23
Getting Personal
David Lazarus
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Regarding a mid life chrysler .... Last year I had a 94 Jeep Cherokee which I wanted to get some additional cash out of by trading in during the CARS program. My preference was a small cross over vehicle to cart around our kayaks. My loving wife's preference was a male menopause car. When I couldn't swing a deal at one dealer for the crossover, I called my daughter to offer the car as trade for a new vehicle for her. She wouldn't answer her phone and I stopped at a third dealer who had several Pontiac Solstice GXP convertibles available. The next day we paid cash and I drove home my very stealth yellow convertible. I tell everybody that it is my 54th birthday present from my wife. I am, however, still trying how to fit 2 kayaks and associated equipment on or in my toy!
C'mon Tess. How many $1000 handbags does a woman need? Does a number that rhymes with hero come to mind. It's only ONE car. Okay, here's a better option. Forget the car and get a Cessna. Both can take flying lessons and enjoy a REALLY fun toy.
The guy getting ready for the mid-life crisis toy? I began doing EXACTLY that when I was 42 (my numbers were a bit lower, but same goal) and the pot o' money became my toy! It started as a MM account at Vanguard, then that account (also serving as a nice emergency fund) became a springboard for a small-but-growing set of index funds. I'm 56 now, and still working on it. It became my crisis-prevention toy.
David's caller needs to do a little research into construction loans. A construction loan is what the caller was referred to as a project loan. A bank provides mortgages to a borrower to finance a property in a livable condition, not for materials and labor to build a home. When a contractor wants to build a home she or he goes to a lender to get a construction loan. A construction loan is financing to the builder/contractor so she or he can pay for materials and pay his or her sub contractors. Here is how it sometimes (ususally) works: The builder secures the construction loan but doesn't yet collect any money. Construction begins on the property. When predefined milestones are reached -- say the foundation is in place and the structure is ready for framing or the roofing is complete and utilites are roughed in -- the builder contacts the bank and requests a draw. The bank sends someone to verify the construction milestone is complete and issues a portion of the loan amount to the builder. To this point the builder has been agreeing to pay for materials and labor under contracts. The suppliers have placed leins and the property. Now those contracts can be paid with money from the draw on the construction loan and the leins are released. The number of draws during the construction phase aren't very many, maybe three to five. The construction loan and interest are paid back to the bank when the house is sold and the closing takes place. Construction loans are short term financing only. A few banks offer what is called a construction/permanent loan. These loans convert from a construction loan to a permanent mortgage when the building process is complete. These loans are for people looking to contract/build there own home. If the caller is looking to build on his land he will still have to come up with the money to pay for the materials and work or find suppliers who are willing to trust the work will get done so the bank will issue the draw. A construction loan will mean the caller won't need to cover all the building costs but he may still need tens of thousands of dollars to pay supplier and sub contractors between draws on the construction loan.
As far as "fantasy cars" or project cars go, there is one important fact for the caller to keep in mind.
It was spoken by a wise man:
"A project car is a hole in the universe suspended by four rubber donuts; donuts which you cannot eat. You will throw baskets full of money into this hole. You will never see this money again."
Does this mean he should not go through with it? Of course not. However, it would be prudent for the caller to go into it with eyes wide open.
The caller did not specify what level of experience he has with restoring, modifying, or maintaining vehicles. His course of action should be determined by his level of experience and his willingness to learn the necessary skills, and the time he has budgeted to spend on the project.
Most of the time, the best value in a non-practical enthusiast vehicle is buying someone else's project.
If you are fortunate enough to find one with the features you want in the condition you want, you will likely be able to purchase it for significantly less than the original owner has sunk in the vehicle.
Then there's maintenance. On an Alfa Romeo. Good luck.
Either break out the checkbook, or buy a good multimeter and some aspirin for the headache.
Enjoy the project, caller. It will be worth every penny and every headache.
The only sports car you should buy is a Tesla, it will only go up in value as we run out of oil.
The tax cheat will loose all his money, because is house will be flooded, burned, or blown away, and the mob will take his land to pay off his bet.
I wish you had talked more about the failed bank reform act, and how the 'finance education' department is a way to blame consumers for banks shorting sneaky derivatives in a global ponzi scheme they rework every 20 years.
Where are people getting all this money? Where I live the jobs, homes, and future are all gone. And you didn't even mention the upcoming depression due to the collapse of the commercial real-estate market.
Let's hope David does not actually believe some of the things he said on today's program on the husband's mid-life fantasy car. He WAS trying to be funny, wasn't he?! Tess made good-natured, sensible points about the wisdom and fairness of the grand plan to pour savings into the busband's fantasy car. David's comments about the husband's fantasy car went astray when he started joking about the sense that this plan makes for a husband in midlife crisis and the lack of sense it would make for a wife, who would just waste money if she had an equal amount at her disposal. --Come on, David. --Most women's fantasy is not to spend an equivalent amount on a pile of useless handbags, as you joked. Maybe David was lured into a colorful and provocative debate by the program director and the humor just started backfiring--even for someone like me who likes the good-natured interactions that Tess and he have on the program. Methinks David drove his own backfiring fantasy car into a body of quicksand.
You should ditch David and find someone who knows some basics and hopefully more. He said the lender foreclosing on a bassoon loan would end up with a bassoon that the owner retained. No, they would end up with nothing because the owner who didn't pay the loan would hide the collateral so it can not be repossessed. That is why pawn shops keep possession of collateral. More egregious was his statements about a home construction loan, advising the caller to not put up the land as collateral. Holy cow - why would any lender lend a penny on a stucture being attached to and connected with land without having a lien on it too? A mortgage is a lien on real estate, and without collateralization of the land the lender would only have pledge of personal property with no viable alternative for repossessing and selling it. The correct answer: the caller should call local banks or thrifts and ask about a "construction/perm" which are done all the time and allows for progress advances during the interest-only construction phase, then smoothly rolls into a regular permanent loan upon completion so the borrower doesn't need to worry about changes in underwriting standards or rates during the interim.
I assure you all lenders will need to have the land as collateral, but the value for it will be included in the collateral so its value, if paid by the owner, will count towards required equity. He should be aware that few if any banks will be interested in a construction project without a general contractor, and may not even be interested in a permanent if there wasn't unless all permits were properly done and maybe even only if they have inspected along the way.
Today's comments on the show made by Los Angeles Times columnist David Lazarus to co-host Tess Vigeland included:
“This is totally a guy thing, Tess, you should totally spilt.â€
“Oh Tess, you so don’t just get what we’re talking about here?â€
"We have a plan to buy the totally coolest car and you what, you’re telling me, what, we want to go buy handbags and things?"
And finally, “It’s a guy thing. You just don’t get it. Deal with it.â€
Really? Is this really the year 2010?
Perhaps you were trying to be funny, but you went too far. Your comments to Tess, and all women everywhere, were insulting, sexist and dismissive.
Take your own advice: “Deal with it!â€
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