Saturday, July 1, 2023

Perspective

Back in 2000 I left a cushy tech job at Bell Communications Research (Bellcore) to join my first startup. As anyone in the tech industry shortly after 9/11 would attest, that was not a good time for any startup dependent on Wall Street money because within days of the terrorist attacks the money spigot was shut off. Three months later my startup went up in smoke. I'll spare you the full story of how the slick-willy CEO was eventually convicted of investor fraud and spent more than a few years behind bars in a "federal pound you in the ass prison" but I'll tell you the first real life lesson I learned as a result of this experience: work for yourself if at all possible, because no one else can be trusted to look out for you when the chips are down.

This was one of the darkest periods in my life. I sat at home, burning wood in the fireplace trying to stay warm and save on my utility bills, while making the minimum payment on the credit card I had used to fund renovations on the home the last four years -- all the while watching my bank account steadily dwindle toward zero, not knowing when I would be employed again.

Paranoid that I might lose the home in bankruptcy, I elected to sell it. This seemed like a rational decision at the time, particularly because the housing market was hot and I had an offer on the property within three days. This did allow me to maintain an extremely high credit score as well as keep me in a position of zero long term debt the last 20 years but, looking back at it with the perspective I have now, selling my first home was the worst financial decision I have made in my life.

In my defense, however, it's important to understand that at the time I had no clue that the bedrock of our financial system would eventually be shaken to its core and the economics of home ownership would spiral out of control due to the unparalleled greed of bankers and corporate executives everywhere that have increased the cost of homes and the overall cost of living outside the earnings potential of all but the most well-educated and well-employed individuals. As a result, I am still clawing myself out of that financial chasm 20 years later.

Had I not sold the house due to my precarious financial position at the time I would have managed to pay it off in approximately 12 years, put the vast majority of the wages earned in the last 10 years into various investments, and my net worth would be a lot higher now. The slap in the face, as well as the perfect evidence that something is fundamentally askew with this country, is the fact that my first house -- a very average 1500 square foot ranch on less than 1/2 acre -- is now worth $500K today. To put that in perspective, 20 years ago you could buy a 3000 square foot McMansion in a very nice neighborhood on a 3 acre lot in my area for $300K.

After I sold my home I shared a house with my brother for a modest rent. About two weeks before my unemployment insurance ran out I found a gig in another startup. I had to accept a concessionary compensation package because those were the times, but money was flowing again. A couple years into my tenure at the second startup I considered buying another home. I was shocked as I watched prices skyrocket well out of my range of affordability and I was left wondering how the hell all these people were qualifying for these loans and making ridiculously huge payments.

Reading great real-estate blogs like Calculated Risk starting in the summer of 2005, I eventually realized that these people really hadn't bought their home -- they were renting it from the bank courtesy of a slew of questionable mortgage products, such as interest-only loans. In addition, fraudulent mortgage brokers weren't validating income and this allowed people who had no business purchasing a home in the first place to be in direct competition with me for a limited supply of homes. As we all know, Wall Street's chickens eventually came home to roost, leading to the crash of 2008 and the well-deserved collapse of several casinos otherwise known as investment banks.

In 2008 my brother decided to get married so I was forced to find a place on my own, which I did for the outrageous sum of $1500/month. Mind you, this was nothing more than a townhouse with no land or garage. The mortgage payment, including taxes, on my first home was a comparatively reasonable $1150/month. The price to rent ratio at this time was clearly in favor of ownership but I couldn't afford to buy anything at the time - a similar scenario to what exists today.

In 2012, I tried to buy a home about 10 minutes away with a large pole barn on 2 acres and quickly discovered that it was a short sale -- a bank-owned property -- from which the owners had been evicted due to lack of payment. Unfortunately, that purchase didn't work out but it was not for a lack of trying. If you care to learn about the reality of short sales read my tale of a short sale.

Frustrated with my continuing inability to buy a reasonably priced home in New Jersey, as well as ever-increasing costs of living and decreasing quality of life caused by a corrupt and wasteful government that has long considered its population lacking the intelligence to pump its own gas or carry a gun, I've been trying to leave New Jersey for some time. In fact, part of my strategy for seeking employment as an airline pilot in 2018 was revisiting the idea that airline pilots can live almost anywhere they want, provided they are willing to take on the inconvenience and cost of commuting to and from work by airplane.

Due in large part to the great business relationship I cultivated over the years with my landlord she has kept my rent below market rate. She retired recently, however, and now depends on her rental property income for her livelihood. When it came time to renew my lease earlier this year she insisted on a $300/month increase. When I raised concern she noted she could easily charge another $1000 a month to anyone else renting the property as that was the going rate in my area. After a brief visit to Zillow I figured out that while she might be crazy like everyone else in this market, she wasn't lying. As I signed the new lease for the outrageous sum of $25000 / year I vowed this would be the last residential lease I sign. So last month I finally took the plunge and bought a sizable tract of land on a mountain in Tennessee, on which I plan to build my forever home.

This blog will chronicle the related efforts.