This was actually on Ben Jones’ blog, but I thought was such a gem as to be worth saving:

Carol Lloyd at the San Francisco Chronicle examines the finances of two speculators.

“In the three years since Lori Sacco and Chris McCook put their faith in real estate, the couple have embarked on what might conservatively be called an E-ticket ride, pulling equity from appreciating properties to provide down payments for the next investment. They have bought eight vacation properties, four homes in Florida, three in California and 100 raw acres on top of a mountain in Lake County.”

“McCook got licensed as a contractor, Sacco as a real estate broker. Together last month, they opened a real estate brokerage. Sacco readily admits that she and McCook have made mistakes. This summer, the couple ignored their own formula and bought two high-end condos in Florida before learning how competitive the vacation rental market was there. Now, only a few months later, they are putting them on the market to reduce their debt and stress. ‘We broke our own rules,’ she explains. ‘Vacation (rentals) are not for the faint of heart.’”

“They don’t have jobs, but their lives appear to be a whirlwind of work. They don’t have incomes either, though they maintain middle-class lifestyles. Sacco estimates that along with McCook’s mother, they’ve made $1.3 million since they began their buying spree, but all of this is still in equity on their properties. Their monthly reality is more sobering. They have $2.3 million in mortgage debt and negative cash flow that ranges from $5,000 to $15,000 monthly depending on the season.”

“So how do they pay the bills? ‘We sort of count our equity loans as our income,’ she says, with the slightest wince. ‘If we had real jobs, we’d be fine, but we just need to get some money in. Some people call it a pyramid, but I don’t like to think about it that way.’”