Dave Barry's Money Secrets

by Dave Barry

  NORM: So anyway, a year ago, two days before the Fourth of July, which is the height of our busy season, I had an on-the-job injury, which I won’t go into the details of here.

  GLADYS: He shot himself in the scrotum with a bottle rocket.

  REAL ESTATE GUY: Huh. Well getting back to . . .

  GLADYS: Is it OK to say “scrotum”?

  NORM: It was a freak thing, Bob. It’s a little demonstration I used to do where I launched the rocket from my pants. I called it the “Fart of Doom.” It’s a great sales booster—kids love it—and I did it a thousand times with no trouble, but this one time, I don’t know what the hell happened—bad fuse, probably—but next thing I know I’m an unemployed man with a third-degree burn on the old nutsack that would not heal. Gladys was changing those bandages ten times a day. Is it OK that I said “fart?”

  GLADYS: Do you have any idea how much pus a burned scrotum can produce?

  REAL ESTATE GUY: No.

  GLADYS: Most people don’t.

  NORM: So we were hurting for cash, I tell you. We have five children under the age of three, and it got to the point where we had to choose between buying food for them, or cigarettes. No parent should have to make that choice, Bob.

  REAL ESTATE GUY: No.

  NORM: So there we were: Our kids were starving, and our rent was past due. They even repossessed my Bowflex machine.

  GLADYS: Like you ever used it.

  NORM: It was the humiliation, goddammit, pardon my French.

  REAL ESTATE GUY: So things were bad.

  NORM: They were terrible. We didn’t have two nickels to rub together. Gladys was thinking about turning tricks.

  REAL ESTATE GUY: That’s awful!

  GLADYS: Not really, I saw something about it once on The Maury Show, “Hooker Housewives.” You can make good money, set your own hours. And it’s not like I was getting a lot of loving from Mister Scrotum Wound, here. He still can’t get his . . .

  REAL ESTATE GUY (interrupting): So you were desperate for money . . .

  NORM: Right, we were desperate, and just when I thought we had hit bottom, we discovered a money-making concept that changed our lives.

  REAL ESTATE GUY: My incredible program, Get Rich by Becoming Wealthy Making Big Money in Real Estate?

  NORM: No, robbing convenience stores. Not with a gun, of course; we’re both religious people. We had this fake bomb we made with duct tape.

  GLADYS: Inside it was Tampax.

  NORM: I’d say, “Give her the money, or I set off this bomb!” It worked the first two times, but the third time, the guy says, “OK, OK! Here’s your money!” But instead of cash, he pulls out a fricking shotgun. You can’t trust anybody, Bob.

  GLADYS: When Norm saw the shotgun, he jumped behind me and yelled, “Don’t shoot me! It’s her Tampax!”

  NORM: I was thinking of the kids. They need a father.

  REAL ESTATE GUY: So getting back to . . .

  NORM: We ended up in prison, five to ten, and that’s where I saw your infomercial, Bob.

  REAL ESTATE GUY: You mean for my incredible program, Get Rich by Becoming Wealthy Making Big Money in Real Estate?

  NORM: No, this was back when you were selling that kidney dialysis–by-mail program. Boy, that was a stinker, huh? I heard there were a lot of lawsu . . .

  REAL ESTATE GUY: I don’t think we need to . . .

  NORM: But the thing was, I liked your style, Bob. First time I saw you, I said to Skag—Skag was my best friend in prison . . .

  GLADYS: “Best friend,” he calls it.

  NORM (ignoring her): . . . I said, “Skag, this guy has something. When I watch his infomercial, I say to myself, now that is an infomercial.”

  REAL ESTATE GUY: Thank you.

  NORM: So I started following your work, and when I made parole, first thing I did was get your tape, Get Rich by Getting Rich in whaddycallit.

  REAL ESTATE GUY: Real estate.

  NORM: Right. And Bob, in my own words, it is a dream come fricking true.

  REAL ESTATE GUY: So you’ve made money?

  NORM: Out the wazoo, Bob. If I can say “wazoo.”

  REAL ESTATE GUY: By applying the principles described in my program?

  NORM: The what?

  REAL ESTATE GUY: The principles of successful real estate investing.

  NORM: Sure, whatever.

  GLADYS: How come he made you get that tattoo, if he’s your “best friend”?

  NORM: Don’t you make air quotes at me, bitch.

  GLADYS: Oh, right, I’m the bitch.

  REAL ESTATE GUY (to camera): There you have it: One couple’s true story of how they achieved financial independence through my program, Get Rich . . .

  NORM: At least I’m not a whore.

  REAL ESTATE GUY: . . . by Becoming Wealthy . . .

  GLADYS: Tell that to your “best friend,” Skag.

  REAL ESTATE GUY: . . . Making Big Money . . .

  NORM (lunging toward Gladys, knocking over the camera): I SAID DON’T MAKE AIR QUOTES AT ME, BITCH!

  VOICE OF REAL ESTATE GUY (over sounds of struggle): . . . in Real Estate!

  VOICE OF GLADYS (being choked): WHORE!!

  (THE SCREEN GOES DARK AS THE CAMERA FALLS INTO THE POOL.)

  I admit that the preceding is not a totally realistic depiction of a real estate infomercial. The real ones are even stupider. But the message is the same: Anyone can make money in real estate!

  The only problem with this message is that it is, with all due respect, a tub of whale shit.* 32 I say this because I personally have, on numerous occasions, failed to make money in real estate. I’ve owned a string of houses, in good real estate markets and bad, and no matter what, I have almost always managed to not make money.

  What’s my secret? Simple: I make certain fundamental mistakes, and I make them consistently. These are proven, time-tested mistakes, and I believe that anybody—even somebody who has no previous experience losing money in real estate—can apply them.

  Mistake Number One: Buy an Older House

  The reason people usually give for buying an older house is that older houses have “character.” What do we mean by “character”? We mean “dry rot.”

  The problem is that many, if not most, older houses were built in the past. Back then, people were stupider than they are today, and one result was that they built their houses largely out of wood. This was a mistake, because wood—and you can look this up if you don’t believe me—comes from trees.

  What’s wrong with trees as a building material? Plenty. Go outside and examine a tree. From a distance, it appears to be a sturdy, permanent object, but when you examine it closely, you discover that it is a living organism, like a big hamster, except that virtually every part of the tree is constantly being eaten, bored into, nested on, or otherwise occupied by a vast teeming horde of ants, beetles, worms, termites, vines, toadstools, spiders, mosses, hornets, woodchucks, birds, chipmunks, squirrels, snakes, bats, and so on. A tree is nothing more than a giant hotel/buffet for critters. This is why the tree must keep committing acts of photosynthesis and growing new branches: If it didn’t, in a matter of days it would be termite poop.

  Cutting a tree down and calling it “lumber” does not change what it is: It’s still a tree. Building a house out of “lumber” is really no different from building a house out of pepperoni or Cool Whip. It’s still edible. Sooner or later, critters are going to resume eating it. The most deadly critter is the dry-rot fungus, an organism made up of tiny but voracious spores that, when magnified 127,000 times, look like this:

  There are millions of these things munching away at the typical house. The older the house is, the more they’ve munched, until in time, what’s holding the house up, structurally, is paint.

  And that’s not the only problem with the older house. It probably also has an antiquated electrical system, installed back in the days when electricity traveled at only 57 miles per hour and wires were fashioned from goat hair and beeswax. The plumbi
ng system—consisting of pipes made from some material no longer considered safe, such as arsenic-coated lead—passes water about as smoothly as a ninety-one-year-old man with a prostate the size of a bowling ball. The windows, which cannot be opened, are as effective against drafts as a volleyball net. The heating system, although it has been modernized on several occasions (most recently 1928) was originally designed to burn some fuel that is no longer available, such as heretics. The air-conditioning system, if there is one, was apparently tacked onto the house in a single frenzied day by unskilled workers using only chainsaws. The current roof was put on during the administration of Warren G. Harding; the attic insulation consists primarily of spider corpses; and the basement is prone to flooding, as evidenced by the presence of a thriving coral reef.

  In other words, an older home is a giant collection of costly defects held together by a few coats of grime and latex. But many people, when they look at an older home, don’t see these problems: They see character. I know this because I am one of these people. More than once I have had my brain paralyzed by what psychiatrists call Old House Delusion Disease (OHDD).

  My wife and I bought an old house that had every known old-house problem, including termites, not to mention a grand total of one closet, and an entire room that had no electrical outlets—a clear indication that the house was not built by or for people with a need for, say, lighting. Were we discouraged? No! We thought it was quaint!

  Here’s how delusional we were. We had plumbing problems (of course), and at one point, in an effort to fix a leak, some plumbing guys were crawling around under our house. They emerged holding some yellowed, crumbling, rolled-up newspapers, which they’d found wrapped around our pipes, apparently as insulation. We carefully unwrapped one of the newspapers and found that it was a Miami Herald from 1927. It had a story in it about Charles Lindbergh.

  So consider our situation: There we were, confronted with stark evidence that our pipes, in addition to leaking, were very old. It’s like being aboard a boat in the middle of the Pacific and discovering that not only were you sinking, but also that your hull was made entirely of Triscuits.

  And how did we react to this horrible news? We were thrilled! Charles Lindbergh! It was so charming!

  The plumbers were also very excited, but in their case it was because they knew we would be putting all their children through Harvard.

  Old House Delusion Disease is very powerful. Usually, when you buy an old house, you hire professional house inspectors. These inspectors are very thorough: They spend a whole day crawling around the house, and then they give you a detailed, written report, which says DO NOT BUY THIS HOUSE, YOU IDIOT.

  Not in so many words, of course. The report breaks the house down by major defects, which are further broken down into subdefects, sometimes hundreds of them. The house, according to this report, consists entirely of defects. You read this report, but because you have OHDD, none of it actually penetrates into your brain. Your brain remains impervious, even when the inspector goes out of his way to warn you about serious problems:

  INSPECTOR: OK, there’s something I want to show you here in the living room . . .

  YOU: Don’t you love the living room? It has such character! The molding!

  INSPECTOR: Right, about the molding, I wanted you to see this. (The inspector takes a screwdriver and taps the tip gently against the molding. The molding disappears in a smokelike puff of wood particles, and then a large part of the wall itself collapses, leaving a gaping hole, through which can be seen, in the gloom, an exposed wire that periodically emits a shower of sparks, illuminating a dripping pipe covered with green slime. A rat darts past, pursued by what appears to be a boa constrictor.)

  YOU: Ha ha! These quirky old houses! That can be repaired, right?

  INSPECTOR: Well, yes, I suppose it could, if you’re willing to completely . . .

  YOU: I’m not worried about cosmetic problems, as long as the house is structurally sound. They knew how to build these babies in the old days. (You stamp your foot on the floor to emphasize this point. Your foot goes through the floor.)

  INSPECTOR: Um, that’s another thing I wanted to mention. Your floor joists have been almost entirely eaten away.

  YOU (retracting your foot): Termites? No biggie! A lot of these old houses have termites! We can just have it treated by . . .

  INSPECTOR: Actually, it’s beavers.

  YOU: Beavers?

  INSPECTOR: They’re building a dam in the basement.

  YOU:

  INSPECTOR: I’ve never seen that before.

  YOU (recovering): The kids have been wanting a pet!

  At this point the inspector, who has dealt with OHDD before, gives up and edges out of the room, taking care not to put too much weight on any one part of the floor.

  You, of course, go ahead and buy the house. As a true OHDD victim, you would buy this house if it was actively on fire. Once it is yours, you begin calling what will become a never-ending parade of skilled, highly paid craftsmen, who will spend so much time at your house that eventually they will become a part of your family and invite you to attend all their children’s graduations from Harvard.

  To summarize what we have covered so far, the first proven technique guaranteed to lose you money in real estate is to buy an older house. This leads us to:

  Mistake Number Two: Buy a New House

  Unlike old houses, which fall apart over time, new houses start falling apart immediately. Often the last subcontractors on the job have to sprint from the house as it begins to collapse around them, like Indiana Jones in the Temple of Doom.

  There are several reasons for this. First, new houses are crap. No, wait, that’s unfair to crap. In parts of rural Nepal, people make houses out of actual dung, and these houses are much sturdier than new American homes in subdivisions with names like Manor Oaks Estates Phase IV.

  One problem is materials. We’ve established that a major flaw in older-home construction was that the houses were built out of wood, a material that not only rots and burns but also is viewed as lunch by large segments of the animal and fungus kingdoms. So today, new houses are built out of: wood.

  Yes! We’ve learned nothing! Only now, thanks to modern manufacturing techniques, the wood we use is much flimsier. Take the “two-by-four.” This was originally a sturdy piece of lumber that measured two inches by four inches, which is how it got its name.* 33 But over the years, the lumber industry—whose executives live in homes constructed entirely of stainless steel—has been cutting costs by reducing lumber sizes, so that now a “two-by-four” is more along the lines of a Popsicle stick:

  Modern “Two-by-Four”

  (actual size)

  Scientists in the lumber industry are working day and night to reduce the size of the “two-by-fours” even more. They dream of a day, in the not-so-distant future, when a “two-by-four” will be invisible to the naked human eye, and a single termite will be able to consume an entire home in forty-five minutes.

  Another problem with new homes is the quality of the builders. Don’t get me wrong: I’m not saying there are no good builders. There are good builders: Their names are Arnold and Herb Frinker, and they are honest, competent, reliable, and reasonably priced. They retired in 1987.

  But the rest of the field is pretty bleak. In parts of the nation, all you need to do to become a professional house builder is take a brief course and pass an exam that is not overly demanding, as we see from these actual questions:

  Professional House-Builder License Exam Questions

  1. What type of vehicle should a professional house builder drive?

  a. A truck type of vehicle.

  (Correct Answer: a.)

  2. You’re building a house for a customer who is locked into a very rigid move-in date. You have repeatedly assured this customer that the house will absolutely, positively, definitely, no question, count on it 110 percent, be finished in six months. Assume that the date is March 1. When will this house be fini
shed?

  a. You mean, like, completely finished?

  b. Not this year, that’s for sure.

  c. How the hell should I know?

  (Correct Answer: These are all correct.)

  3. A buyer has just moved into a house you built and is calling you repeatedly to complain that there is a toilet installed in the middle of the living room; that there is no floor in the kitchen; and that hot water is gushing from the electrical outlets. How do you respond to these problems?

  a. Get a new phone number.

  b. Explain that these are normal things caused by the house “settling.”

  c. What problems?

  (Correct Answer: There is nothing wrong with any of these answers.)

  To review what we have learned about real estate so far: It is a huge mistake to buy an older house, because it will fall apart and you will forever be repairing it. The same is true if you buy a new house. But you can’t buy any kind of house unless you have money, which leads us to:

  Mistake Number Three: Get a Mortgage

  A mortgage is a great big wad of money that you borrow so you can buy a house that you cannot, by any sane standard, afford.

  There are many different kinds of mortgages available, including fixed rate 30-year, fixed rate 15-year, variable rate 30-year, variable rate 10-year jumbo with balloon, variable fixed year 15-balloon jumbo rate, and 30 variably rated ballooning yearly jumbos, to name just a few.

  Before applying for a mortgage, you should thoroughly familiarize yourself with the advantages and disadvantages of each type of mortgage. Then you should pick one at random, because they all work exactly the same way: Every month, you send a payment to your lender, and no matter how many times you do this, you still owe the same total amount. It’s like the movie Groundhog Day, where no matter what Bill Murray did, he always ended up starting over in exactly the same place.

  Fact: Inside the mortgage business, customers are commonly referred to as “Bill Murrays.”

  The difference is that Groundhog Day eventually ends, whereas a mortgage never does. To date, the Egyptians have made more than 55,000 monthly mortgage payments on the pyramids, and they still owe exactly as much on their mortgage—a 30-year variable jumbo balloon—as they did in 2600 B.C. (They’re thinking about refinancing.) You should just accept the fact that you’re going to have a giant mortgage balance until you die, possibly as a result of beaver bites.