Ben Jones' Housing Bubble blog has an amazing piece about a couple of speculators making a living off their home appreciation, but with no other sources of income. They've made $1.3 million buying and selling properties, but all of their net worth is in home equity, and they have a negative monthly cash flow of $5,000 to $15,000. They hold $2.3 million in mortgage debt.
What's amazing is that the mortgage lenders are letting them continue to buy properties with no income other than what they pull out of their properties in loans. As the market turns from a seller's to a buyer's market, they're likely to get crushed pretty quickly. Though at first I thought the new bankruptcy laws could potentially leave them in debt for the rest of their lives, their lack of actual income may save them, and leave their creditors with the short end of the stick.
Favorite quote: "Some people call it a pyramid, but I don't like to think about it that way."
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