He was certain that would lead to many foreclosures in California, as prices had gone up far beyond the ability of the average person to afford. It was no secret that adjustable rate mortgages would be resetting in 2006, 20, and that many borrowers would not be able to handle the increased payments. How did he know, when so many others didn’t? He explained that a credit melt-down was looming and a housing crash coming. In 2005, I was hosting a radio show in San Francisco, the Real Wealth Show, and had Robert Kiyosaki, the author of Rich Dad, Poor Dad as a guest. That property went up in value about $100,000 per year for 10 years straight!

It was the beginning of a run-up in real estate values in California. Little did we know we had timed the market perfectly. We would manage the property and pay for all expenses, in exchange for inheriting it someday (in which case the property basis would step up to market value, and the past taxes would be eliminated.) Rich and I found a 6-bedroom home that met the exchange amount, so we offered to turn it into a 4-plex, while living in one of the units. Paying the unexpected taxes would have made that impossible. I jumped in to help him out, mainly to reduce his stress, as he had been hoping to retire. That meant he had to find a replacement property in just a few weeks time.

However, he had taken many tax deductions from that property over the years, which would be recaptured, unless he did a 1031 exchange. Real estate values in California slowly declined after the 1990 oil price shock, debt accumulation from the 80’s, and growing consumer pessimism from high interest rates.ĭad was invested in an apartment in Marin County that lost value due to poor management during a brief recession, and it was subsequently sold at a loss. In fact, one of his challenges became my opportunity in 1996. I’ve been obsessed with understanding market cycles and predicting what would happen with the housing market for decades, after watching my father get blind-sighted several times during his real estate journey.

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