If they have 17 properties, exactly how could they "lose" a few? Were these allowed to go back to the bank with no recourse? Does she possess equity that could be used to pay the bank(s)? This is probably the tip of the iceberg. I hope her husband is prepared to go back to managing hotels.
* Foolishness is no substitute for good financial sense. *
...the Cromers began leveraging the equity in their first house to buy a second house, then leveraging their second house to buy a third, and so on. In all, they have acquired eight properties in three different states with an estimated value of $3.4 million.
The strategy requires a strong stomach for risk, not to mention a strong housing market. (We should emphasize...a strong housing market. AKA Housing Bubble)
"We have gotten lucky," said Robert. "But we've also done our homework and we've been willing to take risks." (It's called "gambling".)
Though the couple has more than $1 million in equity on their properties, they borrow as much as they can to still qualify for the best rates. "Then we ride the market until we can refinance with 20 percent equity," said Yvonne, adding that most of their loans are interest-only, five-year adjustable-rate mortgages. (Lions, and tigers, and Interest-only ARMs, Oh my!!)
2008-03-23: Investors are going bust
Robert and Yvonne Cromer began investing in real estate in 2000, when they tapped the equity in their College Area home to buy a nearby rental property.
Over the next few years, the San Diego County couple repeated the pattern, accumulating 17 properties in five states. In 2004, they were featured in a CNN Money article headlined “Tycoon in the Making.”
Since October, they have lost three homes in San Diego County to foreclosure – homes they bought for a combined $2.6 million, according to county deed records. They have lost three homes in other states to lenders, Yvonne Cromer said.