My real estate experience started back in 2004 during the boom in San Diego.
I worked as a loan officer, and during my first few months in the real estate business, I noticed primarily two things:
1. It was WAY too easy to get a loan. I predicted, correctly, that there wasn’t a chance all that easy lending would hold up.
2. The difference between rich and poor property investors.
It doesn’t matter which country I’m in, this difference always is visible.
The rich, and the real property investment tycoons buy their properties in cash. The poor and middle class use loans.
Why is using loans a losing formula?
Well, I soon realized at my loan broker job that if someone has a 30 year mortgage, that person is going to end up paying roughly 2 1/2 times the purchase price of the house by the end of the loan with normal US rates.
So if the house cost $200,000…they would end up paying $500,000. Not to mention, during the first few years of the loan your payments are almost 100% interest (just to compare: here’s how much are sellers closing costs in Jacksonville Florida). So if you sell after a year or two all your payments would have gone to pay the interest, not the balance of your loan.
On the other hand, my rich clients bought a property with cash, resold, bought another property while trading up, resold, and so on. Almost always with cash.
This is where Ecuador comes in.
In Ecuador, you can buy a decent, livable, maybe even nice property starting from $25-30,000… making it much easier to pay cash for.
Imagine living without a big, fat mortgage over your head…trust me, it feels good.
So, in the US, when it is virtually impossible for you to buy with cash (I mean, who has $250,000 sitting around) consider doing what the rich investors do, and try investing in cash… in Ecuador.
However, there is an exception to this rule, of course. Life is never that simple.
If you happen to catch the market low before a bubble hits, then sell when the bubble is at it’s high point, like during the high years of 2004-5-6 in the US, then you could still make a ton of money buying with or without a loan.
So now if someone asks you, “paper or plastic?” you’ll know what to say.
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