Ep332: Christopher Elliott – Question Conventional Wisdom When Buying a House

Andrew Stotz 00:03
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning. In our community we know that to win an investing you must take risk but to win big, you've got to reduce it. This episode is sponsored by Ace darts Academy's valuation masterclass, they call it the boot camp for valuation because it takes about 200 hours and students must value about 20 companies to graduate. It really is the complete proven step by step course to guide you. From novice to valuation expert go to my worst investment ever.com slash deals before March 31 2021 to claim your 30% podcast listener discount. Fellow risk takers This is your worst podcast host Andrew Stotz and I'm here with featured guest Christopher Elliot Christopher Are you ready to rock?

00:52
am ready.

Andrew Stotz 00:54
So Christopher is an award winning consumer advocate, multimedia journalist and customer service expert known for his practical advice and creative solutions to customer service problems. He's the author of scammed how to save your money and find better service in a world of schemes, swindles, and shady deals, and how to be the world's smartest traveler, and save time, money and hassle. Chris is a nationally syndicated columnist through the king features syndicate, which distributes his work to publications from the Seattle Times to the Miami Herald. He writes a weekly column for the Washington Post's and USA Today. Elliott is the founder of Elliott advocacy, a consumer advocacy organization, Christopher take a moment and filling further tidbits about your life.

Christopher Elliott 01:48
I just wanted to say I couldn't have written that better myself.

Andrew Stotz 01:53
I tried to say it as best that I could to with my radio voice.

Christopher Elliott 01:57
A great radio voice. I love it.

Andrew Stotz 02:00
Thanks. So tell us a little bit about what you where you are, what you're doing what's interesting in your life, right. Now, before we get into the big question.

Christopher Elliott 02:09
Well, like everyone else, I am kind of trapped where I am. But in a good way. I like where I'm trapped. I'm in Sedona, Arizona. I'm going to do something that probably none of your other podcast guests do. I'm going to swivel around and show you the view from my room.

Andrew Stotz 02:27
Fantastic.

Christopher Elliott 02:29
See, this is right over here. This is a wow, this is capital. Right over there. And we're having a nice beautiful day.

02:38
Little bit. Well,

Christopher Elliott 02:38
a little overcast, but

Andrew Stotz 02:42
looks beautiful. It is so cool.

Christopher Elliott 02:45
And when I'm done with this podcast, I'm gonna go out hiking.

Andrew Stotz 02:49
I was just gonna ask you do you get I mean, one of the things in Bangkok, I mean, we have, we have a park nearby. And I like to go to it. It was closed for a little while it's open now. But truthfully, even when the park was closed, I just walk around the block and ride my bicycle around the block is a lot less cars. Just curious, you get a chance to get out often. I mean, I know it sort of saves my mind sometimes. Oh, hell yeah.

Christopher Elliott 03:13
I mean being here. You know, the one fact that you didn't mention is that I am a global Nomad. I do not own a home. And this is going to be important later on in our discussion you'll see in a minute. But I've moved from one place to another because of the amount of travel journalism that I do. And we've been here in Sedona for almost five months, which is the longest that I've ever been in a place since I left my home and started moving. So as you can probably imagine, we're getting a little stir crazy here. So it's

Andrew Stotz 03:51
interesting, you know, I mean, one of the things that people are creatures of habit, and we like living in a place for a while, because we know where everything is, and we get comfortable with that. And yet you change your environment. I guess you probably don't change maybe your immediate environment like the computer that you work with and the system that you got set up of how you kind of manage your yourself personally, or does that even get changed all the time?

Christopher Elliott 04:18
No, I mean, the only thing that gets changed, the computer stays the same, the phone stays the same. I have you know, kind of set up like the, you know, the lapel mic that I use for for interviews like this, but everything else is is I'm a minimalist so I wear the same clothes every day, the same like t shirt and when I do when I have to get all dressed up, I wear this but otherwise it's just same pants. It's really I fit everything that I own into a carry on. And that is how I choose to live my life.

Andrew Stotz 04:53
And how does that just for the listeners out there that have accumulated a lot of stuff and they probably look at it and say Say, oh my god, this is heavy baggage for me right now. But I'm just curious, does it? How does it make you feel or what's the benefit for those people that may be thinking about, you know, moving towards that?

Christopher Elliott 05:11
Well, I'm kind of skipping to the end right now of my worst investment, but it feels amazing and liberating. And when I did it, when I really did it, four years ago, it was scary. On the one hand, because I was giving up everything I was putting, you know, everything that I couldn't take with me, I put some of it in boxes, like my college degrees, and things like that. And I put them in storage. But even now, all those things have gotten, I'm down to maybe two boxes. But on the other hand, it was a emancipating feeling to just not have to worry about stuff. And only and then taking all the things that I had and putting them on a computer. So all the documents, taking pictures of them and all that. And I highly recommend it. Being flexible, like that opens up all kinds of great possibilities to you don't have to be tied down to one place, to a mortgage, to utility bills, to really anything and some And really, the one thing that pandemic has taught us is that almost any form of work can be done remotely. Almost not everything, but almost.

Andrew Stotz 06:32
Yeah. And if you're not doing it remotely, you need to figure out either how to do it or find something else that you can do. I know I've focused a lot on my online courses, as you know, one of the alternatives. But it turns out, you know, these are great methods to share your ideas with the world. Now, I really feel like you're a good writer, because you've, you've opened up a loop, you've opened up a hook, you've told us that you kind of get into the end of the story here before we get started, which is kind of like an opening paragraph in a good article to get us excited. So I think we need to get into it. So let me just ask you the famed question, now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it, then tell us your story.

Christopher Elliott 07:21
I bought my first house in 2001. And I had resisted for a lot of years because I just moved around a lot as a travel writer and as a journalist. But I found a great place down in the Florida Keys. I love being in the Florida Keys. I was working as a writer and as a diving instructor. And the price was right $175,000 for a house in Key Largo. You can't do that today. This is before the big housing boom. I see you nodding there. You really can't do

08:01
that today. No way.

Christopher Elliott 08:04
So those were the days I didn't I wasn't making a lot of money. And so I I paid as much of the mortgage upfront as I could and then got on an accelerated plan on a 15 year mortgage. I just the idea of being tied down to some debt really didn't appeal to me a lot. I know that there are people out there who say that's good debt, there's good debt and bad debt. I believe all debt is bad debt. So I was trying to get out of it as quickly as possible. It just so happened that we also a few weeks after moving into the new house got pregnant. So our two bedroom, we knew was not going to cut it for very much longer. In the meantime, the housing market exploded. And I mean, it really, really took off it was you know, the year to your growth, especially in South Florida was just phenomenal. So by the time my son was a year and a half years old, we started getting very serious about selling. So we did a couple of renovations on the house, ended up selling it for $350,000 which was not that unusual in that market. But what we did next was I'm getting to my mistake now. We took all that money. And we moved to Central Florida and we paid cash for a house. Now I have this aversion to debt. So of course we're going to pay cash for a house if we can, I did not want to go to a bank and do all that. I thought to myself, this if even if we have a couple of years of moderate growth, we're going to Have, I'm gonna, I'm gonna make a lot of money off this house, it was a four bedroom house in the Orlando suburbs. And it was in a beautiful area, the house needed a little TLC, but I didn't mind we had some cash. So I was able to go and invest, put new hardwood floors in, and new windows, things like that. So the years start to go by, and, and I start getting restless, because that's just kind of how I am. And I'm thinking maybe we should sell a house and move into something a little bit bigger in a different area. And just as we're having that discussion, the bottom falls out of the housing market. And we say to ourselves, now, we're just gonna have to stay here for a little while longer. I had bought that house for $235,000. So I had, you know, little leftover to work with, and I figured I can I'll renovate the place dual landscaping, maybe add a new kitchen, things like that. But I always thought you read the stories about every dollar you put in, in landscaping is $3 that you get back. No such nonsense. It's just such nonsense. Because you know, one size doesn't fit all, there are people who do make a good return on their investment. But then there are also people who for whatever reason, don't. So this was, we bought the house in 2004 stayed in it until 2017. So we were in there for 1112 years or so,

11:41
wow, that's a long time given you

Christopher Elliott 11:43
know, now, we got stuck in that house, which was made it even more frustrating. But then I got to a point where, unfortunately, mom was not with us anymore. And she decided to leave and I needed to sell the house. And so I figured, well, you know, how much is this house worth? And Can I get some of my money back for it. And unfortunately, the housing market still hadn't fully recovered. And I ended up selling the house for I'm trying to remember the exact figure. Well, selling the house was a massive undertaking, because we had several buyers that came in and fell through. And then they kept renegotiating the price down. So we started at $305,000. And we ended up being negotiated all the way down to $285,000. Once the real estate agent took her cut, and once I started figuring out how much I had actually put into the house in terms of renovations and everything like that. We had lost money, we had lost a significant amount of money on that house. And, and I made a resolution to myself that I would never buy a home as an investment again, or I would never buy a home at all for that matter, but definitely not as an investment. It's just it's a very risky thing. You're guarantee you're not guaranteed success by any measure. But also what they tell you that about the American dream. And I know it's kind of ironic, we're talking about it. You're not in the United States, you're in Bangkok, but It's nonsense. There is no American dream of own of homeownership. It's an especially now. And I hope you ask me about that. Because things are changing so much now that really buying a home from I think most people is an it's not a smart idea.

Andrew Stotz 13:54
Oh, well. I mean, I have so many thoughts going in my head. But I'm just curious if you could summarize kind of the lessons that you learned from that.

Christopher Elliott 14:04
I should tell you, I don't have any prepared notes for this. So I'm just kind of speaking off the top you're

Andrew Stotz 14:08
doing, you're doing very well. So don't worry about that.

14:12
I think

Christopher Elliott 14:14
I think the lesson that I learned is to not listen to the conventional wisdom. I really, I just kind of assumed that what everyone was telling me that owning a home was the best investment you can make that you can't lose money off of home all those all those things may be true for some people, but not always true and not true for me. And I wish that I had maybe listened to some of the contrarians out there. I didn't do that. I think that it was also wishful thinking that well, you know, all these people are saying like you can't go wrong by buying a house. So they must be right and I want them to be right. But, you know, as I found out, they were not

Andrew Stotz 15:00
There's just a lot of different things that come to my mind about this, maybe I'll share some of the things that I'm thinking about. First is, when my father passed away, I was going through his papers. And I found this one paper, just one piece of paper where he wrote down the house, the first house, he bought, the date, he bought it, and the price he paid, and then the price he sold it for and on the date that he sold it. And I went through each of the houses that he had, as you know, he was a career employee at DuPont. And, and basically, if he just looking at the total prices, you know, I would say he probably had about a 2%, average annual return. But that doesn't, of course, account for all the spending that went into keep up that house and everything. So obviously, if you're buying a house in perfect timing, and you're selling it at the perfect timing, you know, that's just, that's just an anecdote, really, of you know, somebody that's done really well. But that's not the way it generally happens. So, but it was just great. The fact that I could just read it written out on a piece of paper, and he was, you know, started buying his first home at the age of 60, outside in 1963, or something like that. So the second thing is, I was thinking about, you know, buy low, sell high, you had just sold high, and then what you did is eventually put that back into something, but what else do you do? Because that brings us to this conventional thing, which is, you know, this idea that we're, I guess I would I would say is it, it's like a marketing message. Now, sometimes a marketing message is meant to sell a specific product. But sometimes a marketing message is meant to just sell a particular behavior. And I think it's good for us to listen, when we listen to things to think, what is the what is the objective? I mean, someone's taking making their voice out there to tell you something. They're spending time energy and all that to convey their message. What are they? What's in it for them? What is it? What is the message, and I think, you know, that message in America was that message of owning a home, and living the American dream and all that. And I think, you know, for me, I bought my first home when I was 40. In and I sold it very quickly after that never bought another one. And the idea that, that I'm not attached to that gave me a lot of freedom, you know, in that way. And, you know, I think also the other thing I would last thing I would just say is that the America is America housing market is fueled by one thing that most countries don't have. And that is Fannie Mae and Freddie Mac, which are the secondary mortgage buyers that are buying loans from the banks. And this is like a huge sucking sound that these organizations originally they were just built, the FAS help the banks to manage their balance sheets, when they would have too many loans, they needed to sell some, but then they turned into this giant organizations that are demanding loans, whether they're, you know, lower income loans, or whatever. And now all of a sudden, you just have this huge government organization that is fueled by this. And that doesn't exist in like Thailand, as an example, when a bank makes a loan, it's gonna be on their books for a very long time. And it just not it's so in some ways, in some ways, I wish that Fannie Mae and Freddie Mac were privatized that you know, private society, business, if there's a market for it, they do it. But that's a whole nother story. And that just fuels the idea of, you know, availability. And then the last thing is just the fact that this you said good debt, bad debt, you know, my niece, one of my nieces just bought a house something in your in the middle of a crisis, how can you do this? Well, money is free. How can you avoid going into debt? when money is pretty much free, you know, getting in at let's say, two 3%. Everybody's going to go into debt, who can resist that and all of a sudden, we're in a another massive amount of debt for a lot of people anyways, a lot of different things. Anything you'd add to that?

Christopher Elliott 19:09
You know, one of the things that the recurring thoughts that I have, as I look back at the situation and think how could I have been so stupid, is that I really, and I'm not a big believer in government conspiracies. But I really do believe that the system is kind of rigged. That the there's a tax deduction for your mortgage, that there's this constant drumbeat of own a home, if you don't own a home, you're not successful buy a house. And you have an army of real estate agents who are out there trying to sell you a house. I mean, during the pandemic, it's boom times for the real estate industry. Now is that even possible? You get people who are out of work and you've got an economy and recession How is it possible that home prices are actually going up? If you don't think something is wrong with this picture, you know, you've already drunk the Kool Aid probably. And that I'm afraid that that's what too many people have done is that they've drunk the Kool Aid, they assume that homeownership is the end all be all. There's some social engineering going on where people, the government is encouraging people to buy homes, to upgrade into bigger homes to take out more debt. It's just not there is when I look at the situation, I just see more wrong than right.

Andrew Stotz 20:36
There's an interesting book called hidden in plain sight. And it's kind of the one dissenting voice on the investigative committee of the 2008 financial crisis to the mortgage crisis. And basically, his argument, which never really got heard, was that it was fueled, you know, that the crisis was fueled by obviously, first thing was low interest rates. But that wasn't the main thing, it was that the government was mandating that, you know, the Fair Housing Administration was mandating that, you know, more and more people got access to, you know, loans, which, you know, theoretically makes sense. But everybody knew in the banking industry from history, everybody knows that if you, if you, if you bring in a million more people who have lower credit scores, there's a cost to them. And rather than bearing that cost through the government budget, they decided that they would, you know, kind of hide it through Fannie Mae and Freddie Mac, and then you bring in a million more buyers, and when you have a million more buyers out there pushing up prices. And so there's so much involved in it, but I think the lesson for the listener out there is, and I really like what you talked about, about, you know, don't don't just fall for the conventional story, the narrative, you know, look at other other thoughts, you know, ask around, find out somebody that's been renting and say, why are they doing that? You know, it's one of the things about, you know, conversations Nowadays, people just say, well, you think that I think that we're on two sides, but one of the biggest intellectual challenges is to ask yourself to question, why does that person think that? Stop trying to defend your position, find your let's say, you think you're right, but why does that person think that way? And then, you know, explore that. And that's a mental challenge. That's very difficult these days, because it's so polarized.

Christopher Elliott 22:24
I think we're on the same page you and I on homeownership, probably our, maybe our positions are very similar, since you haven't owned a home since you're in your 40s. But you only owned one home, I own two homes. So you would think that I would maybe have learned my lesson that the first time around, I you know, what I keep thinking is, what if I take that money and invested it. And even with the downturn during the Great Recession, I would be retired by now if I put that money into the stock market.

Andrew Stotz 22:54
Yeah. And that's one of the things that I always tell people that I talked to is just the idea that, you know, I have an investment in my coffee factory here in Thailand, my best friend runs it. And he's got a great management team. And every problem that comes up, they are hustling to try to figure out how to survive and thrive and keep profit going and keep growth going. And when you buy a company, in the stock market, you're basically buying a management team, and you're buying a CEO. And when you buy many companies, you're buying many management teams and CEOs that are trying to figure out how to make the company successful and beat the competitor and still be profitable. And that there's just nothing that beats that from an investment perspective, I would always want to be able to own a piece, even if it's a tiny piece in a great quality, you know, CEO and a great quality management team. And that's something that housing never can do. And I think in Thailand, it's been interesting, because what's happened is that, you know, the first of all, they shut down tourism, so there's just a lot less people in Bangkok. Second thing is that we had had a big housing boom. And now all of a sudden, all the people that thought I was crazy for not buying a house because you know, it goes up, all of a sudden, we're sitting on this huge surplus now of property in Bangkok. And the secondary market, the ability to sell those things is just negligible. And so many of those people thought they may exit at a higher price, but they ended up not. And that's the huge part of the game that they were expecting in the housing market, not that they were going to earn income from it, but that they were going to get a big gain in the price. So sometimes when we look ahead, we just it just never gets there with property prices. Sometimes it does. Sometimes it doesn't. Well, listen, that was fantastic. And I think a lot of lessons but let me ask you last. Second to last question. What one action would you recommend our listeners take to avoid suffering the same fate? I mean, think about that person who's listening right now say my mom had a house you know, my mom and dad out of house. Their parents had a house everybody I know has a house. I like this house. I want to buy it. The money's there. I can get it. What advice would you give them

Christopher Elliott 25:00
I would tell them to think really carefully before you make that purchase. The, you know, one of the things that I kind of hinted out was that they, the way that people work today is changing so quickly, Are you absolutely sure that your job is going to be in this place in a year in five years in 10 years, the way that people are working today with you know, we're doing this on a zoom call you, you really don't have to be anywhere to do a lot of the jobs that are being done. So is this really where you want to be? And if the answer is no, I mean, my financial advisor always says, if you're not going to be in one place for more than five years, don't buy a house just rent, because you'll have more flexibility. And, you know, I really wish that I had listened to more voices like that, I didn't have my financial advisor back then. But if I had, I might not have purchased a home, I might have put some of that money into the stock market. So my advice would be, to not just listen to the people that you know, and that all have made the same investment mistake. Listen to some people may be who are not doing that, and find out why they're not doing it, you know. And renting really is, there's so many different rental options. Now. I mean, I, as you mentioned before, I do a lot of travel writing, and you can you can rent places by the month, you can rent them for six months at a time for a year at a time, you can rent with utilities included vrb o and Airbnb have long term options now. So you could do what I'm doing and just always be in a different location and never be in one place for more than a month. And that's kind of an exciting thing. It's scary. But it's also very exciting. Because you get to see a lot of the world you know, you don't have to just be in the same place all the time.

Andrew Stotz 27:01
It's interesting, because when you read older books, you read about people and they say, Well, you know, they live that this hotel, like what? You can live in a hotel, you know, everywhere, there's places that you know, offer. And nowadays, you know, you could imagine that there's a lot of places that so don't be afraid to ask, Is this for rent? Could I rent this? You know? Yeah,

Christopher Elliott 27:22
absolutely. Well, and you know, what I've, I've, I've been writing this one newspaper column for more than 20 years, called the travel troubleshooter. And it I helped someone with a, what seems to be an intractable travel problem. And, and there's this recurring theme that I've noticed is that people will talk about how they saved a lot of money, and waited until retirement to travel and that there's this, this was their one big dream trip that they were taking. And something went terribly wrong, I didn't they want me to fix it. And over and over again, I talked to people who have waited until they're 62 or 68, to retire and travel. And I'd like to just challenge your listeners and viewers, to not wait until then to start traveling. It's a big world out there, there's so much to discover. If you can sell your house, rent your house to someone else, get out there and travel, you can do your job at the same time and discover the world which is you know, you don't want to wait until you're 62 or 68 or older, because you might not have the ability to do to discover some of these parts of the world. I mean, it's not like you're gonna go heliskiing when you're in your 70s zone, you know, get out there.

Andrew Stotz 28:44
Do it now. Well, I speaking of someone that left America when I was 26, I just got to Thailand, and I just you know, I was on fire and I have been since and I traveled all around and I just by I personally love from travel. What I love most is kind of challenging my paradigm challenging my framework to walk into a country like China where I was told that, you know, this is communist, this is bad, this is this. And then the walk in and say okay, so it's been here for 5000 years, or whatever that number is, you know, we're talking about a pretty old civilization compared to let's say, America, where I came from. So can I mentally challenge myself to take off the framework that I've been given? And what you learn when you travel more, which I think is so valuable is the idea that really each country socializes their people with their own myths and beliefs and, and truths, you know, but in the end, it's all you are a product of your socialization within your country, because you can just go from one country to the next and see people thinking about things so differently. And you think are people really that different? No, they're not that different, but they are given different thoughts and different, you know, right from a young age. And so you know, I love the idea about traveling. Just to break my paradigm and say, you know what I thought was good, maybe it's bad and what I thought was bad, maybe it's good, challenging your mind. So I think that's a big gain I get from that travel aspect. I just wanted to highlight one last thing, and then that and then we'll close this out. But, you know, after interviewing, after receiving about 500, written stories of loss and interviewing more than 300 people, I've identified six common mistakes. And I just want to talk about number three, which is driven by emotion or flawed thinking. And what I propose to people in this how do you how do you handle this? Well, what I say is you find an explorer, and list out on a piece of paper, opposing views, and discuss them with a knowledgeable and objective person. It's a very simple thing, get a blank piece of paper, and just write down why you shouldn't do this thing that you're so excited about. And it's a good way to kind of challenge yourself to look at the other side, you may still make the same decision, that's fine, but take the time to take the look for the opposing view. All right, last question. What's your number one goal for the next 12 months?

Christopher Elliott 31:15
Not getting infected.

Andrew Stotz 31:18
That's a good goal. Well, then you should be in Thailand because we've only had 7000 infections out of 70 million people and only 70 deaths. So

Christopher Elliott 31:27
I'm gonna come visit you.

Andrew Stotz 31:29
Yes. Well, you're welcome and my mother who's 82 and listening to this podcast, we would both welcome you for a nice cup of tea I think is what you're drinking. So listeners, there you have it another story of loss to keep you winning. Remember to go to my worst investment ever.com slash deals to claim your 30% podcast listener discount on the valuation masterclass. As we conclude, Christopher, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?

Christopher Elliott 32:07
Thank you for having me. I really appreciated nama stay

Andrew Stotz 32:11
nama stay sobre de kaap. All right, that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.