Tuesday, March 15, 2005

Exit Strategy: "We Can Always Sell"

This Palm Beach Post story is a good example of an ordinary couple taking incredible risks with real estate. "(R)eal-estate investment is what has allowed the Ackermans to move from a modest $165,000 home, purchased in 1999, to the six-bedroom stunner they live in today..The Ackermans bought three of their houses the same way: They financed 80 percent of the purchase price with an interest-only loan. To avoid paying private mortgage insurance, they put 20 percent down on each home, but only 5 percent of that was out of pocket. The remaining 15 percent came from simultaneous second mortgages, called 'piggyback' loans."

"The double loans have left them carrying eight mortgages..If interest rates go up, "we could be in trouble," admitted Gregg. "If that happens, our exit strategy is to start liquidating homes. Right now, I'm just playing the game," said Janey. "But we have an out. We can always sell." How many speculators have the same exit strategy?


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