We are doing better than we deserve

My wife and I are 45 years old. Our equity, investment and savings net worth is currently about $2.1 Million. The home we live in mortgage free is currently worth about $1.1 Million. We work in the entertainment industry and our annual income plus investment income is about $230,000. Our situation is very unique because we gained wealth by predicting the downfall of the real estate market. Here’s how we got to this point in our financial situation. Before my wife and I met: My wife bought a Burbank, Ca. Condo ($130k) in 1994 (right after earthquake) I bought a La Crescenta, Ca. Home ($229K) in 1996 (total fixer upper) (During this time I rented rooms to pay for improvements. I did my own work with my Dad and gained “Sweat Equity”) We married in 2001: While renting out her condo we were living on double income with no kids. In 2004, I believed the real estate market was too high and was going to crash. Against everyone’s advice, we sold the condo for $300K and used the left over proceeds to pay off the mortgage on the La Crescenta home. My wife took advantage of the tax free gain of up to $250k and it was beautiful. When my son was born in Oct. 2004 we were living mortgage free. 🙂 People were saying: “Paying off your home is the worst thing you can do. It’s the cheapest money you can borrow. You’ll never get rich that way.” Oh but the peace of mind was immeasurable!!! I lived in the La Crescenta area my whole life, and decided I wanted to try living someplace new, where there were more young families. We wanted to move to a new neighborhood eventually, but I kept waiting for prices to drop. For no sane reason they kept climbing. I became an avid student of the real estate and financial markets. I started researching many different L.A. neighborhoods. I looked at all types of statistics: School ratings, Crime rates, Megan’s Law database, the number of Christian churches, sports programs for kids, air quality, weather, number of parks, community layout. Commute was also an important issue, but I soon realized I would have to sacrifice commute time to have all of the other things on the list. We finally settled on Westlake Village, Ca. It was perfect in every category except commute. Although my commute is 10 minutes less than my old commute to La Crescenta, my wife’s commute is longer. The market was way too high. We sold the La Crescenta home in May of 2007 for $810,000. (My wife’s $250K tax free cap gains reset after the 2 year waiting period and we used it again along with mine too!) The invisible gain: We decided to wait to buy our next home until after the prices dropped. We rented a condo in Westlake Village for $2100 and put our stuff in storage. In the beginning, the interest on the money was paying our rent. Most of our income went to savings. We watched as the prices dropped over one and a half years. The homes we could afford to pay cash for became nicer and nicer. It was exciting and fun to watch the market fall because it meant we could afford a nicer home as time went by. It was a hard time to be happy because so many people were in distress while our situation got better and better. We prayed for friends who were in distress. It was bitter-sweet. Right after Bush announced the bailouts several homes in the area came down into our range. In November 2008 we bought our completely upgraded home on a cul-de-sac in an awesome neighborhood. It had originally listed at $1.499K but the previous owner rode the market down for over a year and finally sold it to us for $900K. Because we were worried about bank failures, we had half the money in a treasury and half in the banks. We had to wait for the treasury account to mature, so we put 50% down and had a mortgage for less than 2 months. When the treasury matured we paid off the home and have been MORTGAGE FREE since January of 2009. We saved our money and bought another home in Westlake Village for only $505K in 2011. That was an unheard of price even then. Because of our financial situation, we were able to jump on amazingly low price only a few hours after it hit the market. The next day there were already several backup offers behind ours. The house was clearly underpriced. We depleated our savings and dumped about $35k in desperatley need improvements. Since July of 2011 we have been renting it out for $3100 with a payment of $1905. The current value on that home is about $750K and we owe about $390K. Recently we did something we never have done before. I bought a pre-owned 2013 BMW with 10K miles and financed it at 1.9%. The car payment is $500. We have enough in the bank (40K) to pay for it, but I didn’t want to wipe out the reserve savings. Everything else is in real estate, retirement funds, college and mutual funds. After years of driving old cars I wanted to treat myself to a BMW, so I did the unthinkable and financed it. It’s hanging over me like a ton of bricks. My wife has a 2007 Mercedes E350 that’s paid for with only 70,000 miles so she’s happy with her car it should last several more years. We like to take our cars to 200,000 miles when we can. Does it seem ridiculous to have a car payment? I just like knowing the liquid cash is there for emergencies. It’s the only outstanding debt we have. We have always paid off the credit card in full every month. (With year end cash back, Visa actually PAYS US to use their card!) Still having this car payment is just so much against everything I believe. I’ll probably pay it off before the year is out. We give to our church weekly and sponsor a child in Mexico. I tithe in daily life as much as possible. Even more so I believe prayer is the strongest thing any of us can do to help others. I listen to your show all the time. You think exactly like I do. You are the best! I absolutely love it when people ask “How are you?” and you say “Better than I deserve.” I don’t have a college degree and my wife grew up very poor, yet for some reason God has allowed us to be in this unique financial position. God has blessed our lives. I hope my wife and I can find new ways to help others with our blessings, but with specific purpose and forethought. In a world gone mad with debt, it’s nice to there is a guy on the radio who thinks like I do. My family and I are doing better than we deserve. May God continue to bless your words so others can learn to live debt free.

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