Q: Could you briefly introduce yourself and tell us how you came to write Renters Win, Home Owners Lose?
A: I was born in Dominica, a small island in the Caribbean with a population of roughly seventy thousand people. At seventeen years old, my mother and I immigrated to the United States. At age twenty-five, I joined the military and spent fourteen years in the U.S. Navy. Most recently, I’ve spent roughly ten years as a financial management coach, conducting workshops and private consultations for people in the military, government agencies, and the civilian community. In 2005, I published my first book, Are You Financially Checkmate?, a project that took almost four years to complete.
The book: The inspiration for Renters Win, Home Owners Lose essentially started in 1996. While sitting in an economic class for a Bachelor of Science degree, it occurred to me that most people in the United States are broke.
Interestingly, I was in the same financial predicament. I was using credit cards to pay for things, not because it was convenient to do so, I simply did not have the cash available. To make matters worse, I was receiving foreclosure threats from my lender who was demanding money to bring the mortgage current. Meanwhile, my credit-card balances were skyrocketing.
My desire to improve my situation led to research, which confirmed my suspicion about the financial condition of the masses. I discovered that the majority of Americans live from paycheck to paycheck regardless of income, education, or career position. The root problems are many, but nothing consumes more of our hard-earned income than the homes we buy. Hence the book, Renters Win, Home Owners Lose: Revealing the Biggest Scam in America.
Q: When did owning your own home change from being the Great American Dream to the Great American Scam?
A: As mentioned earlier, since 1996, I became acutely aware of my financial condition. I was broke and needed to change my situation. My desire for change ultimately led me to purchase my third home, believing that the solution to my problems was in a bigger house. Struggling to pay the mortgage on the property, the Great American Dream gradually became a nightmare.
Besides, the debt on the home scared me. In 2002, it became more obvious that I was simply working to maintain a property that made other people wealthy, more specifically the lien holder or mortgager. Meanwhile, I was getting nowhere financially. My experiences led to more research which resulted in Renters Win, Home Owners Lose: Revealing the Biggest Scam in America. Today, I’m a proud renter, and I plan to keep renting indefinitely.
Q: What kind of research did you have to do? How long did it take you to put everything together?
A: Most of my research was based on reference materials. The Statistical Abstract of the United States (2001 through 2009) served as a vital resource. Other sources included the annual Retirement Confidence Survey (RCS), current events, personal experience, and clients’ contribution. The project took roughly a year to complete.
Q: In regard to the scam itself, how much of it is the banks, government, etc., and how much of it is investors?
A: Mortgage companies, real-estate brokers, banks, and even our government (HUD, FHA, Fannie Mae, etc.) love to trumpet the idea that they are in the business of helping people attain the Great American Dream. But encouraging people who know little about the intricacies of real estate and the complexities of financial investment to take on the biggest debt of their lives (a mortgage) is no way to help them succeed. Surely, these organizations know the difference. They are the ones who either devise the loan/mortgage to purchase the property—the worst component of the home buying scheme—or support it. Instead, their mantra is intended as a ploy to pad their own asset base or build their corporate images. Once home owners become obligated for the property, they are liable to pay interest on the loan for years. Hence, ongoing profits for investors. Our government depends on property tax to meet numerous obligations. Meanwhile, most home owners scrape to meet the demand of a mortgage with no guarantee of a profit when they sell the home. Consider a simple mortgage scenario, for example:
- If you borrow $100,000 to buy a house for thirty years at 7 percent interest, your monthly payment will be roughly $665 for the life of the loan (principal and interest only). Your total cost for the mortgage will be approximately $240,000 (interest only), close to two and a half times the amount of money borrowed.
- To break even on this business transaction, your home must appreciate about 13 percent annually. This would cover the cost of the 7 percent interest loan, the 4 percent inflation rate, and roughly 2 percent property tax and home owner’s insurance costs.
- The average annual home appreciation rate is 4 percent, despite the real-estate industry’s claim that homes appreciate 10 percent annually. Hence, a net zero percent return or less on the so-called investment. The situation gets worse because this scenario does not account for other costs associated with the property.
Q: Is there any hope for current homeowners?
A: Current home owners should take a hard, honest look at their housing situation, mainly to prevent further financial losses.
- They should try to restructure their loans if necessary: The lowest possible fixed interest rate, and the shortest possible term. The longer the home owner stays obligated to the property, the higher the losses will be.
- They should avoid investing any additional unnecessary funds in the home. Most of it will go to waste (unrecoverable).
- Extra earnings should not be invested on the mortgage (double payment, for instance). All cash that goes into the home will be locked in the property. The only way to retrieve the money is through a reverse mortgage or home equity loan, both of which are counterproductive to the owner’s financial goals or expectations. Instead, extra cash should be placed in a safe investment as liquid assets to counter some of the losses experienced in the home.
- They should avoid drawing the “equity” from the home. Taking a second or third mortgage on the property simply exacerbates the financial losses of the owner.
- Upgraders need to reconsider their options. The answer to their financial solution is not in a second, third, or fourth home. The evidence is seen in the lives of others who have been convinced to purchase subsequent homes for financial gain. Most of them are broke and cash-poor.
Q: What are you working on now?
A: Currently, I’m revising my first book, Are You Financially Checkmate? I’m also in the process of writing a book series for men, covering all aspects of how to become the best husband, father, role model, and leader.
Q: Is there anything else you would like to add?
A: Yes: It should be understood that I am not oppose to home buying. There are many people who are financially able to purchase any home they desire. Losses experienced on the property as a result of the mortgage, maintenance, etc. can be offset by gains from other investments.
First-time home buyers, on the other hand, who believe that they are investing in a home for financial gain should think again. Instead, they should consider stashing as much cash as possible in a moderately safe investment while they continue to rent. They will certainly make more money this way. Meanwhile, they should be content in their position, not thinking necessarily that buying a house is the key to their financial success and personal happiness. In other words, having a home is no indication that a person is financially stable or becoming wealthy. It simply means that the individual has a place to live (for now) and is legally obligated and willing to comply with all the requirements to live in the home.
Thank you for your time.
My pleasure. Thanks for the opportunity to speak with you. Here is one of my Web sites.