – they should use it (hence my statements about the gimmicks – you would be surprised how much name dropping there is at cocktail parties, etc.). Otherwise, this is just going to be another new construction building.
“hence my statements about the gimmicks – you would be surprised how much name dropping there is at cocktail parties, etc.”
Do you really think valasko–or anyone over 30, who has worked in any professional job–would be surprised by the amount of name dropping?
Or was that just a(nother) conversational tic?
I would take Aqua off the list. From what I hear on the street the building is having problems with the rental units and the use of the pool/deck/amenities. Too much riff raff in the develeopment and it doesn’t have the feel of a luxury building.
“On East Lake Shore Drive alone, there are probably 1000 people w/ net worths over 10 million.”
Cook County has 168k millionaires in total.
You’re saying among this set that there are 1,000 people with $10MM+ that live on ELSD alone? I call BS–there likely aren’t even 10k people in Cook County with $10MM+, much less do 10% of them live on ELSD. Gold Coast maybe another story, but I doubt ELSD.
elsd is only like a block long. no high-rises. probably not 1000 people living there unless the drake is stuffed full
“You’re saying among this set that there are 1,000 people with $10MM+ that live on ELSD alone?”
There are 8 buildings on ELSD, plus the Drake. 5 of those buildings are 10 stories or less. I doubt there are 1000 people living on ELSD, period.
“You’re saying among this set that there are 1,000 people with $10MM+ that live on ELSD alone? I call BS–there likely aren’t even 10k people in Cook County with $10MM+, much less do 10% of them live on ELSD. Gold Coast maybe another story, but I doubt ELSD”
What the hell are you even talking about?!! ELSD is composed of mostly coops. Most of these coops are in the 2 – 5 million range (with a VERY few under a million) and ALL require 50-100% cash downpayments and have assessments that are 2-8k/month (I know because I had a weekend place there). These people ABSOLUTELY have 10 million plus (because they are vetted before they even are accepted) and most have to have at least 4 X the value of their coop in wealth.
Furthermore, you add credibility to my points by stating that there are 168,000 millionaires in cook county alone. I suspect that there are even more = but people don’t report the extent of their wealth for many reaons.
Lastly, refer to #3 in my earlier post.
Clio – IMO u can comp Trump to Ritz, especially cause I was talking about building name bragging rights not necessarly fp for fp.
Chicago does have the most millionares per capita from my research.
errrr….cook county, not chicago
I just looked at my numbers – there are 237 units on ELSD. I would bet 1 million dollars that every single person that owns has a minimum net worth of 5 million dollars. Anyone care to take me up on it?
“Chicago does have the most millionares per capita from my research.”
Last I heard 1:10 people living on the island have a net worth exceeding 1 mill…….. not sure the little mid-western cow-town can compare…. Maybe WLP can comment…….
“I just looked at my numbers – there are 237 units on ELSD. I would bet 1 million dollars that every single person that owns has a minimum net worth of 5 million dollars. Anyone care to take me up on it?”
Only if you take a reciprocal bet that those 237 units do not house over 1000 people.
I will take the bet. what are the stakes?
“Only if you take a reciprocal bet that those 237 units do not house over 1000 people.”
Anon, you forgot to factor in all the live-in help, maids, nannies, cooks, personal assistants, butlers, drivers, etc. The number might grow to 2000…….
The Palmolive surpasses Trump/Ritz etc. It is quiet elegance in an amazing location.
“Anon, you forgot to factor in all the live-in help, maids, nannies, cooks, personal assistants, butlers, drivers, etc. The number might grow to 2000…….”
Okay, I forgot the “with $5mm+ net worth” proviso. Heck, let’s make it $500,000 net worth, as I’m happy to include children in the head count.
So Clio – please. ‘Splain to us peons why all of your wealthy buds aren’t buying units in the Ritz. Enlighten us if you so deign to.
Gotta agree, the Ritz brand carries more cachet than the others mentioned.
A-Fed, I wouldn’t knock the Palmolive building. Someone tells me they live there, I’m jealous. I don’t reference soap at all. Its historical significance and Playboy intrigue, in my opinion, is pretty interesting. Not knocking Trump’s location at all, but the brand doesn’t do anything for me.
Ritz means high quality to me as well. much better than that Top Hat wannabe.
“Splain to us peons why all of your wealthy buds aren’t buying units in the Ritz. Enlighten us if you so deign to.”
Poor marketing. Package it in the right way and it WILL sell (even in this market). Rich people want to be the “first” for everything and pay premiums (first to drive the new model “insert car name”, first to live in the new “insert luxury building name”). The fact that they AREN’T selling tells me that the company needs to fire the marketing dept and hire someone else!!
“Okay, I forgot the “with $5mm+ net worth” proviso. Heck, let’s make it $500,000 net worth, as I’m happy to include children in the head count.”
ARe you serious?!! The cheapest place on ELSD is a glorified studio for 550k w/ 2000/month assessments. The majority of place, as I stated are in the 2-5 million range and require 5+ million in net worth to even begin to start the process of being accepted into the coop. OK – why am I even wasting my time on this idiotic topic – it is clear I am dealing w/ morons who do not want to believe that there are any rich people out there. Fine – everyone is poor and real estate is terrible and everyone is going bankrupt and the whole world is going to collapse – there, do you feel better?
“Ritz means high quality to me as well…”
Plus they make a mighty fine cracker.
Maybe they could leverage the slogan — “Everything’s better when it sits on a Ritz”
“ARe you serious?!!”
Reading comprehension problems strike again.
http://www.marketwatch.com/news/story.asp?guid=%7BAD3D5EF8-C58A-11DF-BA89-00212804637C%7D&siteid=rss&rss=1
7 million homes in the shadow inventory….
Anyone who thinks chicago has bottomed better take a hard look at the stats.
“Rich people want to be the “first” for everything and pay premiums (first to drive the new model “insert car name”, first to live in the new “insert luxury building name”).”
Proof of how pathethic people can become when their wealth becomes all about impressing other people.
If I had $10 million or $100 million, I wouldn’t start spending it foolishly for status symbols — I’d spend on things that made me more happy.
“I feel that karma is with me. All that negative equity from the FB’s is migrating it’s way into my bank account. My balance grows exponentially with all the savings from renting!”
Calling BS on this one. Purchase – rental parity has definitely been achieved in most Chicago neighborhoods. Expect upward rental pressure in addition to that. By next year you will be inverted on rent – own parity.
400k LP condos (today’s sale prices) can be rented for 2,300 a month (though that is increasing — we are raising rents across the board in the fall). Not sure what crappy neighborhood you live in, but I am sure a comparable condo can be had for circa 225k.
“The majority of place, as I stated are in the 2-5 million range and require 5+ million in net worth to even begin to start the process of being accepted into the coop. ”
This is not true. Maybe in New York on 5th or Park but not in Chicago.
“Not sure what crappy neighborhood you live in, but I am sure a comparable condo can be had for circa 225k.”
He lives in a studio in uptown. The 2 “bedrooms” are the closets.
Clio: “The majority of place, as I stated are in the 2-5 million range and require 5+ million in net worth to even begin to start the process of being accepted into the coop. ”
Jmm: “This is not true. Maybe in New York on 5th or Park but not in Chicago”
‘
uhhh – I lived there and know this for a fact – end of story. Also, look at 1500 N. LSD – in this building, you need 5 million in LIQUID assets to be even considered. Again, FACT – not hyperbole.
But once again, every single person on this site seems to want to believe that there is no one out there w/ money, etc. Go ahead and believe it if you want… while you are at it, check out some fantasy movies also.
“But once again, every single person on this site seems to want to believe”
You aren’t a good advertisement for the Lab School.
I live on the NW side..
Good luck wth your plan to raise rents across the board. if my landlord tries a stunt like that he’s got another thing comin to him. ….
One neighborhood with alleged rental parity does not make a citywide market.
“You aren’t a good advertisement for the Lab School.”
Nor for the lambo driving set, which already had its fair share of reputational difficulty.
“You aren’t a good advertisement for the Lab School”
you forgot about Harvard and Stanford….but then think about it.. if a “moron” like me w/ poor reading comprehension can get into those schools, what does it say about the rest of you?
“if a “moron” like me”
You’re the only one using that word. And said use does not reflect well on you.
Besides, if you’re waiting for grad school to develop your reading comprehension, I’d expect that it was a lost cause from the beginning.
“I’d spend on things that made me more happy.”
I’d squirrel most of it away and not do anything drastic immediately. I’ve heard you’d be amazed how many “friends” you find out you have when you receive a windfall.
Heck I don’t think I’d even buy a $1MM property with NW around $10MM. For me and even for my future family a 800k house in a decent neighborhood would be sufficient. And you can get some monstruous McMansions in Chicago for this amount if you’re willing to broaden your scope.
(thing is in this net worth scenario I would never be concerned about cab fares to the drinking neighborhoods so I would def. take the big McMansion in the non-GZ hood).
I’d rather be the big fish in HD’s hood than be a small fish near clio (and have to live near clio).
“Nor for the lambo driving set, which already had its fair share of reputational difficulty.”
and you, Bob, forgot about the Bentley, mercedes, bmw and jeep set….
to the rest of you, I know that I am sounding obnoxious – don’t mean to be, but I just can’t take the ignorant people on this site refusing to believe the fact that there are tons of people out there w/ money and education who are able (not yet willing) to spend lots of money on lots of things. Let’s hope that everyone drops this topic and returns to the topic of real estate.
“For me and even for my future family …..”
good luck finding a woman (? or man) that will tolerate your irritating and disagreeable personality.
Bob there are plenty of big fish in my neighborhbood. A house around the corner recently sold for 1.5 mil to the managing dirfector of a large investment firm. 800k buys a nice house but not enough to be a playa.
“good luck finding a woman (? or man) that will tolerate your irritating and disagreeable personality.”
Hahahaha. pot/kettle updated for CC!
‘ if a “moron” like me w/ poor reading comprehension can get into those schools, what does it say about the rest of you?”
It says that its a shame that we weren’t a member of the lucky sperm club born into a family of your wealth, ergo we may have been able to accomplish such great things for society as a whole, rather than just being a general knobtwat (since we can’t say d-bag here, i’ll make up a word) on the internet.
David/Dave – The Palmolive is an extremely nice, elegant building – there is no doubt about that. But ask someone from out of town if they have heard of it. Most likely, no. Ask the same person about Trump/Ritz and they will know what you are talking about. Despite the connection to Playboy and Chicago, there isn’t much widespead fame regarding the building I feel. It’s barely part of the Chicago Skyline!!! (which is the measure for how awesome a building is jk jk jk).
“good luck finding a woman (? or man) that will tolerate your irritating and disagreeable personality.”
I’m already ahead of the game vs. you, clio: I don’t drive a lambo and I don’t go around shouting to the world how many thousands of rich and successful people there are out there.
Also, curious why you are single? If you indeed know thousands of rich people you don’t know any rich widows out there?
Oh wait I forgot, since they’re rich they don’t need the best thing likely to come along with clio: his money.
Yes clio…I guess for some people..they’re just going to have to pay for it. Craigslist is shut down so happy surfing.
Clio — one building does not constitute “majority” as you put it. Most large (3-4 br) coops seem to trade from 800k-1.25M.
Coops have a very difficult time finding buyers for obvious reasons. Run market times and you will see it takes substantially longer to trade a coop than a condo. It is an antiquated concept suitable for only a few areas, and I am not sure LSD gold coast is even one of them.
“Oh wait I forgot, since they’re rich they don’t need the best thing likely to come along with clio: his money”
uhhhh no – hands down, the best thing about me is my looks (my assistant just made me write that)!!
“Most large (3-4 br) coops seem to trade from 800k-1.25M”
Uhhh most large coops (3-4 bedrooms) on East Lake Shore Drive are ABSOLUTELY , unequivocally in the 2-5 million dollar range. Look it up. Seriously, though, let’s get off of this topic – I don’t think it really adds much to this post anymore.
of course it’s one of them!! every single owner has a net worth of $5mil plus! and clio drives more than one whip so he would know.
clio I hate to say it but if you are as rich as you say and are still single you have to be one of the ugliest losers on the planet… seriously
HD —
I show 50 2/2’s in Logan Square all for sale less than 250k. Most around 200k. That is absolutely rental parity with a 1k rent, and may even be cheaper at today’s rates. As for your downpayment, that 1% you are earning in savings isn’t a big opportunity cost.
If you are in a different neighborhood, just let me know. I am sure the results would be the same.
Where is Zekas when you need him?
http://www.chicagonow.com/blogs/homeward-bound-chicago/2010/05/three-bedrooms-and-corner-views-on-990-lake-shore-drives-32nd-floor-all-for-under-850000.html
lol.
this thread is the gift that just keeps on giving.
clio, who does your assistant remind you of most — Megan Fox or Scarlett Johansson?
depends what pill he’s popped
clio–your assistant needs to work on their sycophant skills.
“to the rest of you, I know that I am sounding obnoxious – don’t mean to be, but I just can’t take the ignorant people on this site refusing to believe the fact that there are tons of people out there w/ money and education who are able (not yet willing) to spend lots of money on lots of things.”
Jesus Clio, can you give it a rest allready. I know a few wealthy people (+100 mil catagory) and they act nothing like you. Actually they don’t brag about their wealth, and don’t like disclosing what they have to others. Humility man Humility…… try getting some.
“if my landlord tries a stunt like that he’s got another thing comin to him. ….”
Is this a typo? Because the phrase is “another think coming”. “Another thing coming” makes no sense.
“Where is ***** when you need him?”
Please don’t repeat his name two more times.
“Is this a typo? Because the phrase is “another think coming”. “Another thing coming” makes no sense.”
Never much into Judas Priest, eh?
“Humility man Humility…… try getting some.”
Nothing says humility to me more than bragging about one’s candy apple red lambo. And actually owning it and driving it, IF true.
JMM,
I’ve got three guesses:
1. Walking the drive
2. 235 Van Buren
3. SoNo
“clio I hate to say it but if you are as rich as you say and are still single you have to be one of the ugliest losers on the planet… seriously”
Why don’t you come out to the cribchatter meet-an-greet and see for yourself. And, in terms of my assistant, she is even better looking than me!!! – and no, she didn’t make me write that last part!
“Actually they don’t brag about their wealth, and don’t like disclosing what they have to others.”
I am not bragging about my wealth, VLasko – seriously read and re read all of my posts on this thread and please tell me where I am bragging. I am stating facts to support my opinions. If I was a bum living in section 8 housing in a bad neighborhood and we were discussing that neighborhood, I would disclose this as well (to support whatever opinions I had). The only thing I ever bragged about that didn’t have relevance on this site were my looks (and I do apologize for that)!!
Gladly, and i’ll bet a million dollars i’m much better looking than you… in fact, we will have a cribchatter panel of regulars do a mr. cribchatter contest. If I win, you write me a cashiers check for a mildo and if I lose i’ll wash your car every day for the rest of your life… bob can video tape it, and it will get many hits on the internets
Bob: “candy apple red”
Now you’re just trying to pick (or Vik) a fight.
“you write me a cashiers check for a mildo”
I don’t think that’s how that works.
shut up anon, i’m trying to make a million dollars just because you’re ugly don’t ruin that for me
haha. anon has reading comp skillz.
sonies you are younger than senior clio. so you will have to compete against a picture of him in the 80’s, hopefully wearing a white sport jacket.
“I am not bragging about my wealth, VLasko – seriously read and re read all of my posts on this thread and please tell me where I am bragging. I am stating facts to support my opinions. If I was a bum living in section 8 housing in a bad neighborhood and we were discussing that neighborhood, I would disclose this as well (to support whatever opinions I had). The only thing I ever bragged about that didn’t have relevance on this site were my looks (and I do apologize for that)!!”
Not going to get into a pissing match with you C but what the hell does owning a candy apple red lambo + all the other cars have to do with a discussion about Realestate. You can easily use 3rd party facts to support your opinions. To me and many others on this site it looks like bragging and not supporting ones views.
“shut up anon, i’m trying to make a million dollars just because you’re ugly don’t ruin that for me”
I’m just pointing out the flaw in your plan.
“what the hell does owning a candy apple red lambo + all the other cars have to do with a discussion about Realestate”
I am not the one who brought up my cars on this thread – re-read and beware of anon who will comment on your reading comprehension skills!!
“sonies you are younger than senior clio. so you will have to compete against a picture of him in the 80’s, hopefully wearing a white sport jacket”
I may be 41, but definitely look like I am in my late 20s.
fat don’t crack, amirite?
“beware of anon who will comment on your reading comprehension skills”
Wouldn’t be attacking me after misreading my post, nor making incorrect statements about what “everyone here” knows/thinks/writes, so wouldn’t really care.
“Wouldn’t be attacking me….”
not attacking you at all (seriously) just trying to make a joke – I actually appreciate being called out when I am wrong or don’t understand something. It makes me a better person.
“not attacking you at all (seriously)”
I was talking about the 11:34 post. And exaggerating. And I got the joke.
Clio, I am sure your story is about 10% accurate and 90% BS. I base my impression on the quality of your posts (low) and the ridiculousness of your observations (high).
In the last 3 years I have been coming to this site daily. This is by far the best thread I have ever read on cribchatter.
Clio is single because he cannot marry legally in this state.
Jmm – rental parity and cash flowing two flats have similiarities but the are two different things.
Other than two flats and a handful of distressed sales, the marketg is pretty much frozen.
“Clio, I am sure your story is about 10% accurate and 90% BS. I base my impression on the quality of your posts (low) and the ridiculousness of your observations (high).”
Sorry to disappoint – but, as I wrote before, I have given everyone on here enough information to confirm on their own that I do own millions of dollars in real estate (multiple houses and condos in and around the city), did go to Uof C., Harvard, and Stanford, and do own the cars that I have. There are people on this site who don’t like me but have confirmed on their own that what I have posted is true. The only reason this matters to me is that it should add validity to what I say when I talk about real estate as well as people w/ money. No other reason- I certainly don’t need my ego stroked and don’t need approval from anonymous people on a real estate site. Now, let’s get back to posting about real estate!!!
Clio has a kid in college? And he’s only 41?
” I certainly don’t need my ego stroked and don’t need approval from anonymous people on a real estate site.”
oh don’t worry, because you aren’t getting either…
“Never much into Judas Priest, eh?”
That song grates on me. And not just because Judas Priest sucks.
“That song grates on me. And not just because Judas Priest sucks.”
Of course, in HD’s sentence, his LL isn’t thinking something, he’s raising the asking rent–and having another think doesn’t really fit, as HD would move, or punch him, or something, not correct his misapprehension of facts.
But he THINKS he can get away with raising the rent. But he’s got another think coming.
(and I have that stupid song stuck in my head now)
That assumes that you actually read his posts. It’s news to me.
‘#juliana on September 22nd, 2010 at 3:03 pm
This isn’t news for everybody, other than the unsurprising details. Clio mentioned he was divorced previously.
“deafening silence. collective jaw drop.””
“
“But he THINKS he can get away with raising the rent. But he’s got another think coming.”
No point in arguing it. I think you’re layering on an interpretation that is not necessarily correct, and one could certainly have “another thing comin'”–thus it’s not a misuse of the phrase, but another, different phrase.
stop feeding the ego, it only grows bigger and need more to feed it each time.
I’ve always used “another thing coming” – I admit defeat.
http://www.phrases.org.uk/meanings/another-think-coming.html
“I’ve always used “another thing coming” – I admit defeat.
http://www.phrases.org.uk/meanings/another-think-coming.html”
Only if you presume the Brits to be the last word on English. I presume you use lift and lorry, etc. etc. as well. And that you have a laugh rather than having fun.
If not, feel free to ignore those limey toffs. I do.
one thing you guys are missing here if you read between the lines, is all the money all the toys all the homes and all the superior education…Clio is still not truly happy and with all this still seeks approval and attention.
*Given we all deep down dig for approval and attention its just the level willing to get this satisfaction
I guess I’m a wet blanket, but things seem to be getting a little mean. It’s one thing for Clio to post personal things about himself that you think are absurd. It’s another thing to personally attack Clio. You may think he’s a blowhard, but no reason to get mean.
jp3 havn’t you ever heard of the idle rich, we have nothing better to do put post all day long.
Well its off to the garage and I can’t wait to get behind the wheel of my Aston Martin V12 Vantage, you know I purchased the carbon black special edition nothing but the finest for a rich bastard like me!
“my Aston Martin V12 Vantage”
pffft. Shudda gone with the DBS.
pffft. Shudda gone with the DBS.
Anon, didn’t you know I keep the DBS at my little summer place in the Hamptons.
“Anon, didn’t you know I keep the DBS at my little summer place in the Hamptons.”
No, I did not. Now I’ll have to make a trip to the Hamptons. Keep the keys in the drawer to the left of the dishwasher?
Me, it’d be my Aspen summer car.
No, I did not. Now I’ll have to make a trip to the Hamptons. Keep the keys in the drawer to the left of the dishwasher?
Ok, but don’t be a cheap azz like Bob, please fill the tank before you leave.
Sorry, but I am going to pull an HD and believe that if I cannot google it, it doesn’t exist.
Is Clio really just Tom Vu?
http://www.infomercial-hell.com/tom-vu/
If not, please tell me how I can verify his riches.
“Is Clio really just Tom Vu? ”
I don’t see Tom as the Italian car type.
Sorry, bad suggestion. Tom is definitely hetero as well.
I am at a loss then.
Even though Clio is kinda obnoxious and full of bs sometimes, I gotta agree with him on one thing:
There really are more rich people in Chicago than most people might think. I think the only difference is that they don’t really flaunt it like people in NYC or LA. I mean I am definitely not one of them, but I do know a few people both in the city and the burbs who are quite wealthy, but you would never guess from looking. My brother’s godparents, for example, are business owners and definitely have millions of dollars in the bank. However, they live in a modest condo in Harbor Point, drive a ford explorer, and shop at dominicks and target like normal people. You would never know they were wealthy unless you knew them closely. And the people they associate with (who I have also met a few times) are just as wealthy as they are but at the same time pretty modest as well. When I was little my siblings and I used to spend weekends at their condo sometimes, so I kind of got a glimpse of their personal lives, and in their world it seems like everyone is just as wealthy as them. We would walk down the hall and run into a C.E.O. of some company, they would take us to the park and we would see kids with actual nannies, we would go down to the garage to get the explorer and on the way see maseratis, jaguars, really old classic sports cars, etc. It wasn’t as if they were the only wealthy people they knew, pretty much everybody in that area had a ton of money as well, but when tourists and suburbanites come downtown all they see are people in jeans and t-shirts driving fords and toyotas so of course they think “This is Chicago, not New York, of course there are no rich people here” but in reality wealth is all around them.
Sorry for writing a novel here, just thought I’d offer some perspective
“Sorry, bad suggestion. Tom is definitely hetero as well.”
Yeah did you check out the vid of Tom with his babes.
Seriously Southbound? Was that necessary? As pompous and irritating as Clio has been at times, he’s not mean spirited. And I don’t even think he’s been judgmental about any of you, your financial decisions, your bad investments, etc. He may sound out of touch, acting as if he doesn’t understand why everybody doesn’t have a fancy car / house / Harvard degree. And he may have challenged your thoughts about the real estate market. But he never stoops to researching people, posting personal information about them, then making personal attacks.
Give the guy a break.
“Seriously Southbound? Was that necessary? As pompous and irritating as Clio has been at times, he’s not mean spirited.”
Agreed.
At least stick to info he actually posts. And, frankly, better (for all of us) if we leave some of *that* alone, too.
ps: Altho the Tom Vu speculation is funny, and strangely compelling.
I think southbounds post is fine. Clio has noted numerous times that he has posted information to verify his claims and has put himself out there. southbounds comments are very generic in nature and he does not name names.
valasko you are wrong and an idiot. There is a basic blogging etiquette: you don’t post any additional personal information about someone that they have not shared or have given permission to share. Just because someone says he is a realtor, you should NOT post where he works or who he works for. The same thing with Clio. I don’t think he ever posted about what he did for a living. Therefore, this is off limits. If you want to be a troll and look it up for your own personal use, fine. But don’t publicly post it.
I disagree.
Content is out of line because there’s a big difference between (a) Clio choosing to post personal information about himself and (b) someone else deciding they’re going to post personal info that Clio has chosen not to reveal. We all post personal things about ourselves – what we do for a living, what neighborhoods we live in, etc. That doesn’t mean it’s ok for others to start posting our info. The fact that you don’t like Clio doesn’t change that.
Tone is out line because it’s mean spirited and unproductive.
I’ll also point out that if Southbound is right, then we pretty much have confirmed that Clio is wealthy and has skin in the game. Seems to me that someone like Clio, who (if Southbound is right) lost millions in real estate, might have a worthwhile perspective on a blog about real estate. More so than . . . I don’t know . . . bunch of people who have never actually bought or sold real estate???
jg based on your commentary above, I did not give you permission to call me an idiot. In the future please do not post personal information on me being an idiot. Thank you for your time.
But don’t you think it would be useful to know that Clio may be promoting certain properties over others out of self interest, hoping that he can unload them on the next knifecatcher? Saying Clio lost money doesn’t mean that the losses have been realized yet.
“Seems to me that someone like Clio, who (if Southbound is right) lost millions in real estate, might have a worthwhile perspective on a blog about real estate. More so than . . . I don’t know . . . bunch of people who have never actually bought or sold real estate???”
Not an excuse. You could draw the same unsupported conclusion when anybody says they like one of the properties Sabrina posts here. And I seriously doubt that anybody is buying properties because Clio pumps them on cribchatter.
The difference is that we hear about how wonderful Oak Brook and Hinsdale are at least once a week. And belittling people who can’t fathom spending a million dollars on a condo. I feel no compulsion to mention where my real estate is located unless it comes up in a thread.
“Not an excuse. You could draw the same unsupported conclusion when anybody says they like one of the properties Sabrina posts here. And I seriously doubt that anybody is buying properties because Clio pumps them on cribchatter.’
“And belittling people who can’t fathom spending a million dollars on a condo. I feel no compulsion to mention where my real estate is located unless it comes up in a thread”
I don’t recall Clio ever belittling anyone about not being able to afford a million dollar condo. On the contrary he/she has been very nice when less expensive places come up and yet people still get mad at him/her. It still doesn’t make a difference. You just don’t divulge personal information about someone that that particular person has not given you permission to do so. I am a paralegal and have seen lawsuits about things much more trivial than this. This is a grey zone and Clio could definitely consider legal action (as he/she has threatened in the past) against this southbound person. Granted Clio may not win, but it sounds like he/she has enough money and “personality” to make this southbound person miserable.
That’s not a difference. Many people compare properties posted here to the benefits of living in their own neighborhoods. Only Clio gets singled out with personal attacks.
My last post on the matter. I’ve said my mind. Attack away if you really think it’s appropriate. Clio has proven he can take it.
Talking about the different neighborhoods of Chicago is one thing. Bringing up two suburbs repeatedly is something else. There are a lot of suburbs out there but this blog is supposed to be about Chicago real estate. I don’t feel like I need to add my .02 about my suburb every chance I get and I get tired of Clio doing it.
“That’s not a difference. Many people compare properties posted here to the benefits of living in their own neighborhoods. Only Clio gets singled out with personal attacks.”
“There are a lot of suburbs out there but this blog is supposed to be about Chicago real estate.”
Whoa, Juliana. Hold up, there. Didn’t I read a recent thread where you and Bob discussed accounting and all sorts of shit that didn’t relate to real estate? Also, aren’t you the one with the daughter going to college in Colorado? I thought so….. Your tone is abrasive and I am sure that you are single because what man would put up with your attitude? I apologize about that last comment, but the way you were going at it with Bob on that recent thread was really unladylike and offputting. You have absolutely no right to criticize anyone. You are not a good example for your daughter.
Off topic topics abound on here. I usually post at nights or weekends and try not to clutter up the board during the busier times. The accounting issue came up when some idiot spewing ridiculous information about depreciation needed correcting. I’m an accountant and I couldn’t let it go.
And my little thing with Bob was when he decided to rant about health care and blaming the baby boomers for the financial crisis. I know I should ignore Bob, like most people here, but he hit my hot button at the wrong time. Its hard not to be abrasive with the likes of Clio and Bob.
And finally, I got a big loving family and I’m proud to say that I am the heart of it. A lot of people depend on me emotionally and I thrive on that. It brings me happiness that money can’t buy.
“Whoa, Juliana. Hold up, there. Didn’t I read a recent thread where you and Bob discussed accounting and all sorts of shit that didn’t relate to real estate? Also, aren’t you the one with the daughter going to college in Colorado? I thought so….. Your tone is abrasive and I am sure that you are single because what man would put up with your attitude? I apologize about that last comment, but the way you were going at it with Bob on that recent thread was really unladylike and offputting. You have absolutely no right to criticize anyone. You are not a good example for your daughter.”
lol, I have been married forever and my husband wouldn’t know what to do without me. I really don’t deserve such a loyal man, but I got lucky. And we both know we will always be there for each other, whatever the future holds. Its good to have that kind of person in your life.
“I am sure that you are single because what man would put up with your attitude”
so much drama
You guys are crazy today. Must be the full moon.
I deleted a whole bunch of comments in this thread.
As has been mentioned here- please do not post personal information on anyone (buyers, sellers, real estate agents, your kids, your ex, yourself etc.) You wouldn’t like it- so don’t do it to others.
Play nice!
Hear hear, Sabrina. But if we had even just a smidge of moderation on Crib Chatter, Clio would never have gotten under the other poster’s skin to the point where this drama could have come about.
Not just a full moon but a superharvest moon on the autumnal equinox.
Back to the original post… Only 3 sales in 2010! They must have staff in the sales office. What do those poor people do all day? Do they just wait for someone to walk in the door? I almost feel like paying a visit, just to give them something to do.
A-Fed
Agreed. You are 100% correct
“ost millions in real estate, might have a worthwhile perspective on a blog about real estate. More so than . . . I don’t know . . . bunch of people who have never actually bought or sold real estate???”
Incorrect. I have lost nothing in real estate, and hence, so far have had better judgment/luck (some combination) than whomever lost millions.
“Incorrect. I have lost nothing in real estate, and hence, so far have had better judgment/luck (some combination) than whomever lost millions.”
Bob Bob Bob,
While you might not have lost *millions* in Real Estate, you have also never realized a profit buying and selling a property. You have never actually owned your home or any investment RE whatsoever. To me (and I imagine most other CCers) that fact puts your abusive, unneccessary and belittling name calling commments in the ‘can’t consider these ill informed opinions/advice seriously’ file.
Most serious RE investors who have lost money lately (many have not) made a TON of money when the market was stable due to their good judgement and risk taking…an amount that most likely is equal to/more than the amount of money that you stand to make in a lifetime in your 9 to 5. Were you around to offer congrats and applaud their brilliant decisions then?
Didn’t think so.
Even when someone says they have turned profits buying and selling you manage to dig into your inexperienced self and come up with a put down towards them.
Being a successful investor in this business, regardless of when you were involved, takes a lot more than luck….luck has very little to do with it. It takes planning, forecasting, budgeting and having an ‘earned through involvment’ decision making capability.
In other words, it is easy to sit back in a rented studio and call those have made investing in this Industry their career morons, idiots, retarded, etc. What is not so easy is to invest your capital and take those calculated risks that earn you millions of dollars.
Until you actually take risks and invest in a home for yourself, your ridiculous comments are of no value to those who do.
I agree with the posters who believe clio is being unfairly ganged up on, degraded and belittled. While I have made some comments to him in response to his revealing how and where he has decided to spend his money, I have never resorted to name calling, belittling or questioning his business prowess.
Since I have been in his seat for a good portion of my posting time here, I should know better than to post comments that add fuel to this unneeded fire.
clio, I apologize for my part in the negativity unfairly directed towards you. While I might not agree with your comments at times, I do not think you are a bad or stupid person in any way.
Would I personally choose to possess a million dollars worth of automobiles and have a full staff to help run my ’empire’ (LOL j/k with that word)? No I would not, but to each his own. If that is what makes you happy, who is to say it is wrong?
As I stated above, if you stop trying to defend your opinions and ignore the haters who come down hard on you, your ‘posting life’ would be a much more enjoyable experience.
I’m sorry I came to this thread so late! And I’m pretty sure there are loads of cheapskate women in Chicago who would find Bob hilarious (try the hideout.)
“clio, I apologize for my part in the negativity unfairly directed towards you”
Clio, i would like apologize for any *UNWARRANTED animosity i showed towards you.
thanks alanon, westloop, jg and anon – i appreciate the support. I think the lesson here is to stick to the topic at hand (something I sometimes forget). That way, we probably can avoid all the drama. We should realize that we ALL come from different backgrounds (social, educational, financial) but each one of us contributes something to the discussion as the general population is composed of people just like us. We should also remember that in the discussion of real estate, not a single person on the site is always right or wrong – opinions are just that – your own view based on your personal situation: valid and right for you but not necessarily for everyone else (and believe me, although it seems that I am lecturing to everyone out there, I am taking these comments to heart as well!!).
haters gonna hate
thanks groove
“The accounting issue came up when some idiot spewing ridiculous information about depreciation needed correcting. I’m an accountant and I couldn’t let it go.”
Juliana — ad hominems such as calling posters idiots buys you no credibility.
The fact of the matter is that you just don’t understand the difference between economic / book depreciation and tax depreciation. Since you are likely a tax accountant, I get that, but the concept applies to buildings regardless of whether they are “allowed” depreciation. Allowed simply means allowed a deduction for federal or multi-state income stax purposes — it has nothing to do with the economic cost of depreciation.
Again to illustrate, a simple example. Tell me why I won’t receive what I paid for my 2005 car 5 years ago?
Good post clio and all very true.
“The fact of the matter is that you just don’t understand the difference between economic / book depreciation and tax depreciation.”
Your analysis was flawed from the get-go. You separated land out from the underlying structure and (I assume) attempted to hold it at purchase price for the duration.
The thing is land values change, and quite drastically in the GZ. When developers can tear down a structure and build a 4 or 6-flat with units selling for 250-500k each, that’s going to impact land values (and it did). Now that that market has evaporated, look for land values to fall quite a bit.
“What is not so easy is to invest your capital and take those calculated risks that earn you millions of dollars.”
Especially not these days wleo. I’ll stick to safer investments for the time being–I’m not confident in this economy at all.
And my comments, by and large, aren’t really directed at the ownership set. They’ve already committed to either a mortgage or put their money down and there’s no going back from that, they are fully vested. Me? Notsomuch. Gonna sit out for awhile still.
Land doesn’t depreciate. It changes in market value, sure, but land does not have a finite life nor does use of land reduce its intrinsic value (environmental issues aside!).
When you use your house, it wears down. Mechanicals, fixtures, etc. only have a finite life. People rarely, if ever, replace these items yet hope their homes will increase in value anyway.
Again, the land should appreciate or depreciate, but the building unless rehabbed is only going one way (again unless major work is put into it — new siding, mechanicals, roof).
“The fact of the matter is that you just don’t understand the difference between economic / book depreciation and tax depreciation.”
I’m not quite sure how book depreciation (especially schedules that are I assume for commercial property) have much to do with economic depreciation. Maybe it makes sense if you are a MBA or CPA type.
“Your analysis was flawed from the get-go. You separated land out from the underlying structure and (I assume) attempted to hold it at purchase price for the duration.”
Yeah, I don’t disagree at all with the notion that most things depreciate, the methodology just seemed bizarre. I doubt that in practice, many/most houses that are sold today are actually in worse shape than 10 years ago. Yes, you have to account for the money put in to keep it in good/better shape (as well as many other things) but I’m not sure a depreciation schedule is the best way to do that.
Bob — you can model whatever you want with the land. In fact, I would argue the majority of house price declines have come from the fact that the land itself is cheaper because of all the economic factors out there.
Replacement values on new construction put in place haven’t changed that much. Maybe a little labor savings, but certainly not on materials or aggregates.
So the declines are in the land.
The depreciation, the use of the building that reduces its expected future benefits, is often unaccounted for by homeowners.
In a sense, I am arguing is that most people do not replace the wear and tear in their homes at a rate that depreciation would suggest. Sure they do cosmetic stuff, but when it comes to mechanicals, roofing, siding, etc. that is rarely replaced unless its a full rehab. Yet the expected remaining life of that stuff keeps declining. And yet they want to be paid for their “used” house at the same price.
No one pays a new car price for a used car right? Some people here can’t figure that out.
“Land doesn’t depreciate. It changes in market value, sure, but land does not have a finite life nor does use of land reduce its intrinsic value (environmental issues aside!).”
Who cares about anything other than market value. If your structure has “depreciated”, but is actually worth more (hypothetically holding the land constant), you’re better off. Who cares if it depreciated. The main thing to account for in thinking about whether you are better/worse off is the value of living in the home (relative to living in other homes or renting, and all the pluses/minuses of that). It has some correlation to depreciation, but why not focus on it directly?
“No one pays a new car price for a used car right? Some people here can’t figure that out.”
Well it does explain the premium on new construction. Not sure if gut rehabs have the same magnitude of premium, anecdotally I am thinking not.
oh yay more accounting talk
zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
Look, the depreciation schedules just give a sense for how much a building reduces in value each year. Buildings typically are depreciated at 39 years, so I was suggesting that for a $500,000 value building (ex-land) that equates to $13,000 a year. But in that cost are fixtures and other things that lose value quicker, say 7 years. So just come up with a blended rate and divide through. If you don’t spend that much in capital improvements, you’re losing value on an ecomomic basis.
Repairs, such as fixing a leaky faucet don’t count. They just restore the aging fixture, etc. to working order. Capital improvements, such as a tear off roof, add value to the property.
“Not sure if gut rehabs have the same magnitude of premium, anecdotally I am thinking not.”
True but in the case of a gut usually the existing foundation and walls are used. Price those out — they are expensive to put in place.
Ok Sonies, but its an important concept.
Intuitively, you know someone who buys a place, puts ZERO dollars in for 10 years and turns around and sells it is going to fare a lot worse than someone who updates a place and improves it.
Again, why shouldn’t I get the price I paid for my 5 year old car when I go to sell it with 50k miles on it?
This concept is completely lost on most home buyers / owners.
“If your structure has “depreciated”, but is actually worth more (hypothetically holding the land constant), you’re better off. ”
Why would the structure be worth more? The land might be worth more, but why would the structure be worth more unless it was improved?
The only way I could see this is widespread inflation in building materials / replacement costs. It happened in the boating industry when petroleum spiked because the cost of fiberglass hulls was so high. But that is rare and an anomoly.
No other durable goods (and structures are durable goods) appreciate simply because of time. Scarcity value, but a house can always be built, either greenfield or tear down.
“Repairs, such as fixing a leaky faucet don’t count. They just restore the aging fixture, etc. to working order. Capital improvements, such as a tear off roof, add value to the property.”
Really an odd distinction. If you don’t fix a faucet your house is worth less and if you don’t fix a roof your house is worth less. Yes amounts are different and value you get from them is different and over different time frames. But, they are of the same nature from an economic perspective. Maybe your view makes sense from some sort of accounting perspective.
Let me ask a different question. Do anyone disagree with the methodology of the NYT rent/own calculator (asking about methodology, not values for inputs)? I haven’t looked recently but I’d be really surprised if it includes a depreciation factor (other than that the assumed upkeep costs tell you something about depreciation).
“This concept is completely lost on most home buyers / owners.”
so are interest rates and amoritization schedules, but thats why some people are wealthier than others.
Yes it does. Both maintenance AND renovations. This captures the costs, if you believe the cost assumptions. I checked and they looked reasonable to me.
I guess the NYT gets the concept, which is good to see, but most do not.
really depr on personal homes?
dude your water heater at $700 is immaterial, your kitchen remodel at 50k is it really a leasehold improvement? and your roof repair at 3k will extend the the life but come on nobody is going to keep books like this.
your car is (machinery) 7 year life, your house (building) is 39 year and tax 21 year.
“your car is (machinery) 7 year life”
Says who? I keep my cars for 13 years. Remember Groove we’re not talking about FASB here we’re talking about personal books.
Additionally do you really believe a car at the end of a 7-year depreciation schedule is worth zero? That would mean all cars 2003 and earlier should be worth zero in your world. If that is the case I will happily take them off your hands for you.
Just an economic concept. People ignore these costs until they are realized at sale, Groove. No one has to keep books, but the costs are real.
Again, if this doesn’t exist tell me why the car is worth less in 5 years. You know the answer.
“I guess the NYT gets the concept, which is good to see, but most do not.”
http://cribchatter.com/?p=9049#comment-83043
It’s the methodology at your post linked above, which I really don’t understand. You apply a depreciation schedule on top of hypothesized actual maintenance expenditures to suggest that the homeowner is better off. Depreciation has nothing to do with whehter the homeowner is better off. Depreciation costs the homeowner to fix. What makes the homeowner potentially better off (on net) is getting to live in the house.
“But that is rare and an anomoly.”
But the question is when it happens, does a depreciation schedule matter at all versus market value? Or put differently and of more general relevance, different types of structures may and probably do change in market value at different rates (they decline at different rates, e.g., 2/2s versus SFH). That’s what matters, not the depreciation schedule one might want to assume.
Bob, you forget SL depreciation can allow for a residual value, it doesn’t have to go to zero. Buy a $20K new car, assume residual of $4k and depreciate SL 7 years.
Values would be:
2010 20000
2011 17714
2012 15429
2013 13143
2014 10857
2015 8571
2016 6286
2017 4000
2018 4000
Actually if you look at KBB car prices, they really do level off around 7-10 years. That is not an unrealistic price curve if you ask me.
^^^^werd
Yeah what DZ said.
“Depreciation costs the homeowner to fix.”
Ok so if not replaced or fixed, home price value decreases.
If fixed, it should be included in the rent to own calculator which is a true cost of ownership. That determines who is better off right? Maintenance and renovation costs are in there.
The reality is people rarely keep up with depreciation on their homes. They only fix roofs when they leak. It doesn’t mean the costs have not accrued to them.
I’d pay more for a house with a new roof, everything else being equal. Same for people who buy “move in ready” homes. The flip side of this is people pay less for homes that have not been improved. This happens over time and is an economic cost.
“If fixed, it should be included in the rent to own calculator which is a true cost of ownership. That determines who is better off right? Maintenance and renovation costs are in there.”
Yes, it should absolutely be included. But, even if the homeowner did keep up with depreciation, if I know what he did actually put in maintenance etc. and I know what he sold it for, plus rent and the other inputs in the NYT calculator, I can assess how he did. I don’t have to know anything about an assumed or even an actual depreciation schedule. It’s not relevant.
“But, even if the homeowner did keep up with depreciation,”
Meant to say “did not keep up”.
Ok, so then what if the inspector tells you the roof only has 2 year remaining on it and the siding has 5 more years left? What then?
Seller says to you, it ain’t broke so I didn’t fix it. Roof still works, so does the siding.
“Ok, so then what if the inspector tells you the roof only has 2 year remaining on it and the siding has 5 more years left? What then?
Seller says to you, it ain’t broke so I didn’t fix it. Roof still works, so does the siding.”
I would sure hope that is reflected in the sale price. My issue is you presented a hypo where you knew maintenance and improvement expenditures AND the resale price and still claimed depreciation schedules were relevant.
“In fact, I would argue the majority of house price declines have come from the fact that the land itself is cheaper because of all the economic factors out there. ”
This is *undoubtedly* true for SFH and smaller condo buildings.
“I’d pay more for a house with a new roof, everything else being equal. Same for people who buy “move in ready” homes. The flip side of this is people pay less for homes that have not been improved. This happens over time and is an economic cost.”
This. Everyone’s focusing on the use of “depreciation”, which has enough technical meaning to confuse the issue. The fact is that homes wear out, and ignoring that will result in someone coming out of pocket to repair/replace at some point.
I bring up the “why would someone pay $X for a used condo that was $X when new in ’01 when a very similar new condo is available for $X, as well” and it also always comes up in the context of low assessments for new hi-rise condos.
“I would sure hope that is reflected in the sale price.”
And if it is replaced proactively by the seller, then the price is higher?
True cost right?
Depreciation schedules are only a means by which one estimates this true cost.
As long as you agree it is a true cost, then I don’t personally care how you measure it.
“My issue is you presented a hypo where you knew maintenance and improvement expenditures AND the resale price and still claimed depreciation schedules were relevant.”
My scenario was from seller’s perspective. All it was meant to illustrate was that sellers are blind to the cost of “wear and tear” as Anon so eloquently puts it (I call it depreciation, bc that is what it is). They think house prices should increase but ignore the cost of “using” their own home.
Sellers should be cognizent of how much they spent in maintenance and improvements in assessing whether they are or are not getting a good purchase price.
Sellers whine about losing money, but the reality is they are losing a little every day in terms of their cost of usage, owner occupancy.
“My scenario was from seller’s perspective. All it was meant to illustrate was that sellers are blind to the cost of “wear and tear” as Anon so eloquently puts it (I call it depreciation, bc that is what it is). They think house prices should increase but ignore the cost of “using” their own home.”
Just to get it out of the way, I absolutely agree there is real economic depreciation. I have affirmatively said this.
Your scenario was that even though you knew the resale price and maintenance and capital costs during the period of ownership, the owner was still better off because you somehow gained relative to the depreciation schedule (which btw seemed much more aggressive than the nyt assumptions).
Again, things absolutely depreciate, but that is reflected in the resale price (along with other factors). If you know the resale price, depreciation schedules don’t tell you a whole lot more (they tell you a little bit about the avoided rental cost, but that’s not how you used it)).
You’re welcome to the last word if you want it (unless you introduce a different point).
“If you know the resale price”
Meant to say “If you know the resale price and what you put into the house for upkeep”.
Ok, now I’m done.
“If you know the resale price, depreciation schedules don’t tell you a whole lot more”
Consider this example:
Purchase new home for $500k. Hold 10 years, spending $0 on maintenance. Sell at end of 10 years for $500k, net of transaction costs. Assume 0% total inflation (or assume real $$ buy/sell prices are equal).
My take away of JMM’s point is that the Owner made a significant “profit” during the ownership period, b/c the home he sold contained more unrealized, deferred liabilities than the house he bought.
ps: And that the depreciation schedule is a baseline for calculating the size of that “profit”.
Here is what investopedia says about “economic depreciation”:
“A measure of the decrease in value of an asset over a specific period of time. This usually pertains to property such as real estate that can lose value due to indirect causes such as the addition of new construction in close proximity to the property, road additions or closures, a decline in the quality of the neighborhood, or other external factors.”
You’re confusing economic and book depreciation, which is an accounting concept. And I was a controller in my last job, not a tax accountant. There are just too many assumptions and variables to consider without trying to impose a “depreciation expense” on your home. It would muddy any analysis of profit and loss and you would probably end up double counting expenses. I see limited usefulness.
“The fact of the matter is that you just don’t understand the difference between economic / book depreciation and tax depreciation. Since you are likely a tax accountant, I get that, but the concept applies to buildings regardless of whether they are “allowed” depreciation. Allowed simply means allowed a deduction for federal or multi-state income stax purposes — it has nothing to do with the economic cost of depreciation.
“You’re confusing economic and book depreciation, which is an accounting concept. And I was a controller in my last job, not a tax accountant. There are just too many assumptions and variables to consider without trying to impose a “depreciation expense” on your home. It would muddy any analysis of profit and loss and you would probably end up double counting expenses. I see limited usefulness.”
And *this* is why referring to it as “wear and tear” (even tho I didn’t exactly) leads to a more productive discussion of the concept.
“My take away of JMM’s point is that the Owner made a significant “profit” during the ownership period, b/c the home he sold contained more unrealized, deferred liabilities than the house he bought.”
Is the owner’s resale at (more or less) a market price that includes the impact of the postponed maintenance? If it doesn’t, and the new home is a market price, then that’s saying you’re better off because you have bought low and sold high. If the resale was at market, then I don’t see how the fact that he performed less maintenance than he needed to (to keep up with depreciation) makes him better off, beyond what is reflected in the sale price, his maintenance expenditures, etc. versus rental costs.
Also, in JMM’s world owner’s don’t perform enough maintenance, so the new home (which wasn’t part of the hypo) would have those liabilities too.
“My take away of JMM’s point is that the Owner made a significant “profit” during the ownership period, b/c the home he sold contained more unrealized, deferred liabilities than the house he bought.”
Yes correct. Seller should be doing cartwheels, but most would not see it that way. Call them deferred liabilities or accrued expenses during the ownership period. Either way, economically seller made out ok.
“There are just too many assumptions and variables to consider without trying to impose a “depreciation expense” on your home”
Not true. You could reasonably estimate it, just like any business does. Not suggestion a homeowner should do that, but a good rule of thumb might be the average of 39 and 7 years assuming a 50/50 split between structure and interior fixtures. That is 1/23 or slightly more than 4% of the building cost per year. That is why I hold land constant, because the land doesn’t wear out (though its market price certainly changes).
“It would muddy any analysis of profit and loss and you would probably end up double counting expenses. I see limited usefulness.”
There is no P&L associated with owner-occupied housing. It is all costs appart from realized gains and losses at sale time.
It does not mean you couldn’t measure those costs, and adjust your ECONOMIC basis at sale to realistically account for whether or not you really lost money based on appreciation, or if it was in fact your own wear and tear on the home itself.
“Also, in JMM’s world owner’s don’t perform enough maintenance, so the new home (which wasn’t part of the hypo) would have those liabilities too.”
Yes, and when the owner sells for exactly what he paid, he’s also passed on those liabilities–using my example (assume land value =$100k) and JMM’s 4%, he realizes a $160k “profit” at the time of sale.
Of course, I think 4% overstates residential wear and tear, but that’s a discussion I don’t want any part of.
“Of course, I think 4% overstates residential wear and tear”
Try having me and my buds as tenants. You might have to “tweak” your economic depreciation estimates.
And there is the problem with using some arbitrary number to “depreciate” your home. It muddies the analysis. Too many variables.
“Of course, I think 4% overstates residential wear and tear, but that’s a discussion I don’t want any part of.”
“And there is the problem with using some arbitrary number to “depreciate” your home. It muddies the analysis. Too many variables.”
Arbitrary numbers? Accepted by the government and its tax minions as well as by the FASB? Yes, very arbitrary.
You should quit your day job if you deem MACRS / GAAP depreciation schedules to be arbitrary.
“Try having me and my buds as tenants. You might have to “tweak” your economic depreciation estimates.”
Why are you living in my o/o house? If it is rental property, no one disputes the application of depreciation.
Try to keep up, Bob.
“Why are you living in my o/o house?”
Now that would be a good sitcom.
4% on the structure per year, yes it is high to most people. That is my argument — it is a lot higher than people think, if they even care to think about it which most dont.
Think about it. A 10 year old kitchen is out of date today. The 10 year old water heater needs replacing. The 10 year old roof is probably half way to its useful life. The 10 year mechanicals are inefficient by todays standards and are probably 2/3 of the way gone.
That is 10%… And I was only suggesting 4%… Think about 20 years then.
Why would it matter if it is you and your family vs. tenants. Is there magically wear and tear with tenants but not with you?
“4% on the structure per year, yes it is high to most people. That is my argument — it is a lot higher than people think, if they even care to think about it which most dont.”
I get your argument, but I disagree. And that’s all I’ve got to say about that aspect of this one.
“Is there magically wear and tear with tenants but not with you?”
If you consider “BOB. ANGRY!!!” to be magic, sure, I guess.
Why do you disagree? Just gut instinct?
You then don’t believe personal residences don’t depreciate as fast as offices do? Or for that matter, rental residences?
All I am saying is look at other common conventions and it suggestions a higher cost than most people would realize.
I have a 10 year old fridge in my home. Guy came to repair it and said it might last another 5 years. At the same time, a new one would save me 25% on energy costs. That is 6.7% depreciation per year. Fridges aren’t cheap either, especially the built ins.
“If you consider “BOB. ANGRY!!!” to be magic, sure, I guess.”
Conceptually there is no difference. Anyone with small kids knows they are as bad or worse than renters. Only difference is child proofing keeps them from burning the house down.
JMM,
What about inflation?
The 500k a buyer sells a house for after 10 years is not the same as she bought it for.
What about inflation? Fair to consider that when looking at the IRR of the realized gain or loss.
“Anyone with small kids knows they are as bad or worse than renters.”
No, not anyone. Who are these people with kids allowed to destroy stuff? Not the kids I know.
““Why are you living in my o/o house?”
Now that would be a good sitcom.”
It already largely exists. I’m Kenny Powers and anon(tfo) is his lil’ brother whose house he’s crashing at.
They are arbitrary when you are using them on your home. Depreciation is an accounting construct created to match revenues and expenses. Your “depreciation” would be overstated for somebody who maintains their home compared to somebody who didn’t, so you have to make adjustments for every repair and maintenance. You could just as easily subtract an estimated rental expense for the years you lived in your home if you wanted to find your imputed gain or loss and it would be much simpler.
“Arbitrary numbers? Accepted by the government and its tax minions as well as by the FASB? Yes, very arbitrary.”
“Depreciation is an accounting construct created to match revenues and expenses. ”
No its more created to give accountants a job. If they actually cared to the level of detail JMM is talking about they wouldn’t just have 39yr or whatever depreciation schedules for buildings. Instead each major component would be depreciated based on it’s expected useful life. And replacements/repairs wouldn’t be treated as an expense they’d be capitalized in that case.
BTW, FASB has little credibility these days IMO. They standards have been compromised by corporate interests. There used to be some integrity in accounting standards.
Ok fine so you think GAAP, FASB, IRC are all fradulent concepts or agencies, I get it.
Depreciation is mythical, but you still cannot answer why I seem to have trouble selling my 5 year old car for what I paid for it in 2005. Must simply be changes in market value. Damn, its funny how they keep going only one way though.
Whenever you can’t prove your point on home “depreciation” you bring up your car example. How about your computer? Or your big screen TV? Is there a certain dollar value you’re looking at here?
Apples and oranges.
And if you want an example of accounting standards have been compromised, look no further than Lehman’s use of Repo 105s.
“Depreciation is mythical, but you still cannot answer why I seem to have trouble selling my 5 year old car for what I paid for it in 2005.”
“Depreciation is mythical, but you still cannot answer why I seem to have trouble selling my 5 year old car for what I paid for it in 2005. Must simply be changes in market value. Damn, its funny how they keep going only one way though.”
Has anyone actually said that there isn’t real economic depreciation of homes? I have to assume you’re knowingly presenting a strawman.
This is wholly unrelated to what I was debating up above, but FWIW, and with the somewhat major disclaimer that I am not a CPA/MBA, I would think of depreciation as either change in (potentially hypothetical) market value or change in personal value of an asset (or something like that). I can only assume that depreciation schedules are meant to get at something like that. Anything else seems like an artificial construct not necessarily related to true economic value.
And, again, yes of course stuff depreciates.
Man, you guys are giving me a heahache.
Goooooove please post something enlighting, hell at this point I would even enjoy a Clio post.
Yeah, if he just hadn’t used “depreciation” to make his argument seem more legit, as if he understood the concept, I wouldn’t have a beef. I see no use for it other than possibly some realtor trying to make the case with a seller for a lower asking price. Why can’t you just use comps?
“Has anyone actually said that there isn’t real economic depreciation of homes?”
Juliana who somehow labeled me an “idiot” has maintained this. She also said: unless it is a tax deduction it doesn’t exist, or unless its strictly applied to a P&L it doesn’t exist. Also, she said accounting standards are fraudulent, that U.S. GAAP is sham and that the IRC doesn’t make any sense either.
As for depreciation, I certainly understand the concept, having not one but two credentials that start in C and end in A.
So Juliana — you’re so smart — why does the car I bought 5 years ago sell for less today? And tell me why the house, not the land, is any different?
If you cannot deconstruct the land from the improvements (such as buildings that sit on them) then you don’t really understand real estate.
Bottom line:
If you buy a house for 500k, *put nothing in* and sell for 500k, the reality is you experienced some modest appreciation. Why? Your building has depreciated over this same time.
JMM, you are making up things I did not say. Scrambling for a ledge to stand on.
The car has a useful life that is easier to determine than a house that has been maintained. At the end of your house’s depreciable life, what is the residual value? That can vary widely based on upkeep. Cars do, eventually, wear out.
And your house example assumes no change in economic depreciation from housing bubbles, Blue Cross building going up that obstructs your view, changing demographics in a particular area, etc. You postulate that it all can be accounted for with an arbitrary depreciation annual depreciation expense.
Oh, and yeah, I’m a CPA too. Big deal.
“And your house example assumes no change in economic depreciation from housing bubbles, Blue Cross building going up that obstructs your view, changing demographics in a particular area, etc. You postulate that it all can be accounted for with an arbitrary depreciation annual depreciation expense.”
No, actually you are wrong and misunderstood the example anyway. All of that priced into the land not the building. Separate land from building and you will understand. I know it is a difficult concept for you but you are hear to learn about real estate right.
As for estimations, I don’t think it is too difficult. GAAP says structures last 39 years. Equipment last 7 years. Roofs last 20 years. Everything in an old house will need to be replaced or improved over time, even the foundation. Ever hear of tuck pointing? I know you probably have never owned a home, but trust me, it’s all true.
An unemployed CPA I gather.
You didn’t explain to me the difference in residual value at the end of the home’s useful life, depending on upkeep. This is a basic depreciation concept that leaves lots of room for manipulation.
I own a home, haven’t had a mortgage for almost 20 years, and am not a senior citizen. I’ve replaced windows, floors, countertops, water heaters, and will probably have to replace my roof and heating systems if I hold onto it long enough. All those are maintenance expenses and are highly variable. Just because you think a roof should last 20 years doesn’t mean it won’t last longer. Mine is in fine shape after 25, and as long as it is still intact when I’m ready to sell it I doubt it will have a huge effect on market value. Routine maintenance extends the useful life of my home. The residual value hasn’t been effected much by time. Only by economic conditions.
“An unemployed CPA I gather.”
A retired CPA. The job suited me at the time but was I hope I never have to do that kind of work again. I would probably become a whistleblower if I were working for my previous employer.
JMM, let me try to help as a non CPA.
In the 1950s a house was constructed in Lincoln Park
Land Cost = $5,0000.00
Construction = $15,000.00
Total Value = $20,000.00
In 2005 the house was purchased by a developer. Did the developer purchase the the property for the value of the land or the value of the home? His assumption/proforma would probably assume something like…..
Land Value $600,0000.00
Home Value $0
“upkeep” = capital improvements that add to the cost basis of your home.
“Mine is in fine shape after 25, and as long as it is still intact when I’m ready to sell it I doubt it will have a huge effect on market value.”
Think again. Good luck with the home inspection!
“I’ve replaced windows, floors, countertops, water heaters, and will probably have to replace my roof and heating systems if I hold onto it long enough.”
All capital improvements that increase your cost basis in the home.
Wonder how much you have spent relative to the purchase price of your home? Probably quite a bit.
So you have spent a bunch of capex to offset the depreciation in your home. So you agree with me? Btw, that capex is depreciated once it is put in place, so residual value is not a concept that really applies.
Ok so Juliana are you drawing a pension? Do you think the acutarial assumptions to determine funded status are BS as well? Things like service and interest cost — all BS? So when your pension plan goes critical, you shouldn’t worry about it? With the PBGC steps in, nothing to worry about here?
“All those are maintenance expenses and are highly variable.”
New HVAC system = capex. Cleaning a furnace = maintenance.
Oh, so everytime I do a repair at my home I have to recalculate the “depreciation” schedule? Or do you keep a ledger of each repair and a separate depreciation schedule based on its useful life? Seems like an awfully labor intensive exercise with no apparent benefit. What was the benefit again?
Its one thing if your house is a tear down. Its another if its been maintained. If its a tear down (Valasko’s example) the building’s value is zero. If its a well maintained greystone, its much more.
And this thread is a perfect example of why i’m not friends with any accountants (anymore)
Actually, yes I do think actuarial assumptions, like the 8% return most public pensions assume, are BS.
“Do you think the acutarial assumptions to determine funded status are BS as well?”
I think a home is very different from a car. I’ve always been annoyed when someone refers to a home as ‘used’. A used car or appliance I understand.
Fact of the matter is that in many ways new construction is inferior to much older construction from the 1920’s. Older buildings were solid brick as opposed to plywood clad with Tyvek and a brick skin. real plaster is better than drywall, etc, etc. Even the lumber they used was generally thicker and better quality…
“And this thread is a perfect example of why i’m not friends with any accountants (anymore)” LMAO Sonies
In addition, buyers are more interested in nicer kitchens, countertops, bathrooms and wood floors than they are in hearing that a roof was just replaced or the AC condenser is brand new.
All told, I kind of liked this thread better yesterday. Clio, where are you?
“Oh, so everytime I do a repair at my home I have to recalculate the “depreciation” schedule? Or do you keep a ledger of each repair and a separate depreciation schedule based on its useful life? Seems like an awfully labor intensive exercise with no apparent benefit. What was the benefit again?”
My father kept meticulous records of all of the improvements AND repairs done to their home over the 17 years they lived in the house. The benefit when it came time to sell was it helped them justify their ask price to the buyer. They were able to get 51% appreciation over this horizon.*
*They didn’t live in a bubble area with idiots paying outsized premia for land speculation.
That might work in a sellers market. Deflating bubble trumps it though.
“The benefit when it came time to sell was it helped them justify their ask price to the buyer.”
“My father kept meticulous records of all of the improvements AND repairs done to their home over the 17 years they lived in the house. The benefit when it came time to sell was it helped them justify their ask price to the buyer. They were able to get 51% appreciation over this horizon.*”
Bob, bubble or not thats a terrible rate of return, are you sure you have you numbers right?
“Bob, bubble or not thats a terrible rate of return, are you sure you have you numbers right?”
Not too bad if it’s real $$.
“Not too bad if it’s real $$.”
These bubble mentality people think they’re going to get an % market risk premium over the long-term as well as insane appreciation from their RE investments, STILL.
Its going to take another few years before people realize that there are almost equally as many years of famine as there are of feast.
Err an 8% market risk premium.
Bob, Not trying to get you all wound-up, my observation was that holding for 17 years during one the the best bull markets and only getting a 51% return isn’t very good. Trust me I think realestate is going nowhere for years if not decades.
“Err an 8% market risk premium.”
51% over 17 years is 2.45%/yr. Which, for any period during your life, is less than inflation.
OK everyone – read the last 100 posts on this thread and then honestly tell me if you think my posts are more annoying, irritating, and ridiculous!!!
Just keeping it real clio. You can skip the stuff that you don’t understand.
“51% over 17 years is 2.45%/yr. Which, for any period during your life, is less than inflation.”
Hardly.
http://www.bls.gov/cpi/cpid1008.pdf
Look at page 5: looks to me like around half the time from 2000-present its been below 2.45%.
“Look at page 5: looks to me like around half the time from 2000-present its been below 2.45%.”
anon means, I am sure, that there is no 17 year period during your lifetime with an effective annual rate over the 17 year period of 2.45 percent or less.
C R I B D R A M A
I just read this thread from the start….
Whether you are a CPA, 2xCPA, investor, wealthy single person, common commenter, cribfairy, opinionated jacka$$, pessimistic anti-risk taker, or my parents taught me well shmuck….there is a means to which you can share your life lessons and/or opinions in either a positive or negative manner. Those of you who chose positive, congrats, good leadership skills usually yield wealth, friends, happiness. Those of you who chose negative, stop crying, plenty of people are making money and the world is not going to end (monetarily speaking for wall st and main st).
“anon means, I am sure, that there is no 17 year period during your lifetime with an effective annual rate over the 17 year period of 2.45 percent or less.”
Well if you loan me your time machine I can go back and tell my pops to rent back in ’92. They probably did even worse & just barely broke even given all the upgrades they did. They liked the place though and never treated it as a speculative investment.
Funny story: they moved from owning this one and getting out okay to downsizing & buying a new one less three weeks before the new tax credit kicked in–I told them to wait a bit & rent but no. Owning is psychological to a lot of people.
“Funny story: they moved from owning this one and getting out okay to downsizing & buying a new one less three weeks before the new tax credit kicked in–I told them to wait a bit & rent but no. Owning is psychological to a lot of people”
I think the tax credit was only for first time home buyers. Also, there were severe income limitations/restricitions. For a single, you couldn’t make over 125k. For a couple, the limit was 225k….. so your parents probably wouldn’t have qualified.
JMM,
Doode you remind me of my Econ professor he got he CPA worked then decided to get his phd in econ. the guy was always arguing accounting principles and adam smith.
I learned a lot from him, it cant be you? he was old and retired i heard.
sorry i missed out on yesterday lesson/lecture
Glad you are not comparing me at least to that U of C prof who is getting roasted for complaining about taxes.
“I think the tax credit was only for first time home buyers.”
Incorrect. There was a $6,500 credit for previous owners in the last tax credit.
Of the 3 iterations of tax benefits from buying it went something like this:
Wave 1: $7,500 interest free loan tax credit, to be repaid.
(4/9/2008 – 12/31/2008).
Wave 2: $8,000 tax credit for new buyers, not previous owners
(1/1/2009 – 11/5/2009).
Wave 3: $8,000 tax credit for new buyers, $6,500 tax credit for previous owners. (11/6/2009 – 4/30/2010).
Looks to me like I’d better look at what our government does and not what it says. And what it appears to do is throw ever increasing incentives at renters trying to convert them to owners. I’ll sit on the fence until a real good incentive pops up like a 15k credit.
“my Econ professor he got he CPA worked then decided to get his phd in econ. the guy was always arguing accounting principles and adam smith.”
He was in the econ dept as opposed to b school? Really very odd for an economist to be arguing accounting principles. Not to say that it doesn’t come up, as economists use data generated under accounting rules/principles, but I’m surprised it would be a pet topic.
“Glad you are not comparing me at least to that U of C prof who is getting roasted for complaining about taxes.”
That was pretty entertaining.
“Glad you are not comparing me at least to that U of C prof who is getting roasted for complaining about taxes.”
your welcome 🙂
got a link, would love to read that.
“I’m surprised it would be a pet topic”
i got the vibe that he was very unhappy in the work force maybe it is his vendetta to brainwash young minds to change the wrongs he was faced with?
This is not the original, he took it down, but seems pretty public to me, so am posting. Also article on main trib page at the moment.
http://delong.typepad.com/sdj/2010/09/todd-henderson-we-are-the-super-rich.html
“i got the vibe that he was very unhappy in the work force maybe it is his vendetta to brainwash young minds to change the wrongs he was faced with?”
Was he really in the econ dept? I find that very surprising.
Todd needs to do some budgeting… there is no reason that if you make over 250k a year you should be having money problems, even if you have student loans
“Todd needs to do some budgeting… there is no reason that if you make over 250k a year you should be having money problems, even if you have student loans”
Sonies, this is the problem the country faces, the majority of its citizens spend more than they have earned. Most people today have no hot to set a budget and live within it, although some are learning this concept the hard way.
“Was he really in the econ dept? I find that very surprising.”
I can care less how the high education structure works, but the guy got his CPA worked for i have no clue how long, decided to get his phd in ecomomics worked some more (for how long no clue) and ended up as my Econ professor.
and i have no clue how he ended up that route and where he was at but i am glad we crossed paths i loved his class and even took a second one that was not even required for me.
Man I need some coffee
Sonies, this is the problem the country faces, the majority of its citizens spend more than they have earned. Most people today have no idea how to set a budget and live within it, although some are learning this concept the hard way.
The guy did pay a ton of tax.
It is 1994 all over again. Angry white males and a contract with America.
People get upset with taxes — taxes are really low. That doesn’t make sense to me.
What does make sense to me is someone who makes a lot but doesn’t have a lot being upset with tax increases. And it isn’t necessarily just because they spend everything they make (though the often do), it is because wealth creation is harder than it used to be. For better or worse, this country continues to mature and wealth creation becomes harder, just like it is in Europe.
That’s life I guess.
One thing that mystifies me is he says he has $250K in student loans himself (in addition to his wife having the same). Given his educational and work background, there must be something missing (which he sort of alludes to but does not explain).
I don’t think based on what he said that they are living that irresponsibly. They have very secure and high future incomes. Among the things they are doing is paying off the $500K that helped them to have those incomes (or at least her $250K did).
PS Sorry groove, I wasn’t asking his history, just whether his appointment was in econ dept, b school or whatever.
Actually, I agree w/ the guy in the article – he is not saying that earning 250,000/year isn’t a lot of money, he is saying that it doesn’t make him “super rich” or even wealthy for that matter. He is comfortable at best. He is simply trying to correct the sterotype that everyone earning over 250k is rich. I don’t think that you truly are wealthy/rich until you get into the 1million+ yearly income. I know that this will rub people the wrong way, but it is the truth.
A 3% increase in money he makes over 250k isn’t a whole lot to bitch about… the guy probably makes over 400k a year if he’s paying 100k a year in federal taxes oh no,,, he might have to pay 101.5k in taxes next year!!! boo freaking hoo
I agree with JMM, taxes are low, rates are low, on a smaller level (besides groceries) retail sales are every where. i know my dollar is going a long way now,(yet my returns are shyte but thats long term thing)
this guy making 250k and his “problems” are because decisions he made.
and continues to make.
he has valid points they need better legs, and you would think a professor could provide a better argument than that. if i was his student i would ask for my tuition back.
$1M — give me a break — that is an excessive salary and so rare its not worth mentioning. Income comes from lots of places, and for wealthy people, very rarely from current income / W2 salary.
Anyway, earning a lot does not necessarily lead to wealth. Current income is a foolish way to build wealth. Most private equity investors know this which is why taxing their carry at ordinary income rates is such a shot across the bow.
“I don’t think that you truly are wealthy/rich until you get into the 1million+ yearly income.”
This is all definitional, which I don’t really care about. I know I personally won’t feel rich until I can stop working and not have any financial concerns.
But, if we are defining things, what’s the right term for this couple? Upper middle class just doesn’t seem right.
“A 3% increase in money he makes over 250k isn’t a whole lot to bitch about…”
I agree. Though I would guess his AGI is around 350-375 because FTI of 325k gets you close to 100k once you add in IL state taxes.
The irony of ironies is this guy probably gets hit by the AMT schedule anyway (something he probably forgets when ranting about taxes), which won’t change next year regardless. Depending on how deep into the AMT he is, taxes could increase marginally and he may very well not see any increase on his effective tax rate.
“PS Sorry groove, I wasn’t asking his history, just whether his appointment was in econ dept, b school or whatever.”
you know what i have no clue, never cared about that hierarchy stuff, just know him and the class he taught. and will say i am a better person for taking those two classes.
” if i was his student i would ask for my tuition back.”
if you were his student you probably wouldn’t complain as U. of C. law school graduactes earn an average of 400k+ (not starting salary)
“$1M — give me a break — that is an excessive salary and so rare its not worth mentioning.”
It’s more common than you think…..
“if you were his student you probably wouldn’t complain as U. of C. law school graduactes earn an average of 400k+ (not starting salary)”
No, not the case. That would have the average U of C graduate as a 50-ish percentile earning partner at a Big Law type firm. That is not the case.
“It’s more common than you think…”
No, it isn’t.
“if you were his student you probably wouldn’t complain as U. of C. law school graduactes earn an average of 400k+ (not starting salary)”
Clio as i have hinted before, its not your W2 that make you rich/happy, its how you feel at the end of the day when you lay your head down to rest.
to add i had better professors at city community college (JuCo) than i did at U of I.
i think the best quote in that article is he uses turbo tax, i think i pee’d my self laughing on that one.
you would think being a prof at a great university would easily give you connections to a “guy” to do that.
Dunno, I’d say a 1M salary is VERY uncommon, and I’m in finance. What is not terribly uncommon is 1M in total comp. That can happen often. True, it’s a small window into the world but to have someone consistently pulling down over 1M a year is not considered the norm…
That said – don’t these people have deferred comp? You can very easily defer 75K of a 300k salary and be under the magic barrier. When you are done with the firm you have one massive payout of the deferrals and in turn write a rather massive check to the gubberment but at least you got all the other deductions along the way. Of course, this assumes you don’t spend 300k a year and have a reasonable sense of self-control…
“It’s more common than you think…”
No, it isn’t.
“i think the best quote in that article is he uses turbo tax, i think i pee’d my self laughing on that one.”
Is turbotax deficient if you have very straightforward income, deductions, etc.?
“No, not the case. That would have the average U of C graduate as a 50-ish percentile earning partner at a Big Law type firm. That is not the case.”
wait – so are you are saying that the avg attorney from the U. of C. makes MORE than 400k – b/c that is my understanding as well (but didn’t want to offend anyone by saying so)
1 million dollar incomes are, indeed rare, but definitely more common than most people think. Two attorneys, two business people, two docotors, a business owner, hell, even a realtor in good times could EASILY make this amount (if not more). The funny thing is that people don’t realize it. It reminds of the Huxtables on the Cosby show – they kept referring to them as an upper-middle class family. W/ Cliff as an Ob/Gyn and Claire as a partner – both in private practice, their combined incomes HAD to be 1 million (if not very close) – people just don’t want to believe it!
“$1M — give me a break — that is an excessive salary and so rare its not worth mentioning.”
It’s more common than you think…..
Clio, your at it again. Please use statistics to back up you claims. 1.93% of the population makes over $250k. Can’t locate the 1 million crowd but I would guess that its less than 1% of the population. I don’t like to call people names but you sir are an idiot.
valasko,
I don’t think we are saying anything different. As a percentage of the total population, it is small – but in terms of pure numbers, it is not as small a number as you think. Unfortunately there will be no published data reflecting the true incomes of people as most people are able to reduce their reportable earnings in many ways – but think about it. The avg partner attorney makes 400-500k, the avg partner in a decent company makes (500k plus), the avg md in priv. pract may make 300-800k. Now think about all of the doctors, attorney partners, corporate partners out there and you will begin to see my point. Now think about all of the business owners and you will begin to agree w/ me.
“their combined incomes HAD to be 1 million (if not very close)”
Dude, come on with the ovestatements and now you’ve resorted to fictional characters to back up your point. I’m surprised you didn’t bring up the fact they lived in the NY metro area which really means they HAD to make, like, a BILLION dollars a year. Not being real people and all..
roscoevillager,
you missed the 2 points that I was trying to make by using the Huxtables:
1. an attorney partner married to an MD in priv. practice make good money (close to, if not near 1 million).
2. there is a disconnect w/ the general population understanding that these people make this amount of money. I don’t know if it is because it makes the general population feel bad, but fact is fact. I didn’t make up the rules or the salaries…
Clio, it may be common in your world, but why don’t you head down to the real southside of chicago as see how common it is. Why don’t you head over to Mumbia and ask the 50% of the population that lives on the street how common it is. You need to stop looking thru your rose color glasses.
Also can I make a suggestion, why don’t to take your commentary over to the yochicago site.
valasko,
I am not looking at the world through rose colored glasses. I know better than anyone the suffering, hardship and plight of MANY people out there. Furthermore, I probably have more compassion and empathy for people than anyone else on this site. My points are meant to add balance to the rest of the people who post on this site who seem to believe that everyone is going bankrupt and is poor. Again, it is NOT to rub it in, but merely to educate so that you guys aren’t left wondering who is going to buy all of these million plus houses. Education and knowledge is power, my friend!!
clio,
I get your points, however, it seems to me you throw out a lot of random numbers in your comments. Now that’s fine but you push sooo hard and you don’t source information which hurts your credibility. I don’t disagree with your point that a dual income from very high powered professions will push a household income very high. I am poking fun at the fact you chose fictional characters as your rationale (maybe it’s only amusing to me – that’s ok).
About your “upper middle class point” (and I am going to have to defend the professor here) then we should point out that there are some rather high costs to 2 parents working an maintaining a “luxurious” lifestyle. These costs will likely make a couple feel very “upper middle class” because it’s (I believe from my own experience) hard to feel “upper class” if you are living off a salary (ie you HAVE to work) and there is concern for maintining your income. This is how “upper-middle class” was born. People who work hard and earn significant sums of Money don’t exactly feel rich. This is where our professor friend comes into the equation – he dosen’t feel rich even though he has some big numbers to back it up. NO, there should be no tears for this dude and it should speak volumes for his lack of awareness that there was backlash. Nobody wants to hear about the atrocities suffered by the rich, even the other rich people…
as long as this compassion is more than your bombasticness then I could believe it.
People make big payouts in finance once or twice in a decade. They typically get paid in restricted stock. That is not $1M income / salary. For every MD at Goldman, there are 3 schleps at Harris Williams, Piper, Houlihan thinking they are crushing it in the middle market at 400k a year.
Average big law partners may make 500-600k before they pay their secretary, contribute to their partnership account, etc. Only the highest compensated draw over $1M and that is typically due to large client credit / relationships.
Only doctors in highly paid specialties make anywhere close to 800k.
Some Fortune 500 CEOs draw cash salaries above $1M. But they are the top of the heap of a 10k+ head organization. After all, there are only 500 of them to go around.
Clio, I know you think you are educating, but you are wrong, both empiracally and anecdotally. And this comes from someone who may both make and have as much or more than you do.
“I am poking fun at the fact you chose fictional characters as your rationale (maybe it’s only amusing to me – that’s ok).”
I enjoyed it. I would have thought clio would have gone with Alex P. Keaton, although Alex’s post sitcom employment history is a little muddled.
“Is turbotax deficient if you have very straightforward income, deductions, etc.?”
straight forward type of W2 and dedutions, a normal person can do it all by their lonesome, or that $90 (i think its like $50 for the software and $40 to file state and Fed) a person that doenst have a “guy” could get any ol CPA to do it for like $120 and end up with a better return and some knowledge for future returns.
dont get me started on the HR and JH tax refund loan scam they have. most of the people i see using HR block and the software could do their taxes on paper and mail them in for free.
I do many of our warehouse/mfg employee’s taxes for them for free. and many of them i go over for dinner sit down with them and teach them how basic it is and most after that do it themselves.
and of all of them only twice i had to do a K1, its 98% just W2 and standard deductions. all easy and the internet can help with any new chages each year or deductions.
the jackson h and the HR B are scamming the average joe and raping the poor class.
and to jump into politics look up Luis Gutierrez and the Pay Day Loan places. HR block is pulling the same scam.
“People make big payouts in finance once or twice in a decade. They typically get paid in restricted stock. ”
Its my understanding that at i-banks MD’s (not even dept heads or GS quasi-partners) typically make 200k in salary and have a bonus anywhere from 800k-2.8MM.
Thing is, there are probably only 5,000 people making this kind of coin on wall st, 70% of them are probably in NYC and fin svcs employs over 1MM people.
JMM is right: $1MM in comp is pretty rare. Maybe senior partners at accounting/consulting firms. Even there I suspect they’re closer to 800k-1MM instead of breaking it.
Unless you’re on a commission-type job if someone else is paying you its uncommon they’re going to pay you $1MM+, at least not consistently. Even most C-level execs of the 200-500 largest firms (F500 excl F100) probably don’t come anywhere close to $1MM in cash comp.
Household Income Levels Chicago, IL Illinois
$250,000 to $500,000 17,423 1.67% 98,941 2.05%
$500,000 or more 18,802 1.8% 81,317 1.68%
http://www.clrsearch.com/RSS/Demographics/IL/Chicago/Household_Income
Thanks Dr. Funkenstein,
You illustrate my point well. The NUMBER of households/people making over 500k in Chicago alone is 18,802 – that is a big number and doesn’t include people sheltering much of their income (as bonuses (K1), profit-sharing, pension, etc.).
Seriously, think about it – 18,802+ people that need 18,802+ houses. These people are the people I am talking about. YES, everyone, nearly 19 THOUSAND people in Chicago plus all of those w/ inherited wealth, accumulated wealth, and unreported wealth/income. OK – I am done (for now).
You illustrate my point well. The NUMBER of households/people making over 500k in Chicago alone is 18,802 – that is a big number and doesn’t include people sheltering much of their income (as bonuses (K1), profit-sharing, pension, etc.).
Clio, your orginal comment was “you would be surprised how many people make over a 1 million are year”. So based on you number of 18,800, what maybe 6,000 tops make 1 million a year. In my mind and probably others on this site, and in context the Chicago’s population being of almost 3 million those number are tiny. Basically you have made my point, thank you.
No, Valasko,
you entirely miss the point I was making. Basically, I know that the PERCENTAGE of people making over 1 million is miniscule, but the NUMBER of people is larger than one would imagine. You illustrate my point well by assuming that maybe 6000 people in Chicago make over a million dollars. 6000 people is a large NUMBER – these are the people that are buying the 2 million + houses out there. Again the only reason I am belaboring this point is to demonstrate that there ARE a lot of people in chicago who have the money to spend on high priced units (such as the Ritz Carlton residences – yes, the property featured on this particular thread).
Clio in my mind 6,000 people is a tiny number so I guess we will beg to differ on this point. But if you think its such a large number one why don’t to put your money were you mouth is and buy all the units at the Ritz, I am sure when market sediment changes you will make a fortune. And prey tell where is this vast number of ultra rich, the Ritz has only found 3 of them this year.
Valasko,
what are you talking about?!! 6000 is a huge number compared to the number of expensive properties out there. Also remember that the number of people that can AFFORD these places at the Ritz are greater than 6000 (because we are not counting the people who have accumulated wealth, inherited wealth, unreported wealth – 6000 is only the number of people making over 500k). Second of all, the Ritz only needs to convice 44 of these 6000++++++ people to buy these units.
There are not that many places over 2 million for sale (compared to the number of places under 500k) in Chicago. Therefore, I would bet that the ratio of people that can afford 2 million+ properties (6000++++ people) to the the number of 2 million + houses for sale is probably not any lower than the ratio of people that can afford 500k places to the number of 500k places for sale or :
people that can afford 2 mill + houses/ # of 2 million+ houses for sale
vs
people that can afford 500k houses/#of 500k houses for sale
I know I must not be making my point clear – it is simply that although 6000 plus people is a small number compared to the general population, so is the number of units directed at them.
Sorry for the mis-spellings, poor grammar and seemingly disconnected thoughts – I am at work and have like 100 people asking me questions, screaming, bleeding, and yelling all around me!!!
Clio, no worries on the poor grammar mis-spellings, etc. I do it all the time. Just answer one question for me, why has it taken 10 months to sell 3 unit at Ritz. I am sure if I looked up the data the trump, elysian, etc it would appear just a bad. And please don’t kill anyone.
“18,802 – that is a big number and doesn’t include people sheltering much of their income (as bonuses (K1), profit-sharing, pension, etc.). ”
I’ve seen 5,000 as the HH number over $500,000 for the city limits of Chicago. I wonder if this number captures metro. In any event 18k is not a big number and the vast majority of these people already own everything they want, especially in a climate that castigates conspicuous consumption.
The data are self reported, so sheltering income isn’t relevant, nor are the methods cited really correct.
Clio you forget, no one really wants a $2 million property right now. Those who make a lot and have a lot already have one and have lost their ass on their existing trophy property. People are downsizing not upsizing.
This isn’t Atherton bro, not that I believe you lived there. Otherwise you’d tell me what you order at the Dutch Goose.
valasko,
I understand your point. I think that these high-income, high-net worth people are a little gun-shy right now. They are licking their wounds and waiting for the economy to turn around. Once they feel more confident, they will start spending. Again, the point is that these people CAN afford these houses/condos right now, but are not buying them because they are scared. That WILL change.
I guess we’ve beaten this dead horse all we can….
“This isn’t Atherton bro, not that I believe you lived there. Otherwise you’d tell me what you order at the Dutch Goose”
JMM, funny you mention that – I actually lived on that street (although in Atherton – not Menlo Park). It actually brings back terrible memories – Atherton/Menlo Park/Palo Alto, to me, were EXTREMELY boring and very far from S.F.
“Again, the point is that these people CAN afford these houses/condos right now, but are not buying them because they are scared. That WILL change.”
Scared or they know they can get a better deal. And this is not limited to the upper bracket either.
Anyway, I call BS on living in Atherton unless it was the POS Stanford grad student rental on Las Pulgas.
“Anyway, I call BS on living in Atherton unless it was the POS Stanford grad student rental on Las Pulgas.”
uhh no….it was a single family house and yes, I bought it – but I am going to stop myself at that point. I definitely learned my lesson and am not goint to encourage this type of baiting.
“I understand your point. I think that these high-income, high-net worth people are a little gun-shy right now. They are licking their wounds and waiting for the economy to turn around. Once they feel more confident, they will start spending. Again, the point is that these people CAN afford these houses/condos right now, but are not buying them because they are scared. That WILL change.”
I agree that it WILL change as well, only problem is its going to take 10 maybe 20 years for this to happen. Sure many CAN afford but what makes you think the will buy. There is a change of mindset, the property ladder game is over. I have a number of friends (High Income/High Net Worth) who are in a house that they shouldn’t have purchased(yes the a easly afford the payments) but now have seen a significant loss of equity and its a financial drain. They have also seen significant losses in the stock market and reductions in salary. Currently the are hoping for a market recovery to sell and move into smaller homes. This Clio is the new normal.
I’m not interested in hearing your life story, trust me. That street is arterial and low end. Smacks of a wannabe resident of Atherton.
“I have a number of friends (High Income/High Net Worth) who are in a house that they shouldn’t have purchased(yes the a easly afford the payments) but now have seen a significant loss of equity and its a financial drain. They have also seen significant losses in the stock market and reductions in salary.”
Valasko, again I do understand your point. However, I think that the people who buy at the Ritz are not these working-type younger people. The residences will be filled by either people who have accumulated wealth (10million+), those who are EXTREMELY high earners (1million+), or those with inherited wealth (no idea of the value of a dollar). The people you describe are like many of my friends – and yes, you are right. These people will not be buying in the ritz…. yet.
“That street is arterial and low end. Smacks of a wannabe resident of Atherton.”
True – and the house I bought was a 2000 square foot 4bd/3ba single story tear down – but it still cost well over 3 million…..oh, and if something is in the town limits, you ARE a resident of that town (not a wannabe resident).
I’m late to this discussion but the thing that struck me when reading the original blog post by the U of C professor (and his responses to the comments which you can still read on Google cache) is that they simply have too much debt- even with the high income.
I think he said his wife alone had $300k from medical school and he also had school debt. He also said his wife barely made more than an average Chicago firefighter (which some in the comments disputed with him after providing those salaries) but it was assumed she was not making more than $100k a year in her specialty (which clearly wasn’t dermatology or cardiology.)
So- if they have like $400k in school debt and then you throw on a home mortgage (which he admitted they bought at the peak and it had now come down in price)- and in Hyde Park let’s just say that’s at least $500k or $600k- you’re looking at debt of about $1 million on $300k or $350k in income.
He said he literally only had a couple hundred every month right now (before any kind of tax increase) for discretionary spending. (They did have a cleaning lady, day care etc. because both of them are working full time.)
It’s not about the tax increases, actually. It’s about the student loan debt.
When are people going to start saying that it’s not okay to take out $200k to get a degree where you might make just $75k a year?
And don’t tell me these stories of all these lawyers making $600k a year. That is rare. Most that I know who went to the top schools got out of biglaw within 3 or 4 years and now are lucky if they’re even making $125k. One of my friends is in-house at a big retail chain and she makes $125k – and there is no way to “move up” so she will make around that much her whole career.
Anyway- at some point- people have to figure out that even getting that MBA from Stanford or Harvard for $135k in loans (and two years lost in working) just isn’t worth it anymore.
Clio, I don’t think either of us is going to change the others point of view so lets just drop it. We can review the building next year to see what happens.
Sabrina, As usual you comments above are spot on, and I think your the only clear voice on this blog. Please try to post more often.
“Clio, I don’t think either of us is going to change the others point of view so lets just drop it.”
valasko, agreed (oh… and you better wipe your nose off b 4 u go out tonight)
Nose wiped and off to dinner
“When are people going to start saying that it’s not okay to take out $200k to get a degree where you might make just $75k a year?”
Sabrina
I think you make some excellent points regarding higher education. People definitely need to think carefully about the choice of schooling/education. However, while I could understand someone choosing U.ofI. over Northwestern (not much academic difference but HUGE financial difference), I think someone would be stupid to give up a chance to go to Harvard/Stanford/Princeton/Yale, etc. because they were scared about debt.
Clio, I’m not sure why you feel the need to hate on Northwestern, but it’s a fantastic school that is, dare I say, more selective and academically respected than the University of Chicago. I understand that you may have a certain allegiance to your alma mater, but you lose credibility by consistently stating/inferring that NU is a second-tier school.
Bottom line: Northwestern is awesome. Deal with it.
“stating/INFERRING that NU is a second-tier school”
thanks for proving my point
Crib Chatter: Where fun went to die, at the frat house on the lake.
“Where fun went to die, at the frat house on the lake.”
Fraternities are an integral part in many peoples college experience. To tell you the truth, my only memories of college had to do with my fraternity. I know this is a subject that is off-topic, but hopefully I can offer a different perspective to those who chose (or were not picked) to participate.
“So- if they have like $400k in school debt and then you throw on a home mortgage (which he admitted they bought at the peak and it had now come down in price)- and in Hyde Park let’s just say that’s at least $500k or $600k- you’re looking at debt of about $1 million on $300k or $350k in income.
He said he literally only had a couple hundred every month right now (before any kind of tax increase) for discretionary spending. (They did have a cleaning lady, day care etc. because both of them are working full time.)”
Awww poor baby. He made a bunch of dumb financial decisions, chief among which was buying a 600k place in Hyde Park. Now he can only afford the cleaning lady once a week? LMAO.
Dumb people deserve to be financially ruined: this is America where success or prosperity is not guaranteed*
*Unless you’re a corporation with sufficient political sway to garner a bailout.
“Anyway- at some point- people have to figure out that even getting that MBA from Stanford or Harvard for $135k in loans (and two years lost in working) just isn’t worth it anymore.”
People typically bring some savings to the table for these schools. If I had to guess I’d say median debt burdens are around 60-70k. And HBS & Penn, particularly, will always be the top feeder schools into wall street. The ROI makes sense for that career path (provided it continues to exist), but little else. And no Stanford does not send nearly as many to wall st for whatever reasons–I don’t care if it is the most selective b-school, most of them DON’T go on to become dot-com millionaires.
“He made a bunch of dumb financial decisions, chief among which was buying a 600k place in Hyde Park.”
Wait a minute, Bob – I actually understand your point of view – but let me add another perspective. This guy and his wife worked their assess of in high school and college to get into law school and medical school. There, they probably also their assess off. The wife then had to go to 3 years of residency and 2-3 years of fellowship (with little sleep on most nights). If anyone deserves a 600k place, it should be these people. Where do you want them to live (esp. w/ kids) – in a studio apt? Again, Bob, I actually understand where you are coming from – but believe me, once you get married and have kids, you no longer can think only of yourself – you no longer are the most important person in the world!!
Working your ass off and gaining a bunch of degrees isn’t necessarily a foolproof formula for success either, clio.
Maybe if he rented a nice house in HP instead of buying, he would be in much better financial shape?
Sounds to me like from his rants he has a sense of entitlement. I’m glad reality gave him a swift kick in the arse.
Anybody who complains that 250k income ain’t cuttin’ it fvcked up somewhere along the road in life. And most of the time it has to do with ramping up one’s lifestyle before one has the assets/income to cover it. In fact, they ramp-up based on their expectation of future income or assets. Tough shit.
Clio,
Me and my wife worked our azzez off but guess what? we didn’t have a sense of entitlement to get a over priced home.
Who is to say they “deserve” a home, more than anyone else that’s hardworking?
Apparently they “felt” they deserved a home they couldn’t afford.
Funny thing amongst your people Clio, is that even with a household income of 400k, they have less net worth and 10x more debt than poor ol groove
Groove, your point is well taken but opens up a whole different subject (regarding the value we, as a society, place on different professions). I am somewhat biased but understand the rigors and stresses of being a professional (doctor/lawyer in this example) and DO believe that they deserve more than a typical 9-5 shift worker. I also feel that teachers, firefighters, and cops have different but significant stresses and deserve more. Anyway, I am babbling on, but the point I am trying to make is that, when you are in one of those professions, you DO develop that sense of entitlement. I understand this and don’t necessarily feel that it is inappropriate or unusual. You just have to be in that situation to understand…. count yourself amongst the lucky ones if you aren’t.
The U of C law prof is fine. I wouldn’t have taken on as much debt as they did in their position but their financial status is really not too bad. They have high incomes, tremendous job security. If she’s making as little as he suggested, she must have income growth ahead of her if she continues working. He has added earning ability now that he has tenure and can take on more outside work.
To bring it back to real estate, their most questionable decision was the house purchase. They could have saved a bunch of money by e.g. buying a modest South Loop house, including very significant savings on kids’ school. Only caveat is I dunno whether getting the Hyde Park house and being part of that social environment was helpful to his prospects at achool and his getting tenure (I’m assuming he got it based on title change).
As I said above, I don’t understand why he still has so much debt, but they really are fine.
Clio,
I 100% agree with you doctors deserve a higher compensation for all the knowledge they need to cram in there head. (IMO lawyers don’t)
We trust our pediatrician with our sons life and never question his insane bill as we feel his knowledge and experiance DESERVE the enormous compensation.
also wife worked as office manager for a few doc’s before she went into HR and explained to me the enormous malpractice insurance bill they need to cover in Illinois.
She also explained to me the “EXPECTED” lifestlye they like to maintain.
Now that’s were I say hold up there buddy, this lifestyle and image charade game they play has most in some high debt lifestyle. And as you say you know closely, either you or your ex wife are in the medical field, so you know this high debt lifestlye closley and most likely have a circle of friends living this way so u know what I am talking about.
the funny thing is one doc wifey worked for and we still have over for dinner parties, even though the doc is in a speciality (not family practice they make no money) the doc is in worse financial shape than some of homedeletes clients.
I don’t want to get into the police and teacher underpaid thing, its a touchy subject with me.
So again I say this U of C proffesor and his wife are compensated accordingly, in my eyes more so than they should. It their expectations and decisions that has them were they are at now.
I know I could have went into debit going to grad school and then on to my CPA. But I chose the debt free route. I also can easily get a higher paying job even in this market, but I chose a lower paying job that i am proud of and higher quality of home life. I can eaisly qualify for a home in a better hood and three times the size, but chose the house i have.
So again the UofC professor chose to live on kenwood @ 700k+ home because of, as you say, he deserves it.
Its in the choices man, the choices.
*sorry if this posts comes off rambiling and stopy starty, typing it while shopping at the mall. I think i started typing at 2pm, little groove and wifey groove have filled the stroller so many bags little groove can even sit in it anymore
clio are you nu grad as well? bc she only pops immediately after you infer nu is not tops.
Is this the same Houlihan that’s at 105 W. Madison (Madison/Clark) in the Loop? They have this odd contingent of boiler-room-type young male employees that are always outside smoking/chatting up a storm. These guys are making, or will someday be making %400K?
“That is not $1M income / salary. For every MD at Goldman, there are 3 schleps at Harris Williams, Piper, Houlihan thinking they are crushing it in the middle market at 400k a year.”
“As I said above, I don’t understand why he still has so much debt, but they really are fine”
I guess it depends on what your definition of “fine” is. If “fine” is living pay check to pay check (as he described) with only a few hundred dollars of discretionary income at the end of the month- then I guess they are “fine.” (He also didn’t, by the way, say if they were saving for their kids college at all. That might not be included in the monthly expenses.)
Literally- having to pay an extra $3000 a year in taxes (or $300 a month) means he will have to let the gardener and some other “help” go (which he argued in the blog post would hurt the economy) then he is living so close to the line every month that one wrong move will be catastrophic.
Sounds extremely stressful to me. I thought having big income was supposed to make life easier- not the other way around. They are no better off than someone making $75k or $100k in compensation. They are running on the treadmill all the same. Hence, his blog post about how they’re not really “rich.” See- without the debtload they certainly ARE rich.
As I said in my earlier post- it’s really all about the debt (with every American.) If you make $60k a year and you buy the $300k condo – you will be every bit as stressed out as someone in the upper bracket with 5 times the debt load.
We were sold the story that there is “good” debt- i.e. school loans and housing. But really- there is no such thing.
“Where do you want them to live (esp. w/ kids) – in a studio apt?”
Didn’t President Obama and his family live in an apartment in Hyde Park until his book proceeds gave them the money to buy their current place?
His wife had been an associate at a large law firm. Granted, his job paid almost nothing originally. But they too had big student loans and they didn’t buy a house until much later. Even after he became a U of C law professor.
“People typically bring some savings to the table for these schools. If I had to guess I’d say median debt burdens are around 60-70k. And HBS & Penn, particularly, will always be the top feeder schools into wall street.”
I have 30-something friends applying to graduate school right now. They are single so no spouse working to support them while they go. They don’t have a dime to their names. They’ll be taking out the entire amount in school loans. Of course the schools are all like, “not a problem.”
Not everyone who goes to Harvard or Penn for business school goes to Wall Street (especially now.) They get $90k a year starting jobs at P&G or J&J and hope to move up the ranks. The debt is still a big burden.
“I have 30-something friends applying to graduate school right now. They are single so no spouse working to support them while they go. They don’t have a dime to their names. They’ll be taking out the entire amount in school loans. Of course the schools are all like, “not a problem.””
I hope they are going for all the right reasons. Many people go just to go or because they see it as a way out. They should leverage their respective companies to subsidize a portion of the tuition if thats a concern. Even if the companies do not typically assist, if I personally was really serious about what a grad degree can do for me, I would be talking to the highest level person in the company about why they should pay for it and how much its going to benefit them by making me a more well rounded employee with executive preparions. If they still say no, pay/earn for the degree and quit when you get it!
Sabrina, you are right that it is the debt that determines your lifestyle and wealth. Someone making 1.3 million and living in a 3.5 million house, w/ several cars, vacation home, etc. DOES feel poorer and more stressed than someone making 100k who rents a modest place!!
Groove, you are also absolutely right about the choices we make in life. You obviously made the right choice for yourself and are happy about it. That really is great. I hope that others will realize this and start making those choices.
On this topic of expected lifestyles, I was wondering what are other people’s thoughts. Think about it honestly: Would you guys be more/less or equally respectful of/confident in your doctor/lawyer/college professor/homebuilder/financial advisor if they lived in a 3 million dollar house vs a 300k condo? I believe that the general public (and I have seen this first hand) gives increased respect to those w/ money – whether they deserve it or not. We use money as a measure of success in your field and I wish it wasn’t so – but I DO think it is and is the main driving force behind people buying expensive things!!
“doctor/lawyer/college professor/homebuilder/financial advisor”
Doctor/lawyer/college professor/financial advisor: no bearing on my opinion of them whatsoever. Because I really don’t visit these people at their home.
“homebuilder”
A homebuilder/developer better live in a 3MM house, only because that’s what they do–build homes. So I would expect them to reside in a pretty grandiose example of their own work.
like you would never trust a skinny chef, people don’t trust poor financial advisers…
Not true about the obamas not owning. They owned a condo in Hyde park. Likely cost them about 250,000 in the mid 1990’s. I know an identical unit sold for 450000 at the height of the boom, around 2006 or 2007.
btw: many college profs, especially those in the humanities or social sciences, are not well paid by any standards. An assistant prof in one of these fields will start at 40,000; associate profs make 65,000 and a full prof around 85,000. That is after eight years of grad school to earn a Phd. If they have family and a stay at home spouse, they certainly have to watch their pennies.
I suppose, upon further reflection, the obamas could have rented their condo. I don’t know for certain. But I do know exactly where they lived and it was in a condo development and was quite nice–five bedrooms, full living and dining room, natural wood work. Not entry level at all.
“I guess it depends on what your definition of “fine” is. If “fine” is living pay check to pay check (as he described) with only a few hundred dollars of discretionary income at the end of the month- then I guess they are “fine.” (He also didn’t, by the way, say if they were saving for their kids college at all. That might not be included in the monthly expenses.)”
I guess I think he’s exaggerating a bit for effect and to make what he thought was his point. I don’t think they’re at any real risk of having to sell their house and that there is enough discretionary stuff they can cut back on. For example, he did say they putting some money toward retirement savings, but it wasn’t clear how much. As you note, he doesn’t say anything about saving for college. What about clothing, vacations? I suspect they are not spending the bare minimum on those. They can certainly cut back on lawncare, car expenses, housecleaners, perhaps a cheaper private school (how discounted is lab for profs?), etc.
I put the odds of their having to sell their house as essentially negligible. I also think if he really needed to, it wouldn’t be that hard to pick up a consulting assignment for $50K (at least before he become so famous/infamous).
“We were sold the story that there is “good” debt- i.e. school loans and housing. But really- there is no such thing.”
As I said earlier, the house was a bad decision but the school loans are what put them in a position to have very high and very secure incomes. I do find it odd he has so much debt still, and her too as well I suppose. It also sounds like they made some poor stock market decisions as well.
Just as 100k a year jobs are “not unusual or uncommonthe same can be said about these Stanley Johnson type-borrowers making over 100k a year and living the dream. Keep this guy in mind the next time you say that those who clearly live beyond their means “can afford oit.” This borrower profile is more cthan anyone here cares to admit. But he can afford it, right?
I wonder what their approach to paying down the debt is – it doesn’t seem like they have been trying to pay it down that much more than the minimum. As long as their all-in weighted average rate on the student debt is low, they can be ok. Depending on their situation, they could refinance their home at a lower rate to generate significant savings.
That’s a great question Dave M, what is their approach to paying down debt?
Do these people really intend on paying nothing more than the minimum for the next 30 years? They’ll probably be in their mid-60’s before the mortgages and student loans are paid off.
Do they think they’ll get significant raises and make more money and use that to pay down debt? Or do they plan on spending that extra income too.
Just exactly how will they pay off this debt?
I don’t think they ever gave it much consideration. They probably thought that 1) housing prices always go up and 2) they’ll make tons of money in the future as compared to the money they’re making today. Both of which are faulty assumptions, IMHO.
But if they can afford the minimum payments, it’s OK, right? They can figure out how to actually repay the debt mañana, right? Interest rates are low so that million dollar house is oh so much more affordable? Hahahaahaha
it’s borrowers like this that have driven up the cost of the ‘green zone’ housing. What everyone else pays for their house depends in large part on what this buffoon can pay as a minimum payment. That’s why the ‘green zone’ has held up so well.
“#Dave M on September 27th, 2010 at 6:25 am
I wonder what their approach to paying down the debt is – it doesn’t seem like they have been trying to pay it down that much more than the minimum. As long as their all-in weighted average rate on the student debt is low, they can be ok. Depending on their situation, they could refinance their home at a lower rate to generate significant savings.”
“
“it’s borrowers like this that have driven up the cost of the ‘green zone’ housing. What everyone else pays for their house depends in large part on what this buffoon can pay as a minimum payment. That’s why the ‘green zone’ has held up so well. ”
Sabrina’s example of her friends in their early 30’s who have essentially saved _nothing_ for their grad school plans opened my eyes up that there is a large portion of America that basically lives for the moment and is incapable of financial planning for themselves.
Seriously if you’re in your early 30’s and plan to go back to b-school and you have nothing saved up that says a lot about your past decisions or financial discipline. And unfortunately as HD pointed out these people set the price of these goods at the margins using a lot of credit/leverage.
Can you imagine how much tuition would drop even if it required only a 30% portion in cash upfront?
At the end of the day, the country will be divided amongst those who are in the “how much per month” mentality, and those who are more prudent and conservative financially. At the end of the day, it looks like the “how much a month” people are in a good spot, because they keep getting bailed out by everyone else. Why bail anyone out? Markets should be allowed to run their course.
The zero savings for someone in their early 30’s is pathetic, and the whole grad school thing will only make it worse for them…
“Can you imagine how much tuition would drop even if it required only a 30% portion in cash upfront?”
the evil teachers unions wouldnt like that bob… be careful what you say, they’ll come after you!
“The zero savings for someone in their early 30’s is pathetic.”
They don’t even have any retirement savings?
wtf you should have at least $40k saved for retirement by the time you’re 30, unless you’re getting your doctorate
Not only is it pathetic but it’s extremely common.
Budgets are not rocket science. It’s a little math.
Credit cards, car note, mortgage student loans, utilities, and some pocket money and it’s all gone.
“The zero savings for someone in their early 30’s is pathetic, and the whole grad school thing will only make it worse for them…”
“anon means, I am sure, that there is no 17 year period during your lifetime with an effective annual rate over the 17 year period of 2.45 percent or less.”
Of course that’s what I mean.
The problem is, the people who save money every month are bailing out those who save $0 and went all in on housing and other markets.
And who cares about paying your student loans back when with Obama’s education bill earlier this year the debt is forgiven after 20-years of on-time payments?
It encourages people to carry more debt. Debt that is forgiven or debt that carries a below market interest rate is indeed “good debt” in the sense that it encourages the borrower to not pay it off when able.
“wtf you should have at least $40k saved for retirement by the time you’re 30, unless you’re getting your doctorate”
Sonies – I hope you are saying this with sarcasm. I personally would rather have 40k in the stock market at 30yrs old than in my retirement fund…
“This guy and his wife worked their assess of in high school and college to get into law school and medical school. There, they probably also their assess off. The wife then had to go to 3 years of residency and 2-3 years of fellowship (with little sleep on most nights). If anyone deserves a 600k place, it should be these people.”
1. There was implication of them having ~$1mm into the house, b/t PP and improvements.
2. Dude worked for McK for half a decade (thus I would JMM here defending him (ha!)).
3. I don’t believe the under $100k pediatric oncologist. I also don’t believe that UC is paying law professors over $300k (which is the necessary conclusion if the wife’s salary is to be believed).
4. Perhaps they have meaningful investment income–in which case, I feel much less sympathy for them (heading quickly into “active disdain”).
“I personally would rather have 40k in the stock market at 30yrs old than in my retirement fund…”
40k in a Roth IRA makes infinitely more sense than 40k in a brokerage account which is going to be taxed all along the way.
At leas with a Roth you can focus on your investments and not be distracted by the tax consequences of them either.
“At leas with a Roth you can focus on your investments and not be distracted by the tax consequences of them either.”
Yeah, Bob – just wait. In 20 years, they will change the rules and start taxing Roth IRAs.
Bob – Roth IRA’s are great if you do want to be close to your money and risk gettin nailed on taxes in 20 years. With the market the way it is, returns of 3%+/day are not unsual!
“Sonies – I hope you are saying this with sarcasm. I personally would rather have 40k in the stock market at 30yrs old than in my retirement fund…”
its in the stock market, in my roth IRA…
“Yeah, Bob – just wait. In 20 years, they will change the rules and start taxing Roth IRAs.”
No idea and none of us can predict the future. At most they could is tax the gains though, making them quasi-401ks. I expect significant pushback from this, especially if Roth 401ks start gaining in popularity. (Employer offered Roth IRAs with a contribution limit mirroring 401ks I’ve been told).
where I work they offer a roth 401k
since I don’t make a ton and tax rates are really low i’ve been contributing to that over the last few years and getting a whopping 1k match every year is pretty sweet I guess
“where I work they offer a roth 401k”
Roth 401ks are some serious financial muscle if you can swing the contributions. Max them out and max out your regular Roth IRA and you’re basically guaranteed to be very well off at 60.
I’ve never been at an employer that offered them yet which kinda sucks.
“Max them out and max out your regular Roth IRA and you’re basically guaranteed to be very well off at 60.”
If you make it to 60 that is – living below your means the entire way – sure, by then it’s great! Hope inflation doesn’t drink to much caffene and become hyperrrr!
A-Fed–the hope is equities will be a good hedge for inflation (at least over any 30-year horizon).
Bob- I’m aware of the “hope.” It’s a good idea to put some amount into both a 401k and Roth IRA – no doubt there. But, I would heavily weight personal investments through a brokerage vs. hold and save through 401/Roth.
I mean ATA is up 60% today. Throw some savings at that and BOOM!..you wont see a return like that in your 401/Roth for 10 years if you are lucky (sooner if you jump on the bond train).
The stock market is looking bubbly to me. But Wall Street cheerleaders Marketwatch has a story titled “Have a half decade? ‘Buy and Hold’ is coming back”. With flash crashes becoming more of a reality (PGN today) the market looks to be owned by the algos. I just can’t jump on that train, but Bernanke’s POMO operations may eventually draw in the sheeple. The sharks have all the advantages.
haha that reminded me of this…
That Guy: There are two kinds of people: sheep and sharks. Anyone who is a sheep is fired. Who is a sheep?
Dr. Zoidberg: Errr, excuse me… which is the one people like to hug?
That Guy: Gutsy question. You’re a shark. Sharks are winners, and they don’t look back because they have no necks. Necks are for sheep.
“Bob- I’m aware of the “hope.” It’s a good idea to put some amount into both a 401k and Roth IRA – no doubt there”
Tax diversification is stupid in this context. Pick an outlook and stick with it. I’d prefer the Roth 401k over a blend of a Roth IRA & conventional 401k as it’s far more likely marginal tax rates will move vs. congress starting to tax Roth IRAs altogether.
Changing marginal tax rates isn’t nearly as controversial as starting to tax Roth IRAs as has been suggested here.
“Tax diversification is stupid in this context. Pick an outlook and stick with it.”
Spoken like a true accountant. It’s the total picture Bob, taking into account all methods of investment. Go ahead with you Roth 401k, if you believe that will benefit you the most. In order to be fully diverse (safe, if you consider diversification = safe), then one must invest in all options.
My eariler point was that if you are 30yrs and have 40k in your retirement fund (what ever that may be), you may be missing out on the equity investments via the stock market which may yield greater results, pre-tax or not, while having the funds available should you run into a unforeseen predictament.
a-fed
wtf are you talking about… you do realize you can invest in equities in 401k’s and roth IRA’s right… I get the liquidity arguement, but you shouldn’t be allocating 100% of your savings into a retirement account either, you should also have a liquid account on the side
also you can withdraw contributions (no gains) from a roth IRA penalty free
“Spoken like a true accountant. ”
Has little to do with accounting/accountants and everything to do with effective financial planning.
And the justification for my 100% allocation to a Roth 401k over a conventional 401k was spelled out, but there is another great reason I forgot: when using a Roth 401k it allows you to effectively contribute after tax dollars, so 15.5k of after tax dollars is stashing away ~21k of pre-tax dollars away, an amount not possible with conventional 401ks.
Its such a great retirement vehicle I am really p_ssed more employers aren’t onboard and/or congress doesn’t just allow people to contribute this much to their Roth yearly.
Sonies: I’ve yet to work at a firm that offered a 401k that allowed me to directly trade equities (beyond the company symbol). I’ve only been offered various funds. You are blessed in having that availability.
“You are blessed in having that availability.”
Yeah but you can always roll it into a Rollover IRA then have that flexibility after you change employers. With a Roth 401k the rollover would just goto your regular Roth IRA account.
Bob: thanks! I’m definitely on your side on the Roth 401k product; I’d love to have that.
Hey, everyone, here’s to your financial success and anyway you go about it! I’m just speaking from my own personal experience and advice from friends on Wall St on how to turn 4 figures into 6…agree or disagree, no matter to me!
A-Fed, there is no set formula that works for everyone. Your friends on Wall Street certainly know this.
By the way, your statement “In order to be fully diverse (safe, if you consider diversification = safe), then one must invest in all options” is not correct.
There are diminishing “diversification gains” the more investments you make. Each one has its own overhead costs and don’t forget that you must be doing research to make sure that each is properly invested for your time horizon and expectations. That takes up a lot of time if you have 5 or 6 different investment accounts to manage – each with a different group of investment options.
“A-Fed, there is no set formula that works for everyone. Your friends on Wall Street certainly know this.”
Funny thing is, *my* friends on Wall Street (bulge bracket folks) think that stock picking is a mugs game, as an individual investor, with a job that isn’t stock picking.
http://finance.fortune.cnn.com/2010/09/27/progress-energy-joins-flash-crash-crowd/?source=yahoo_quote
Trading in shares of Progress (PGN), a Raleigh, N.C., utility operator, were halted for five minutes Monday afternoon after the stock briefly plunged 90% for no apparent reason.
The stock dropped from around $44.50 to $4.57 just before 1 p.m. EDT before resuming trading above $44 a few minutes later. The New York Stock Exchange, where Progress shares are listed, said the troublesome trade took place on the Nasdaq.
* * * * ** * * ** * *
Whatever their cause, the frequent market outages only feed the sense that the entire market is either a casino rigged by the money never sleeps crowd or a house of cards on the verge of collapse. Neither view, it seems safe to say, is apt to restore investors’ dwindling confidence.
Didn’t President Obama and his family live in an apartment in Hyde Park until his book proceeds gave them the money to buy their current place
Taxes are low
Those are two of the oddest statements on Crib Chatter in months. Didn’t Obama had a special land deal with Rezko for his side yard? So his first home purchase was for $1.65 million. Wow that is an unusual “starter home” price.
Taxes are not low! 30% federal + state + property + sales + license/fees + tolls = a very high percentage of total income. If you think that they are low you are living in a bubble.
They are too low we should all support higher taxes!
“Funny thing is, *my* friends on Wall Street (bulge bracket folks) think that stock picking is a mugs game,”
Working for a bulge bracket i-bank is the quintessential mugs game. Its the default career path for the least creative and most greedy folks in b-school.
I fully agree that there is no perfect formula for everyone – I did not intend for my statements to come off that way. YET, there are common underying principals that have histoically yielded sucessful results.
Regarding the 401k/Roth, your money is still accessible IN-directly and you dont know its actual value (on the spot). My point again was there are other opportunities to make a lot of money opposed to having a generous lump sum in a retirement account at a young age. You are still young and the high risk may be worth the high reward. While doing so, of course go for long term and invest in 401k/Roth covering your “gamble” of investments and it’s a$$ incase you loose. But with the market the way it is…
HD – If you would have shorted that stock on the way down, or called it at the bottom, thats ~10x ROI! Zing!
“Working for a bulge bracket i-bank is the quintessential mugs game. Its the default career path for the least creative and most greedy folks in b-school.”
Eh, one of em’s an MD at GS (overseas), so it does work okay for some.
ps: definition of “mug’s game”: a foolish, useless, or ill-advised venture. Which doesn’t really fit (quintessentially, at least) working for BB banks over the last 30 years.
mug #1:
http://www.bloomberg.com/news/2010-09-27/airtran-trader-wins-14-fold-profit-on-calls-bought-before-deal.html
Well if they were good enough to get in at GS and work their way up to the MD level they’re undoubtedly rich. However many of those people, being the creme de la creme that they are, likely could’ve made more money or been hugely successful being a bigger fish in a smaller pond/even working in another industry.
Another round of Wall Street layoffs is coming which typically gut the middle ranks. Must suck being the institutional salesperson making 500k then shown the door–those jobs aren’t so easy to get and most of them were likely already living that lifestyle.
Not a mug a-fed he likely had inside info. However he’ll just clam up if the regulators try to question him and absent any more proof they can’t do much else.
Happens all the time before mergers and people very rarely get caught.
No way to keep a secret with dozens of bankers and lawyers on deal teams and that much money at stake.
well he’ll be a mug if he gets caught because it would have been “a foolish, useless, or ill-advised venture” thus landing him in jail….or who knows, karma is a bitch (ahem, Bernie).
If you’ve seen the movie Boiler Room where they refer to their compliance officer as a monkey, I’ve been told its not far off from reality.
The only ways to get caught are bragging about it or if your source gets popped. Even with astronomical returns utilizing options (for maximum leverage) that’s not enough of a proof burden.
Its pretty sad but happens with a lot of mergers. Anon(tfo) is right in that the game is rigged in the sense that people working on wall st trading desks have better access to the rumor mill and better ways to vet said rumors for legitimacy.
“Happens all the time before mergers and people very rarely get caught.”
The most frequently caught are the lawyers, b/c they’re soooo stupid about making unusual (for them) trades. And then they wind up disbarred and convicted of a felony over $100k.
Oh I fully support that we’re all out all the loop to a huge disadvantage. But any investor with the slightest clue of whats going on in current affairs or perform some basic research can acheive decent returns in a relatively short period of time, with mid-level risk involved.
I agree with everything you said a-fed except perhaps “relatively short period of time”. All depends how you define this. It can take a few years for the market to come around to your opinion of an appropriate valuation of a firm.
If you buy based on the right fundamentals you can do well though. My latest pick is AOI.
“Didn’t President Obama and his family live in an apartment in Hyde Park until his book proceeds gave them the money to buy their current place
Taxes are low
Those are two of the oddest statements on Crib Chatter in months. Didn’t Obama had a special land deal with Rezko for his side yard? So his first home purchase was for $1.65 million. Wow that is an unusual “starter home” price.”
I had to look this up since we’ve been chattering about it the last few days.
Blockshopper Chicago had good information- including a page devoted to the President’s real estate purchases.
Whomever said they thought he bought a condo first was correct. The first family bought a Hyde Park condo in 1993 for $277,5000 and sold it in 2005 for $415,000.
That is when Obama had won the Senate seat, the first lady had a better job at the hospital and the first book became a best seller. The house was bought for $1.65 million. He bought 1/6th of the lot next door to expand his property for an extra $100k from Rezko (the original owners owned both the house AND the lot. The Obamas couldn’t afford both of them.)
The correlations are killing the markets for stock pickers. Macro forces make it look like betting on red or black. Its why guys like Pellegrini and Druckenmiller are bailing.
“If you buy based on the right fundamentals you can do well though.”
When he purchased 1/6 of the adjoining lot did that make the lot unbuildable? Or did that subdivision just adjust down the size of home that could be built on the new smaller lot?
“When he purchased 1/6 of the adjoining lot did that make the lot unbuildable? Or did that subdivision just adjust down the size of home that could be built on the new smaller lot?”
It doesn’t matter – he is obama: he can do whatever he wants. Rules don’t apply to him: he can bulldoze and ram his socialist ideas/ideals down our throats, manipulate the common man, and change all the rules of the game in the middle of play. OK, it’s all out – i’m done.
if he could do whatever he wanted he would have walked away with the whole lot, not 1/6 of it.
LOL, oh, the paranoia…wealthier people in Lake View & Lincoln Park have been doing this since the 90s.
Yes subdividing a lot has been done for years but in LP or LV taking 1/6th of most lots would clearly make it unbuildable. That means that the property is now worth ZERO to the person who owns the other 5/6th’s of the lot. Well, that is not completely true as the 5/6th’s still abuts their home and makes it more attractive. It is even possible that it up-zones the buildable footprint on that home.
I seriously think the transaction with Rezko was shady to fraudulent at best. And I am not a conspiritor or a hater toward politicians.
It still seems like this issue was never completely brought to full light. There was more speculation on where this dude was born than what slimy deals he was tied to with Rezko.
“I seriously think the transaction with Rezko was shady to fraudulent at best. And I am not a conspiritor or a hater toward politicians. ”
1. Lot owned by Rezko is still buildable. It’s a 50′ wide lot, still.
2. I fully believe that Rezko was being shady.
3. Obama has admitted that it was a “naive” thing to participate in the purchase of the 10′ strip.
4. Obamas had made an offer to Seller for just the house. Seller’s said “we don’t want to be left with the lot”. Rezko being Rezko knew about the situation and–independently, thru his wife–offered to buy the vacant lot. Seller’s contacted Obamas and said “we’ll sell you the house, we have a buyer for the lot”. Rezko being Rezko likely said nothing to Obama until after the deal was hard (that’s how “favors” often work–don’t let the donee know until it’s too late for them to back out). Was Obama being willfully ignorant? Maybe. Was he actively participating in a shady deal? No more so than GWB with “his” oil company, and less so than most Chicago-area politicians.
Obama said he told Rezko about the property. I don’t think it was the most unethical thing ever done, but I do find it shady that Obama told Rezko about it, given his claim that he had pretty infrequent contact with Rezko. It’s not like they chat every day on CC. Maybe it just happened that he had occasion to be in contact with Rezko, but seems a bit coincidental.
Also, anon, what do you think about the argument that the pro rata price is a fair price for that strip> (I suppose you could make a case that the Obama fence was actually of some benefit to the adjoining lot.)
http://www.suntimes.com/news/politics/124171,CST-NWS-obama05.article
Yes the Rezko(s) may have purchased the lot without O’B knowing about it as suggested. Still O’Bama should have NEVER bought that sliver of land at what is considered well below market value to extend their property. If the suggestion is true that they did not know about Rezko being the buyer of that lot when they made the purchase then they truly bought the home WITHOUT ever believing that they would get the extra piece of land. In other words they liked that home WITHOUT that extra property line from that lot.
When Rezko suddenly popped up as the buyer of that empty lot as your example states and O’B immediately arranged to purchase an additional strip from his buddy he made a bad decision.
How in the world was it too late to turn back? If O’B had ethics he would have at least paid market value for the strip. If Rezko implied that the only reason he purchased the empty lot was so that O’B could buy the home O’B could have easily told him to punt. Had O’B truly not used any influence (directly or indirectly) with Rezko to buy that empty lot so that he could afford the home then he owed Rezko nothing. That just made Rezko a speculator on a peice of Hyde Park R.E. if I understand correctly R.E. speculation was a practice that Rezko was already doing in his normal business operations. Did he not have an option on some Rosemont land adjacent to a proposed casino?
Yes you can compare him to other politicians and come up with similar issues. but the justification that “they are all doing it” does not make it legal or ethical.
“Also, anon, what do you think about the argument that the pro rata price is a fair price for that strip> (I suppose you could make a case that the Obama fence was actually of some benefit to the adjoining lot.)”
Obama has said that whole transaction was a mistake. And it’s easy to say “he’s a smart guy, he should have seen it was a mistake when he was agreeing to do it”, but as we see here regularly, even smart people get blinded by house lust. It’s the kind of stupid thing I could see doing myself, so I’m inclined to believe that it was a result of not thinking it through–b/c if you require him to be smart enough to see it was a mistake in advance, he also has to be smart enough to know that there was *no way* to hide it–can’t have it both ways.
But, yeah, $100k for the 10′ strip is both too little *and* too much, in a weird way.
And, I have absolutely *no* doubt that Rezko got involved for slimy reasons, as was his track record–do favors for rising politicians, with an expectation of future payoff, at least in terms of access. He played the long con with lots of people, and this *clearly* included Obama. But *that* is something that virtually every national politician (and *every* serious prez-candidate) is involved in.
“If O’B had ethics he would have at least paid market value for the strip.”
The appraisal Rezko got, and Obama paid for 1/2 of, said the strip was worth *less* that what Obama paid. Sure, the appraisal was probably wrong, and possibly intentionally so, but how does one determine the “market value” of a 10′ strip of land that’s useful only to the 2 adjacent land owners?
I’m on record saying I’d pay $100k for 10′ next to my house, but next to my house, 10′ would make the remaining adjacent lot unbuildable, so I would need a fairy godfather or a very accommodating neighbor two houses away.
“I’m inclined to believe that it was a result of not thinking it through”
I’d believe that except he initiated contact with Rezko re the property. Why would he do that except to hope for a bit of a favor? Not sure anyone ever pressed Obama on this. If Obama had a killer reason for telling Rezko, I would think he would have stated it (Rezko knowing the previous developer doesn’t seem a compelling reason to me, and it’s also not clear if Obama knew that before talking to Rezko.)
“b/c if you require him to be smart enough to see it was a mistake in advance, he also has to be smart enough to know that there was *no way* to hide it–can’t have it both ways.”
That’s a fair point. But maybe he envisioned a world with rising real estate values where Rezko builds a house, makes a tidy profit, and then you could always point to the deal being a good one for Rezko, making it harder to characterize as a favor.
“If Obama had a killer reason for telling Rezko, I would think he would have stated it”
“Burton said Obama, 46, toured the property with Rezko for 15 to 30 minutes at some point before the purchase. Burton said Obama wanted Rezko’s opinion of the property because Rezko was a real-estate developer in the area. Burton said he didn’t know when the pre-sale tour occurred. ”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_9sOMpy91Js
The whole thing was stupid on Obama’s side, but people like Rezko don’t get close to bigfish w/o (1) knowing what the bigfish are doing and inserting themselves into it and (2) being very persistent and persuasive in inserting themselves. They’re the best used car salesmen around, and the bigfish are both actually human and suckers for the attention, when done right (which is, of course, the skill that makes a Rezko successful at getting close).
I’m not saying that it wasn’t an ethical lapse by Obama (it was–he should have distanced himself from Rezko *immediately* after he heard rumors of investigations), but the totality makes him look like an ethics hypocrite (perhaps even significantly) and a dimbulb on recognizing that someone is trying to get him to “owe them” rather than a participant in illegality.
If he did indeed tour that home with Rezko prior to the purchase and later explained that they were not going to sell the home without a contract on the empty lot then as a impartial juror I am swayed to believe that there was premeditation on the O’B side.
Obviously it does not matter as O’B got a pass on this lot issue. I’d bet that Rezko could tell some really interesting stories if he ever decides to write a book. Wonder if they gave him a pen and paper in jail. There are a few politicians sweating that one….
“There are a few politicians sweating that one”
doode Every chicago politician is sweating that one,
didnt my favorite buddy Luis Guiterrez buy a lakeview new construction home from rezko for like 200k less than what “normal” people were buying it for. and didnt he fund Quinn some big dollars too, we can go on and on and on of which politician “OWES” him return favors.
“we can go on and on and on of which politician “OWES” [rezko] return favors.”
No need to go on and on. Just three word: all of them. That’s what Rezko did.
The logical conclusion to your Obama bashing is Palin 2012!
“I’m not saying that it wasn’t an ethical lapse by Obama (it was–he should have distanced himself from Rezko *immediately* after he heard rumors of investigations), but the totality makes him look like an ethics hypocrite (perhaps even significantly) and a dimbulb on recognizing that someone is trying to get him to “owe them” rather than a participant in illegality.”
“No need to go on and on. Just three word: all of them. That’s what Rezko did”
yeah but he is the one “doin time”, which i think its bogus (rezko is a awesome cat), and every story i hear/heard has me wondering why havent moved out of illinois.
and seriously someone explain to me how stroger is still allowed n his office chair?
“someone explain to me how stroger is still allowed n his office chair?”
Cut a deal with Los Federales and he’s rolling once his term ends?
“Cut a deal with Los Federales and he’s rolling once his term ends?”
is this speculation or reported speculation? if you have a link would love a good read at my 11am meeting.
i wounder how much he really has to snitch on and if its all small fish, most the crooked shyt he did himself without “help”
“is this speculation or reported speculation?”
If you and I repeat it enough, it might turn into reported speculation; for now it’s just me spitballing.
“it might turn into reported speculation; for now it’s just me spitballing.”
its a good guess though, to me he is just a small game with small game dirt, but you never know, right?
but anytime chicago politics come up i always ask why stroger is still allowed in the building. and your the only one who came up with a conceivable answer. i know i have racked my brain a few times but i cant come up with anything.
i thinks about time i get my resume updated and look into the iowa housing market.