Pre crisis to now: how the crisis has impacted my life

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Subprime JD's picture
Subprime JD
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Joined: Feb 17 2009
Posts: 562
Pre crisis to now: how the crisis has impacted my life

I'm 28 years as of this post. Growing up I had the luxury of having a good business man as a father who made good money. In 1991 he was making nearly 40k per month from one restaurant alone. Fast forward to 2011, and three restaurants will be lucky to earn 15k a pop. Growing up money worries were NEVER EVER an issue. We always wore nice clothes, always paid the bills on the time, and the savings grew. i remember being young and seeing stacks of 20's every week when we did the cash flow. As a young boy I would help count the money. I knew we were wealthy, even from that young age. Back then my dad had his immigrant mentality. Save save save. In 1987 we lived in a 3 bedroom 2 bath home that my parents purchased for 149k. By 1991 they sold it for 300k (the 90's bubble lol) and they moved on to a 3800 sq ft home for 700k. This house is on a hill, has an amazing view of southern california, with green hills in the winter and spring. Absolutely beautiful place.

In 2004 the speculative frenzy caught my father. My brother had graduated from USC business school and had learned all about MBS and real estate finance. Together they went on a rampage and purchased the following:

two homes for 400k and 380k (mom and brother each purchased one)

A ten acre property for 750k in the palm springs area (vacant land off the freeway) which was financed via a 2nd mortgage taken out on the house for 350k including savings

A condo in downtown (brother and his friend for 400k/ split 200k each)

Built a restaurant in Riverside county for  $2.5 million. Construction hit delays and took from 2005-2007 to build and open. The $2.5 million was the remainder of my dads savings. For the first time since he gained his wealth, the safe stood empty.

Fast forward to April 2011

By brother is in default on his speculative housing buy

The ten acre property recently recieved an offer of 250k lol

The restaurant in Riverside county has yet to turn a profit since opening in 2007. Its been exactly 4 yrs since it opened. At one point it was losing 6-7k per month. Now it only loses 2-3k per month

The other 3 restaurants are doing well. No debt on the properties but margins are down and continue to fall as food costs rise. Dad owns the properties so we pay no rents (thank god)

Property tax liability is over 100k per year as dad owns many properties (most are vacant that he bought for good prices in the 90's. The primary home mortgage is a shocking $1.56 million. The house mortgage is fixed for 18 more months, then switches over to ARM payment. Depending on rates, the payment will either drop or grow even bigger than it is now. I have begun preparing my parents for the inevitable fact that they will lose their home after the rate adjusts. Actually, we are one lawsuit away from being late on payments. Although we still earn a good amount from the business, property taxes and mortgage costs alone eat up over 260k per year. We also owe two good family friends over 500k. Amazing how my dad went from having over 2 million liquid to owing 2 million and not having a dime in savings. Every week the money is GONE. We used to eat at Flemings steakhouse once a month. We havent been to Flemings since 2007.

At one point in 2007, my dad recieved a insane bubblicious offer of $2 million for a property that he purchased for 225k. I told him to sell sell sell, take profits and GTFO. Just one property, keep the rest, just take some profits. Of course dad and bro just laughed at me saying how we would pay 600k in capital gains and how you "never sell assets". As wall street taught us, buy and hold is a suckers game. Even though I didnt know much about markets back then, common sense told me that selling for 10 times what you paid is a red light warning to get out.

Now my parents sit there in shock. Bewildered at how quickly their "wealth" has vanished. 4 of our commercial properties are for sell, with no bids. Occasionally we get someone call who offers a low ball amount which infuriates my dad. I tell him "forget the values of 2002-2007 they are not coming back." They still have this hope that the real estate market will rebound, that they will be able to save the home. Not a fat chance. At one point my dad owed 250k on his primary home. Now its 1.5 million and the bank will soon be sending letters.

I do not intend this post to be a sob story. My dad allowed my young and inexperienced brother to influence him in the use of leverage. He played a dangerous game with leverage and lost that game. Its amazing how the fiat credit based bubble can get prudent businessmen to take foolish risks. While my brother got his tuition paid in cash I'm paying loans as by the time I graduated law school the losses were piling in and there was no more money to pay for my tuition. I personally went from not having a worry in the world to owing 70k in student loans that are not dischargeable in bankruptcy. I never carried a credit card balance and always lived within my means. I plan to get married soon.

The house is beginning to decay. The backyard wood is rotting and when it rains wood pieces fall off. The pool is old and cracked. The garage doors dont work and we have to manually open a door to get in. Going to greece was a annual event. I went in 2009 and wont be going for a long time. The rest of them still go as they load up the credit cards. Im too fearful of the future and choose to work work work and save save save. Believe it or not, ive been working for 5 months and have managed to save more than anyone else in the family. What a joke right? Me and my woman combined earn 5500 per month net. We save close to $4000 after bills. If I hit bonus I save even more. If she wants a walet I tell her NO you dont need it. No trips, no clubs, just the occasional dinner out.

This is how the crisis has impacted me and my family.

Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Lessons...

A lot of good lessons here. Thanks for sharing.

I hope you are stacking precious metals instead of Bernanke Bux.

My story is much different. I grew up very poor, wearing shoes only during the school year. We had chickens' rabbits and a large garden every year. We canned a lot of it. We lived in an area with poor soil, all hard packed clay. I spent one summer digging 6'X6'X6' holes for fruit trees and I had a mans calloused hands for my 8th grade school year. I learned to hunt, trap and fish and brought it all home to share. One year we even splurged and bought a calf that we raised and slaughtered for beef. My grandparents were in the floor covering business with three stores and lost it all in '87. I don't know the specifics of it, but I do remember the mines and sawmills closing, which was the primary source of employment.

I knew I had to get out and get some life experience. We did not have money for college, and since no one in my family had ever been, I had no desire to go. I joined the Army.

17 years later, and two lifetimes of experiences, I finally hung up my rifle and came home. I had saved substantially during my last tour in Iraq. I used most of it trying to get joint custody and visitation of my kids after I was ordered to report to Baghdad's Green Zone where a JAG officer served me my divorce papers. What little was left I used to buy my home on 2.5 acres with a year round stream, a 1200 sq ft shop and mature fruit trees.

I went out and leveraged up a three unit rental. I was pretty hard on the buy and got plenty of cash at closing from the seller. I realized later that the note was an adjustable rate mortgage with a balloon payment coming up in three more years. I used the cash from the purchase to fix it up and raised the rents. The rest I used as a down payment for a small retail shipping company while I was in the SWAT academy for our state law enforcement agency.

I have structured the shipping business as an S corporation and placed the rentals into an LLC, hopefully seperating the coming default of the rental company from my personal and S-corp income.

I saw the writing on the wall shortly after I bought the shipping company and have paid off all my debts minus the home and rental mortgage and the shipping company debt. I remarried and my new wife and I tore out the horseshoe pits and turned them into raised bed gardens, which are now being turned into greenhouse gardening. We built a chicken coop and now have more eggs every day than we can deal with ourselves. The chicken poo goes directly into the composter. I cleaned out some of the blackberries on the property and found an old hand dug well, which I have cleaned out and capped with a hand pump. I dug into the hillside behind the house and put up a water storage tank, which I will be plumbing into the well and back down to the greenhouses and chicken coop.

We have all our canning and meat processing equipment and are using it. We bought half a beef and a pig from a local ranch and 4H. I am teaching my boys to hunt and fish and eat every bit of whatever we bring down.

We have buckled down, paid off our minor debt, set aside a years supply of clothing, medicine, sundries and emergency food for our family, plus parents, brothers sisters and their kids. We net close to 5 figures a month and have buckled down to where we have 1/3 each month to invest into resilience. We  stacked our savings into silver and gold when silver was $12 an ounce. We plan on trading the metals for the notes on all of our debt, maybe next year. So far so good.

I have a meeting with a local solar company this week. Our last meeting was two years ago and I have been doing every trick in the book to make our house and property more efficient for the eventual transition to solar and maybe hydro power.

I have been using the Weimar hyperinflation as the yardstick by which to prepare, and I think if the ferris wheel stopped right now, we could make it okay. Our corporate income has increased 30% per year since I bought the company 3 years ago. We have yet to take a draw or payment, choosing to pay it off faster instead.

I used my military training to start small groups of like minded folks and help them help themselves getting prepared and gain some resiliency. We now have 6 different groups with about 7 families per group, although one group is up to 35 families now. I have expanded into a political outreach and have been able to influence a few things locally to move us towards more independance and resilience as a county.

As the song says "it's the end of the world as we know it......and I feel fine!"

Best Wishes,

Jager06

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
Jager, I'm glad to hear that

Jager,

I'm glad to hear that you are prepared to the extent that you are. That property with the chickens, the well, the solar power connections are excellent ways to prepare for a global style weimar event. I wish I was as independent as you. I feel like im on the titanic, knowing that the ship is going down, but I'm stuck in the peasant level at the bottom and cant get to the top of the ship because I dont have the first class ticket. I will, however, count my blessings as Ive saved decent money and plan to be at least 40k liquid by September, with over 15k in silver and gold holdings. Been buying silver since the low teens hehe.

This is great and consider yourself blessed:

We have buckled down, paid off our minor debt, set aside a years supply of clothing, medicine, sundries and emergency food for our family, plus parents, brothers sisters and their kids. We net close to 5 figures a month and have buckled down to where we have 1/3 each month to invest into resilience. We  stacked our savings into silver and gold when silver was $12 an ounce. We plan on trading the metals for the notes on all of our debt, maybe next year. So far so good.

1/3rd of earnings to be invested in independence from the ponzi screams FREEDDDOOMMMMMM!!!!!

Excellent stuff. I hope the ponzi survives a good decade or so...

Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Land...

My wife and I finished our Alaska vacation plans for this summer about two weeks ago. She has been adamant about getting away and thought this up all by herself. We have not taken any time off for about 5 years now.

Last night she came home and out of the blue asked if I would agree to buying land in Alaska! We have several customers who winter over here and spend summers in Alaska, and one of them came in to tell us if we wanted their land they would sell it to us for what they paid for it. They are getting older and wanted to make sure whoever gets their place will truly appreciate the off grid freedoms it provides.

They paid $12,000 for it, which was the price their parents paid for the raw land when they bought it in the 1950's.

Needless to say, our plans for the vacation have just been changed to a property inspection trip.

Best Wishes,

Jager06

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1892
Peasant Class
Subprime JD wrote:

I feel like im on the titanic, knowing that the ship is going down, but I'm stuck in the peasant level at the bottom and cant get to the top of the ship because I dont have the first class ticket.

You're not alone, my friend. I'm the sole breadwinner for my young family and my wife isn't even on board. (She's busy taking care of our babies). I worry a lot and relieve stress by playing around with my 401(k) money or finding like-minded people like the ones here.

Poet

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nickbert
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Joined: Jan 14 2009
Posts: 1208
land

Jager-

Out of curiosity which part of Alaska is this piece of land in?  Some raw land prices here haven't changed much over recent decades, but some areas have appreciated very well.  Is there road or river access?

- Nickbert

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
Poet, As we have spoken via

Poet,

As we have spoken via telephone I am well aware of your position. You have major guts to open your mind to the extremely negative information we read on a daily basis. However, its always better to know than to not know. At the same time, were things to go completely dark, we can always assist those who have the means (land) and resources by virtue of being like minded and ready to work hard in assistance.

Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Land...

Nick-

Supposedly it's near Homer on the Kenai Peninsula. No info on the ingress or egress, only that it is surrounded by national forest....maybe she said national park. National forest would be good, national park not so much I don't think.

Hopefully we get some maps or an address/ grid coordinate soon to take a look. I am pretty excited, but letting my wife work it out while keeping my fingers crossed.

Best Wishes,

Jager06

Poet's picture
Poet
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Joined: Jan 21 2009
Posts: 1892
National Forest versus National Park
Jager06 wrote:

National forest would be good, national park not so much I don't think.

For those not aware of the difference:
http://www.nps.gov/archive/seki/nps_usfs.htm

Poet

nickbert's picture
nickbert
Status: Diamond Member (Offline)
Joined: Jan 14 2009
Posts: 1208
Jager06
Jager06 wrote:

Nick-

Supposedly it's near Homer on the Kenai Peninsula. No info on the ingress or egress, only that it is surrounded by national forest....maybe she said national park. National forest would be good, national park not so much I don't think.

Ah, jackpot!  I'm envious... the Kenai Peninsula is a great place.

Perhaps it's in a State Park, specifically Kachemak Bay State Park?  There's Kenai Fjords National Park but that's a little further away.  The closest National Forest to my memory is Chugach National Forest but that's not very close to Homer either.  There's also the Kenai Wildlife Refuge covering part of the Kenai Peninsula.  Either way it's in an awesome place.

- Nickbert

Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1892
Thanks, Subprime JD
Subprime JD wrote:

Poet,

As we have spoken via telephone I am well aware of your position. You have major guts to open your mind to the extremely negative information we read on a daily basis. However, its always better to know than to not know. At the same time, were things to go completely dark, we can always assist those who have the means (land) and resources by virtue of being like minded and ready to work hard in assistance.

Subprime JD

Thank you. I remain fascinated by all the information I see on a daily basis. It's like a slow motion train wreck. Can't take my eyes off it.

I am sure when things get worse, then I may change my tune. But until then, I just do what I can with what I have. That is all we can do.

I hope your father is coming around to your point of view. And your MBA brother, too.

Poet

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Subprime JD

Subprime JD,

Thanks for being candid enough to share those "lessons" with us all.  I feel for your father and family.  I know he must have worked very hard to acquire what he has and it's very sad to think that he may lose much of it.  I wish you all the best of luck.

Subprime JD's picture
Subprime JD
Status: Platinum Member (Offline)
Joined: Feb 17 2009
Posts: 562
just a micro example of how quickly things can change

AO,

My dad worked extremely hard to build what he has over the course of the last 30 years. Interesting how only 3 years of foolish speculation can cause such damage. In the end, I forecast this type of scenario:

Sometime in the next three years the family will stop making payments on the house we have lived in since 1991. My mom will not take this well at all as she opposed my dad and brother's speculations. In fact they used to laugh at us when we cried "caution". So now she is bitter and everytime I bring up the fact that the house is gone she starts yelling at him, blaming him for the debt we incurred. I know its harsh for me to bring up the issue of losing the house but I'm conditioning their sheeple mind one piece at a time. I dread the day when they move out, I picture mom crying hysterically (she is a extremely sensitive and a bit spoiled woman). My parents relationship will suffer as a result of this loss. However, when I tell my dad to "sell something" to avoid losing the house he says "no one low balls me". Yes dad, you may keep your properties but you will lose elsewhere.

So in the end we will own numerous assets debt free (which are illiquid for now) but will be kicked out of the house that we've lived in for the majority of our lives. Pride is one big reason this will happen. I wonder if the rulers are being stubborn like my dad is, not admitting to themselves that they made some terrible mistakes and that some "loss" needs to occur. In addition, I always point out to them not to be too greedy as millions of american households are suffering terribly as a result of the depression. Just ask some of my clients that are desperate for a settlement check just so they can pay the rent that they are behind on for several months. You would be surprised to learn how many people are begging for a couple thousand dollars from their settlement checks (I do personal injury law aka ambulance chaser). I wonder how things were before the crash as I'm sure that people werent as desperate as they are now. Lets just say that I get screamed at on a daily basis when the clients learn how much they will net out of the total settlement. The worst are those who are on social security and can barely scrape by. If things are bad for retirees now, I cant imagine the pain and suffering in a few years when the real value of social security goes down the toilet.

 

 

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