A few days ago I bumped into someone I hadn’t seen for quite some time. Bob (made up name) was a real estate agent I had come to know through networking. I first met him a few years ago just as the Las Vegas real estate market was starting to decline. Bob had been fairly successful and was fond of preaching the virtues of Las Vegas; he had a myriad of reasons why the decline would be very short-lived. While I never gave any credence to his theories, it was quite apparent that he truly believed them.
Like many real estate agents, Bob jumped on the bandwagon as the market heated up and obtained his license; he had been selling cars for a very busy foreign car dealership. He was a middle of the pack salesman and made approximately $40,000 per year. He told of how real estate salespeople were coming in and buying high-end cars and it got him to thinking. Why couldn’t he do that? By his calculations he could replace his income by selling just one house every few months. To Bob this was a no-brainer.
Bob didn’t know very much about real estate. He certainly didn’t understand investing and was not very good at managing his own money. However, he did have two attributes that served him well – he worked hard and he was very likeable. Bob became an agent at the time that hairdressers, bartenders, landscapers, and the like jumped into the market and fancied themselves “investors.” The “greater fool” theory was in full swing and Bob had no trouble selling those fools real estate.
Bob’s personality and work ethic translated into many sales. In his first full year in the business Bob made more than $200,000 — five times more than he had ever made before. Las Vegas was the land of milk & honey and the real estate boom seemed destined to go on forever. We all know how that worked out.
As I said earlier, Bob was not very good at managing his money. Rather than use his vastly increased income to get out of debt and prepare for a better tomorrow, he did just the opposite. Through his auto connections he came across a great deal on an almost new Mercedes SL300 convertible. That steal of a deal set him back a cool $85k. Of course, he financed it. Rather than pay off his mortgage he purchased a new house in a high-end golf course community. While his new home set him back a little more than a million dollars, it was virtually risk free because real estate only goes up. It does only go up, right?
When the market started to turn he did one smart thing. He sold his new home at a profit and purchased a less expensive home. Unfortunately it was still too much house for his income. Speaking of income, he went from almost three years of income in excess of six figures to income of zero virtually overnight. While he waited for the recovery he was sure would inevitably come, he maxed out every piece of credit available to him including his home. That hoped for recovery never came, and Bob lost it all.
Back at Square One
Bob finally gave up the real estate ghost when his wife threatened to take their child and leave. He turned in his license and wound up losing his house, car, and just about everything else. Not only did he have nothing to show for the half million dollars he had made in the three years he spent in real estate, his net worth was actually less than it had been when he started. Instead of owning a modest home with some equity, he now lived in an apartment. He has no savings and little in the way of possessions.
He learned a valuable lesson.
All the flash, glitz, and status meant nothing. He discovered that the things that truly made him happy were his wife, daughter, friends and health. He still had those things. So where did I bump into him? He’s selling cars again.
People say that money is not the key to happiness, but I always figured if you have enough money, you can have a key made. – Joan Rivers