Walking along a pier in Daytona Beach with their
youngest grandson on a recent Saturday afternoon, Steve and Carol
Daimler stopped to see what fish the locals were catching. The
fishermen wowed 10-year-old David with a big flounder they'd just
landed and photos of a 500-pound, nine-foot shark they'd once caught.
After
a day spent playing miniature golf, eating homemade ice cream and
splashing around in his grandparents' in-ground pool, David declared,
"This is the best day of my life."
Such perfect afternoons are
exactly what Steve, 61, and Carol, 60, had in mind when they retired to
Florida from Virginia two years ago. But those days are rare. Instead,
the Daimlers spend most of their time consumed with selling two
investment properties they bought shortly after the move - holding open
houses, distributing fliers, cold-calling realtors and catering to
prospective buyers.
A more typical day: On a midweek afternoon,
Carol got a call from a prospect who said he and his wife were just
outside one of the houses and wanted to see the interior. The only
hitch: The house is an hour's drive from where the Daimlers live. The
caller said he'd wait, so Carol and Steve jumped in the car. But by the
time they arrived, the phantom buyers had disappeared - the frantic
trip was a bust.
To this day, the properties remain unsold,
draining nearly $6,000 a month from the Daimlers' dwindling retirement
kitty. The couple had thought the properties would help finance the
lovely new life they planned to lead in Florida. They had retired from
their jobs - Steve was a sales executive and Carol a benefits
consultant - and moved to Florida to be closer to David and twins Mark
and Nicole, 13, their oldest daughter's kids.
To supplement their
retirement savings of $260,000, they figured they'd buy fixer-upper
homes to renovate, then sell at a profit in the state's hot housing
market. "We thought we'd make $100,000 without batting an eye," says
Carol.
But when the housing bubble burst, so did their dreams of
a real-estate funded retirement. The properties have been on the market
for nine months without a serious offer, and the carrying costs are
killer: The Daimlers pay more than $65,000 a year on their mortgages
(including loans for their primary residence and a vacation house in
North Carolina), plus tens of thousands more for property taxes,
insurance and maintenance.
The couple are pulling out $15,000 a
month from savings to cover their expenses, and they've already run
through more than half of their nest egg.
The irony: On paper they seem
to be in great shape, with a net worth of $1.6 million. But since most
of that money is tied up in real estate - assets they can't easily sell
- it doesn't ease their current cash crunch.
Money is so tight
that Carol has stopped filling prescriptions for her cholesterol
medicine. Steve says he has no choice but to go back to work. "The
financial pressure is too great," he says.
The Daimlers are
certainly not the only retirees to have miscalculated financially. In
fact, nearly two-thirds of workers who retired and subsequently
returned to work say they went back because they needed the income.
But
being in good company is no comfort to the couple. "We're in this
beautiful area and see our neighbors doing fun things like cruises,
golfing and going to the country club, and we can't enjoy any of it,"
says a frustrated Carol.
Watching their savings drain away, she
admits, "is scary." Worst of all, Steve confesses quietly: "I feel like
I've let down Carol and the kids." She counters, "We both made this
decision, but now it feels like a failure."
Putting faith in real estate
Of
course, when home prices were rising fast - especially in hot spots
like Daytona Beach - the Daimlers' plan to turn a quick profit flipping
houses seemed to make sense. Especially since, unlike many hopeful
flippers, the couple were experienced home buyers and investors.
The
high school sweethearts - Steve spotted Carol at a pizza parlor across
from their Long Island high school - bought their first house at 19,
shortly after they married. It was in Florida, where Steve was working
as a technician at the Kennedy Space Center.
When the couple
moved back to New York seven years later, they sold the house for a
$10,000 profit and bought a fixer-upper. Four years later they sold
that house too and bought a more spacious home in northern Virginia,
where they settled down to raise their two daughters and son (now ages
38 to 42).
Shortly after the move, Steve changed careers and
began selling computers. Eventually he became a sales director, earning
about $150,000 a year. Carol focused on raising the kids when they were
young, later getting her real estate license. By 1991, though, she was
working for the state of Virginia as a disability case consultant,
raising their income to $200,000 a year.
The family lived well
but not lavishly. They saved enough to put the kids through college
without loans and steadily put away money for their own retirement too
- although not enough, they readily admit. But they weren't worried
because they had made a conscious decision to finance their retirement
largely through real estate investments.
"I know you should have
a diversified portfolio," says Steve. "But I believed real estate would
give us bigger returns." In 1986 the couple bought their first
investment properties - two townhouses near their home in Springfield,
Va. - using money Carol inherited from her mom.
In the early
1990's they sold one of the houses and used the proceeds to build a
vacation home in the Outer Banks. Current estimated value: $900,000.
They sold the other townhouse in 2001 and used the money to add on to
their Virginia home, which they sold in 2005 for nearly $700,000.
A life-changing move
The
idea of retiring and moving to Florida came to the Daimlers after a
family Christmas gathering at their home in 2004. When their grandkids,
then 7 and 11, went home to Daytona Beach after the holidays, Steve and
Carol were heartbroken.
"They seemed to be growing up so fast,
and we were missing out," says Steve. Plus, he'd become weary of the
extensive job-related travel that kept him away from home for long
stretches.
To supplement their savings, the couple planned to
launch a sideline business, buying houses in need of a little TLC,
fixing them up and then selling them for a profit. "We knew prices
wouldn't keep going up like they had been," says Steve. "But we figured
with demand from baby boomers retiring, homes in Florida would keep
appreciating."
Carol quit her job first, in the spring of 2005.
Shortly after, the couple sold their house in Virginia and paid cash
for their retirement dream home: a $640,000, 3,700-square-foot house
with a game room and an in-ground pool in a gated community in Port
Orange, south of Daytona Beach.
The couple took real estate
investing courses online and joined the Central Florida Realty
Investors Association to network with local experts. When Steve retired
in March 2006, their daughter, an area real estate agent, helped them
search for properties to launch their business.
Exactly how fast
the local real estate market was deteriorating wasn't clear in August
when the Daimlers bought two three-bedroom, two-bath houses: one in a
Daytona gated community for $235,000; the other in Palm Coast for
$120,000.
To finance the purchases, they took out a $400,000
mortgage on their home. They spent $31,000 on renovations and listed
the houses in September. But since then the market has been flooded
with homes for sale, and the Daimlers have been caught in the changing
current.
They've tried every strategy they can think of: holding
dozens of open houses; offering a higher-than-usual 4 percent
commission to buyers' agents; distributing brochures; running thousands
of dollars' worth of newspaper ads; lowering the prices on the homes by
$40,000; and offering rent-to-own and other financing options.
They've
met with countless buyers but have yet to close a deal. Time and money
are running out. The Daimlers' only income is the $36,000 a year they
get from renting their vacation house in peak season. They're reluctant
to tap Carol's small $25,000 lump-sum government pension. Plus, they're
too young to collect Social Security. And they have $31,000 in
credit-card debt from the renovations of the investment properties.
Perhaps
worst of all, they're so busy trying to sell the houses, they see their
grandkids - the primary motivation for the move - only once a month.
With
just $120,000 left in his 401(k), now all in money-market funds, Steve
decided in March to go back to work. He's an energetic man who likes to
rock climb and run. But at 61, he's concerned that he'll find it hard
to get a job or earn close to his former six-figure salary. "I know he
doesn't want to go back but we don't have a choice," Carol says.
One
thing hasn't changed: The Daimlers remain staunch believers in real
estate. "If the financial pressure was off, we'd still look for
opportunities to invest," says Steve. "For now, though, we just don't
have the means to hang on."
The advice
The Daimlers have a
few good options to help them get back on track, says the team of
experts Money recruited to help them. Here are their recommendations.
Make
local connections. Steve needs to land a good job quickly and has
already reached out to former business associates in Virginia. But
since he now lives in Florida, he should also work on developing
professional contacts in his new home state, says Russ Jones, president
of First Transitions, a Chicago career counseling firm.
He
suggests Steve join a couple of local networking groups, such as the
Glazer Kennedy Inner Circle for sales professionals and Execunet, an
online executive-recruitment firm that holds meetings in nearby
Orlando. Steve should also ask his Virginia contacts if they know of
any jobs in Florida.
Sell the vacation home. To alleviate their
cash shortage and help rebuild their savings, Michael Cirino, a
financial planner with Lincoln Financial Group in Jacksonville, Fla.,
urges the Daimlers to sell their beach house in the Outer Banks.
Probable net: $650,000. But while Steve is open to the idea, Carol is
reluctant. "I have an emotional attachment to that home," she says,
"and I don't want to make any more fast decisions."
Institute
bargain pricing. To expedite the sale of their investment properties,
Greg Antonich, a Daytona Beach real estate agent, urges the Daimlers to
cut the prices to at least 5 percent less than those of other homes for
sale in the area. To bring in more prospects, he also suggests offering
incentives, such as paying half of a buyer's closing costs.
Spread
the wealth. The Daimlers have too much of their net worth tied up in
real estate and low-growth cash investments, Cirino says. He suggests
creating a more balanced portfolio by shifting most of the money left
in their retirement account out of money markets and into stock and
bond funds. The planner urges the couple to pay off their credit cards
and start rebuilding their savings as soon as Steve starts working.
Consider
what lies ahead. Within the next couple of years, both Daimlers will be
eligible to take early Social Security benefits, which would give them
an additional $32,000 a year in income. That means Steve may not need
to work for as long as he thinks, says Cirino. One drawback: Taking
benefits ahead of their full retirement age of 65 will permanently
reduce their take by about 20 percent.
After hearing the experts'
advice, the Daimlers feel relieved. While their life in Florida isn't
what they imagined, they now know that they have options to ease their
financial crunch.
They're determined to unload their investment
properties, even if it means taking a loss. And once they have a cash
cushion from the sale, they're looking forward to doing all the
activities they haven't had time for, like going boating with friends
and traveling to Europe.
"We want to enjoy the last third of our life," says Steve. "And now we finally see ways that we can." Making a comeback after retirement
Ohio - Attorney general's office sues six foreclosure rescue companies
Attorney general's office sues six foreclosure rescue companies
Ohio Attorney General Marc Dann took aim Wednesday at foreclosure rescue companies that siphon money from people who are in danger of losing their homes.
Dann's office sued six companies - two of them based in foreclosure-ridden Cuyahoga County - that solicited money from consumers with promises they could save their homes from foreclosure.
Dann said the companies didn't contact lenders or do much else to prevent the homes from being sold, even though they accepted advance payment, ranging from $450 to $10,000.
"This may be the 'last chance' money these people have," Dann said.
The lawsuits, filed in courts across the state, accused the companies of violating the Consumer Sales Practices Act, but also took the new tack of insisting practitioners of foreclosure rescue must comply with the Debt Adjuster Act, which requires them to have insurance, limit consulting fees, undergo annual audits and keep separate trust accounts for clients.
"I believe it's important to take all the arrows in our quiver to attack a business as sleazy as this one," Dann said.
Ohio and Cuyahoga County, in particular, are ripe markets for foreclosure rescue companies. Both have frequently topped lists of the most foreclos- ure-ridden places in the country, and Cuyahoga County's foreclosure rates run triple the national average, giving it the dubious distinction of being, as County Treasurer Jim Rokakis often notes, "first and worst."
On Wednesday, the attorney general sued:
Cary Lavensky, doing business as Home Restoration Services, located in Cleveland.
Richard Pinnix, dba Pinnix Business Services, of Shaker Heights.
United Foreclosure Managers LLC of Youngstown.
American Housing Authority Inc. of Newport Beach, Calif., and a related company, American Housing Financial Inc. of Phoenix.
F.A.S., dba Foreclosure Assistance Solutions and Mortgage Second Chance, of Clearwater, Fla.
Foreclosure Solutions of Cincinnati.
Lavensky said he has been out of the foreclosure rescue business for a year. He said he could recall only one instance in which he had a dispute with a homeowner and, in that case, the family interfered with a planned sale of the home and then demanded a refund.
He said he is certain his company complied with Ohio law.
"I assure you, all our paperwork was drawn up by an attorney," he said. "This is the first I'm hearing of any of this."
Pinnix said that while the attorney general is right in saying he didn't have insurance or separate accounts for clients, "I have saved a lot of people's homes through refinancing and hard-money lending . . . I work 17 hours a day to help my clients. At the end of the day, the truth will come out."
Officials of United Foreclosure did not return a phone message left at the company.
The suits seek restitution for consumers, fines and an order barring the companies from doing further business until they comply with applicable state laws.
To reach this Plain Dealer reporter:
sherylharris@plaind.com,
216-999-4409
Posted at 07:34 PM in Attitude for Success, Bubble Going To Burst?, Commentary by Brian Gibbons - REISkills.com, Current Affairs, Flipping Houses, Foreclosures General, Mistakes of Real Estate Investors, Motivation for REIs, News - Mortgage Fraud, News - Mortgage Lending - Subprime, News for Real Estate Investors | Permalink | Comments (0) | TrackBack (0)