The Collected Works of Author and Blogger Larry Roberts

Archive for 2014

Most real estate investors are really speculators betting on appreciation. It's a strategy destined to be a loser. Real estate investors during the housing bubble put their money to work on faith. There is no logical reason to believe house prices only go up. In fact, there have been two prior periods in California’s recent history where house prices did, in fact, go down. However, with kool aid intoxication, otherwise known as faith-based investing, reality is ignored. If you truly believe house prices only go up, no price is too high, and you don’t have to worry about a backup plan if house prices don’t go up. There is only one viable backup plan when a speculative play on appreciation…[READ MORE]

Borrowers have moral responsibility to default on loans where the payment on an amortizing mortgage exceeds the cost of a comparable rental. The fear of strategic default is a necessary deterrent to foolish lending. Without it, lenders are emboldened to make all manner of bad loans because they believe they will get paid back. Have you noticed the explosion of dodgy subprime auto loans that proliferated when automatic shutoff systems were installed? Lenders will make nearly any loan if they believe they will get their money back with interest. It’s only when they feel they won’t get repaid are they prompted to loan responsibly. Signatory versus asset-backed debt Some have questioned how I can be so against debt, yet I…[READ MORE]

Is foreclosure the end of the American Dream, or is it a fresh start and an opportunity for redemption? I manage a number of properties in Las Vegas, and when I acquired them, I often had to evict the former owners who squatted there after the foreclosure. Some foreclosure and eviction cases can be heartbreaking. However, we live by rule of law in this country, and unless we want to start giving away real estate to those with the saddest story, these evictions must take place. My family’s eviction story My grandmother’s blind sister was 82 years old when she was evicted from her paid-off family home for a highway construction project. True story. Rather than wait a few more…[READ MORE]

 In order to prevent foreclosures and theft of taxpayer money through bailouts, mortgage equity withdrawal should be limited and regulated. I don't like government paternalism. When Ronald Reagan came to power and began our 25 year experiment with government deregulation, I thought it was a good idea. It used to really annoy me when I would see paternalistic politicians who believed they knew what was good for me and for society, and that their ideas of right and wrong should be legislated. Government intrusions into the lives of citizens should be kept to a minimum, and citizens should have the right to make their own decisions and live with the consequences. Well, maybe not. I used to believe all of…[READ MORE]

In its simplest form, a personal Ponzi scheme is borrowing money to pay debt service: acquiring new debt to pay old debt. It's a path to disaster. What does it mean to run a personal Ponzi scheme? Aren't Ponzi schemes the advanced financial management crime of sophisticated money managers like Bernie Madoff? Not really. A Ponzi Scheme is any investment where the returns come not from the investment but from the capital contributions of new investors. If you change the terms slightly, a Ponzi Scheme is also any debt where the payment of debt comes not from wage income but from borrowed money from new lenders. In that respect, personal Ponzi schemes are easy to begin and grow. Anyone can borrow…[READ MORE]

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