We're all Capitalists when we are making a profit

During the 90's when the stock market was booming and people were making a killing on tech stocks no one was calling for government regulations to tame the market or for higher taxes on their profits. Same thing happened in the early part of this decade. Where was the outcry for investigations when people were buying houses and flipping them overnight for huge profits?

Now we want to put all the bankers in jail and regulate the heck out of the mortgage industry and Hillary wants to nationalize the oil industry.

When we make a profit it's our great skill that at play, but when we lose money it's someone else's fault and when a company makes a profit its through stealing. Someones not thinking right here - wonder who?

The great mortgage bailout

Our politicians seem hellbent on making the country one great nanny state. The Presidents proposal to bail people out is just the latest example. Here in NY they want to keep us from smoking, eating trans-fats and taking any responsibility for our lives. Fools and speculators have driven up the prices of homes in major markets and now someone has to pay the piper. It's always the politicians solution to make all of the prudent people pay for the crooks, fools and speculators irrational behaviour. People have been speculating since the great tulip bubble in Holland hundreds of years ago and someone gets burnt. Hell, I bought into the stock market in late 1999 and lost a lot of money. I didn't sue anyone or call my Congressman to get my money back. Instead, I kicked myself for my stupidity and learned a lesson. If people lose their houses because they took out liar loans, why should I pay (and I will, as will you)?

I wish politicians would let the free market take care of itself.

Moving week

Well, this week we will be moving to a new house and am putting up our existing house as a "Rent to own" purchase. I'm not sure if the Christmas season will slow shoppers, but I've had three calls since I put out the sign Saturday. With this rent to own concept it seems that all I need is a sign. The $1000+ that I have spent advertising in papers has not yielded a single buyer and amounts to about 1% of the inquiries about the properties I have used this concept on (4 in total now).

The tenant at my trash property has been tearing the place up and seems to be pretty competent at fixing up properties. But he has uncovered some defects that neither of us saw. It seems that the roof has had a leak on one side for some time. When he tore the bath room wall off the interior of the outside wall was soaking wet. He tracked it down to a roof leak, found huge ant nests in the walls and lots of rotten wood. The property is probably worth even less now in its current state and now that we know the condition of the roof (it was very hard to access since the adjoining house is only 5 feet away).

I've fallen off blogging over the last few months for a couple of reasons. My work load at my job has been incredible the last few months due to being assigned to 2 high value Six Sigma projects. I've also been in a funk due to the inability to sell my rehab. But fortunately, thanks to the prodding of one of my readers, I have that house rented out now and feel considerably better. After moving and putting my current home in shape to lease-purchase I expect to get back on track.

Goals - review and look forward

I've been thinking about how well I did Vs my goals for 2007 in my real estate venture. I've been told that if you write down your goals and review them daily you have a high chance of making them. But that doesn't seem to be the case in our situation.

I did buy 3 houses this year, but since I didn't sell any properties this year, I look at my entire plan as flawed. Flipping houses in this area takes much more expertise than I have at the moment. Watching all the flip shows on TV where clueless people do everything wrong and still make $100K just discouraged me most of the second half of the year.

But I did meet some of my sub-goals:

I did find over $720K of funding although I did not seal the deal on the major source ($500K), so I ended up having about $220K of funding available but did not use any of it. The major source was going to cost me $6500 to finalize the deal (I did get approved) and I borrowed that money from Prosper but by the time it came around to paying out the money and signing the papers, I started to realize I was not going to sell my rehab and was stuck with a $2300k per month payment to make, so I bailed.

We did do direct mail all year to pre-foreclosures but again, do to the failure to sell any properties we scaled back our advertising to just those properties in growing towns. This amounted to less then 20 letters per week which isn't enough to really do any good.

The third goal we just didn't do after our first 2 purchases in February. When we couldn't sell the wholesale property quickly and realized I would need much more cash for the rehab I only worked with pre-foreclosures and only made a limited number of offers to banks for short sales.

I did get an operations manual in place which has been a really good way for my wife and I to communicate about what to do.

I see that most of the sub-goals were geared towards buying property and not towards selling. There were several strategies we tried for selling properties: FSBO, flat-fee listing, full service Realtors, E-bay auctions, The "Sell Your House in 5 Days" strategy and Rent-to-own. The last was the the only success that I had, which doesn't get me any of the equity out of my houses.

So now I am in the position of many real estate investors - lots of equity but little cash.

I had hoped to double the number of houses bought and sold next year when I first devised my 2007 goals, but now think that I will scale back. My experiences buying in areas where population is declining echoes my 1980's real estate experiences in WV.

In the next month I hope to come up with a plan for 2008, but for the next couple of weeks will focus on moving and fixing my current residence so I can market it as a Rent to own house.

A Solution to Real Estate Situation

One of my readers left comments suggesting that I rent out my properties to stop my financial bleeding, so for the past 3 weeks I have been feverishly trying to do that. I have received large deposits on both vacant properties that I have been trying to sell most of the year. In addition, I am refinancing my rehab from 9.7% to a 6.5% interest rate loan.

The "rent to own" strategy that I have used before is what got me a solution that works. Typically rents for homes in this area average about $1000 per month and many of the callers to my sign could or would only pay that. But I found 3 people who competed for the property and am getting $1750 per month. The couple that is renting the property with an option to buy are paying one months security deposit as well as a $1500 option payment to purchase the property in the next 12 months for a price of $199,000. At that price I will break even on this property (mostly due to the extensive carrying costs that I have incurred). So, I feel fortunate that for the next 12 months I should be cash flow neutral on this property and I shouldn't get burned when I sell. If they don't buy I will probably do the same thing again and should have a positive cash flow.

The "fixer-upper" that I have been trying to sell since February and couldn't give away at an auction has also been "sold". I've given the buyer a 3 year lease for $450 per month with a $375 per month rent credit (He paid a $1500 option price). So after 3 years he will have accumulated credits of $15,000 at which time I will Deed the house over to him. Although I'd rather have the cash this is equivalent to loaning out the $13,500 loan balance at 11% interest rate, so it is a pretty good investment.

My big education this year has been that "flipping" is for the people in growing metro areas - not any places where I have lived. But in areas with poor economic climates rent to own is a high demand product for houses.

WOW! House rented already!

Just hours after posting my house on Craigslist I got a tenant - from England no less! She's coming to the US to study for her Masters and will be sending me a check for more than the first months rent and deposit. I just need to send her some personal information and once I deposit the check wire her back the balance.

Too bad the education system is so bad in England. Poor Kelly can't write proper grammatical sentences or spell very well for someone with a college education. Maybe she's majoring in Scam 101. I'm sure she'll make a great tenant though!

How to Sell Your Home in 5 Days?? No Sale Again!

I've decided that the author of "How to Sell Your Home in 5 Days" is either a fraud or just sold his properties during the booming real estate market days. I've now tried to sell 2 homes using his methods and had either no bidders or bidders trying to steal the house. I've spent $1000 in advertising in papers and direct marketing to prospects who are most suited to purchase the property, so I don't think that I have missed anything the author suggested.

A commenter (LRK) has offered the suggestion that I try to rent out the properties and that is what I am going to try to do at this point. With winter approaching (very slow sales season) and heating bills threatening to take more of my money, that seems the only reasonable recourse. My big concern is how low a rent will I be forced to take on my Cheektowaga property. My monthly net is -$2300 and no properties here rent for that amount. I've got the properties listed on Craigslist and with various relocation/ temporary housing websites. Advertising in the Buffalo News is like throwing cash down the toilet, so signs are the only other means I can think of doing at the moment.

Location and Price in Real Estate

I have been watching real estate flip shows over the last few months while sitting in limbo waiting for my properties to sell. "Flip this House", "Flip That House" and "Property Ladder" have been standard fare on Saturday night. "Property Ladder" is the most amusing as it usually highlights clueless people who, given the advice of a professional, learn some hard lessons. Despite their mistakes and ignoring the expert advice many make lots of money. Which highlights the most important lesson in real estate - location can overcome ineptness, ignorance and stupidity much of the time. None of the shows I watch feature homes in Buffalo. The houses are always located in a thriving metropolises of CA, TX, SC or CT.

Which brings me face to face with why my rehab is not selling. This is a beautiful home that has everyone who enters it exclaiming how wonderful it is. It's located in a great neighborhood of well kept homes. I've not heard a negative comment yet about the house itself. But there are two comments people make - "too expensive!" or "taxes are too high!" We started out at at a price of $219k and are now down to $199k but one comment we still get is "taxes are too high" (taxes are $7800). Now this is a house that has 2800 sq ft of living space and at $199k is selling at only $71 per sq ft. It's assessed value is only $165k , so I guess people are thinking it will be reassessed once it is sold and taxes will go higher. Houses of similar size located in the neighborhood are all assessed the same so the possibility of getting the assessment lowered is slim to none.

Five hundred yards to the north houses are selling for over $100 per sq ft. The difference is that you cross from Cheektowaga to Amherst. Both cities border Buffalo but Amherst is known for its good schools, while Cheektowaga has schools which are not so good and rife with racial problems. Cheektowaga is where inner city blacks are moving and Amherst remains largely white.

When I had researched the house for comparables, the only house that had sold in the last 2 years of similar size and style in Cheektowaga was the one I bought (for $182k). There had been multiple sales in Amherst within 0.5 miles in the $250k-$350k range of similar homes. To the eye, the neighborhoods looked identical, but crossing the townline makes all the difference in the world.

I recently found a top notch Realtor and he told me that only 5 homes have sold for a price of over $200K in Cheektowaga last year. He blamed the taxes, but Amherst has similar taxes. So is it schools, racial composition or some other factor making Cheektowaga a bad location? One thing I have noticed is that 98% of the people viewing this home are black. It's a desirable location for blacks who want to leave Buffalo. Whites who wander into my open houses will just turn around and walk out when I tell them the house is in Cheektowaga.

But the kicker is that I have learned that there are only 785 black households in all of metropolitan Buffalo who would qualify for the loan and pay the taxes on this property. That is a very small pool of buyers. In a sense, the Realtor is right that taxes are limiting the prices of houses in Cheektowaga. But the ultimate reality is that this is a town where whites are moving out and blacks seeking to flee Buffalo are moving in. Buffalo is a poor city and the good paying union jobs are disappearing.

So what were my mistakes in buying and selling this property?

• I did not recognize how much influence a town line made in price. Even though no one would recognize the difference between Amherst and Cheetowaga driving the neighborhood, there is a substantial difference in a buyers mind.
• I did not realize that there was a strong racial component to this neighborhood. Over 98% of the 200 people that have visited the open houses have been black. It is possible that a white family will buy this but not likely at all. This also reduces the possibility that a relocating black family will buy this house.
• I did not realize how limited the pool of successful blacks are in the entire Buffalo metro area. If my assessment is correct that only a black family will buy this house, that means less than 0.079% of the people in this area can afford it. To sell I will have to reduce price drastically to increase the pool of buyers or wait longer.
• I did miss on improvements that were needed and spent ~$15k more than I had estimated. Had I used a contractor like the people in all those flip shows used I would have spent about $20k more than I did spend and would really be in the hole, so I feel only partially bad about this.

In the end though, I think it is all about location. Location influences the pool of buyers. There aren't many buyers in Buffalo able to spent the outrageous prices for home as seen on the flip shows near big cities. In my case, the demographics are working against me.

How to Sell Your Home in 5 Days?? No Sale!

I mentioned that I was going to try the technique advocated by the book "How to Sell Your Home in 5 Days" last weekend. I spent several hundred dollars advertising the property, bargain priced it below my acquisition costs at $9,900 and handed out flyers at the local REI club meeting.

The results? Four people showed up, no one was willing to put in any type of bid. So much for a "sure fire" way of selling a house.

I've advertised my expensive rehab for next weekend using the same technique. I've direct mailed postcards to every person in Buffalo that could qualify for loan for this house as well. I hope I get some offers on that house since I'm bleeding $2300 per month on it. My biggest fear now is that no real estate is going to sell until the spring.

Will there be bidders?

I've scheduled 2 open auctions this weekend and next to sell our 2 properties based on the book "How to Sell Your House in 5 Days". Per the book, I should have received 40 phone calls about the property for auction this weekend. So far I have one call. I've not yet gotten any response from news paper advertising in this city. I have the properties advertised in both the major paper and weekly community paper and the price for the fixer is set at only $9,900.

I attended the local real estate club meeting on Wednesday and passed out about 30 flyers. Typically there are over 100 members at these meetings but this week the topics did not have any draw, so attendance was lower than my expectations.

So, I'm not sure if I am going to get any bidders this weekend. On the other hand, signs seem to be the best draw, so I will put out lots of signs tomorrow.

New House

It's looks like I will be buying a new house in the next 60 days. I had a seller accept an offer of $269,000 on a 3200 sq ft contemporary home in my town. The seller had paid $290k for the house and had upgraded the kitchen and put on a new roof. The house is assessed for $339k.

After 9 months on the market and moving to Arizona they became one of the desperate sellers that you read about. The seller had dropped the price from $350k to $290k and had 3 interested parties. We all put in offers, surprisingly, the offers were all around $265k. We had included $5k in seller concessions and our offer was rejected initially. But we upped our offer to $270k without concessions and no one else was willing to raise their offer, so we got the house.

The plan is to rent out our existing house. Maybe a "rent-to-own" offer might work. There are few properties for rent in our town as it is quite desirable to live in. I think that we can still extract more value from our existing home by doing some upgrades. The new house also has potential for upgrades to add value.

At any rate, my wife (who has been unhappy with our current home since we married) is overjoyed with the new house.

Another last desperate attempt to sell property

While I was putting out signs for an open house at my Cheektowaga property the neighbor walked over and handed me a book titled How to Sell Your Home in 5 Days. After reading through it I decided to give it a try on the Buffalo property that I bought in February. I haven't had so much as a looker for months now, I tried to auction it off on eBay with no bidders, so what the heck.

The steps given by the book:

• place an add a week before the sale date in local papers (I put ads in Craigslist as well as weekly and daily papers)
• price it lower than you might want to sell it for
• hold open houses so potential buyers can inspect the property on Saturday and Sunday
• Have a bid sheet at the open houses so that the buyers can place a bid on the property and everyone can see the bids
• call bidders on Sunday evening and do a "round-robbin" bidding, calling each successive bidder and see if they want to raise their bid
• sell house to highest bidder

So, I am going to try to sell this house on the 21st of October.

I had an open house for the Cheektowaga home this weekend. I had 15 people look at it (that's 13 more than the Realtors showed in 2 months while they had it listed!). Every one loves the house- no one wants to pay @$%# Cheektowaga's taxes.

Third Quarter Net Worth update

I've updated my third quarter net worth at NetworthIQ with the graphic located on the side of my blog. My networth is down slightly from the second quarter mostly due to increased debt and decreased cash. I had never really included the profit from the potential sale of my property so that I have not shown a decrease in real estate equity. But monthly mortgage payments from the property I am trying to flip is draining all of my cash and forcing me into debt.

The first quarter of this year was a heady time as I bought 2 houses through what I thought were great short sale deals. However, the real estate market has not been kind and I have been unable to sell either house or purchase new properties. One property that I own that I have "sold" twice through lease-purchase options continues to cash flow very nicely, but this has not been a good time to flip.

Back to flat fee listing

Well, I've gone back to flat fee listing services on both my houses for sale after wasting 2 months with a full service Realtor. The first Realtor was totally unprofessional while the second just wasn't interested in selling the property. At least that is the impression he gave me.

For my wholesale house I am using a new service called IggysHouse which has no charge at all (most flat fee listing services charge $300-$700 for their service). The flat fee listing service that I had for my more expensive rehab is going to give me the balance of my listing time at no charge, but I expect there will be a renewal fee.

I'm also considering a rent to own option for the rehab house. The main problem is that it will give me a big negative cash flow and leave me with a house still unsold next fall if they renters don't buy. I feel I am in lose-lose situation with this house at this point. There are no good options.

• refinance and rent - drops payment $300 per month but lose another $4k upfront and still lose money if I rent it
• drop price under $200k per Realtor recommendation- lose money (already spent over $201k and rising $2300 per month). Unknown how long it will take to sell at this price.
• rent to own - lose probably $800 per month for next year and hope buyer gets financing. Only 30-50% chance of that, so I most likely will have the house vacant again next fall

I had convinced my wife to invest in real estate this year so that she did not have to get a job. I was sure we could make $20k. Looks like I will lose at least $20k this year with no end in sight.

Realtors aren't so great

I've kicked myself for not putting my houses with a professional Realtor, but now realize a Realtor is not a panacea.

I've had my rehab house with a Realtor for 50 days now and here are the results:

• 2 showings
• no flyer box despite repeated requests
• one open house last Sunday without my agent - no advertisements were made at all for the open house, no signs were put up in advance, no mention in the MLS and it was only open 1 hour. Not surprisingly only 4 people showed up
• no magazine advertisements.

I chose the top agency in this area and asked for a top agent. I got garbage. Last night I fired the agent and demanded the #1 seller or else I was going to change agencies.

I was getting 10-15 showings a week when I was doing FSBO using just street signs. I read all this great hype about what agents can do but don't see it.

Maybe I should kick myself instead for using an agent

Rent to Own (Lease-Purchase) Real Estate

I've been struggling lately to sell 2 of the properties that I purchased this year. One a fixer-upper wholesale flip hasn't had a bite for 6 months, the other is a nice rehab that I am trying to sell at the upper end of it's neighborhood price range. The first property is in Buffalo, the second within a mile of Buffalo.

The first house that I purchased for investment in this area was a 1.5 story brick cape in the town of Lancaster. Lancaster is the fastest growing suburb of Buffalo. We purchased the house for $80k. The basement was full of water and it had sat on the market for nearly a year. We spent about $19k rehabbing it with about $8k going to drain tile. Since our cash flow was very tight I couldn't let it sit on the market for long, I decided to try to sell it as a lease-purchase.

I had learned about lease purchase primarily from a course I purchased through Ken Preuss. For this property I put up one sign in front that said "Rent to Own". This sign generated over 500 calls last year and we quickly leased the property to a family. Rental rates are quite low here and a typical home rents for ~$900 per month. We were able to get $1050 and a $2500 non-refundable option payment. The lease agreement specified that the tenants pay the first $200 of repairs, so my maintenance for last year was $0 and the property generated a positive cash flow of $300 per month.

The tenants took care of the property and actually made improvements (installed a new bath room floor and a nice ceiling fan in the kitchen) at their own cost. In the end they decided to buy another house and have moved out leaving me with their option money. We put our "Rent to Own" sign out again 2 weeks ago and were again flooded with calls. This year we have a $3000 option payment and raised the rent to $1075. The option amount is for a sales price of $139k and we give the tenants $500 rent credit towards a down payment if they pay by the first. We quickly found another tenant.

For a rental property this method really seems to work well. The advantages:

• the rent we get is about 20% above current market rates
• the rent credits really motivate the tenants to pay on time (I used to have to chase tenants down in my previous days as a land lord)
• the upfront money we get seems to motivate the tenants to take care of the property
• we don't have to worry about the nitpicking small maintenance items that used to get me out of bed at 2 am
• the selling price is higher than what I think I would get by putting the property on the market

The one disadvantage has been that I cannot get my equity out of the property, although I was able to recover all of my down payment and rehab costs by getting a HELOC type loan on the property.

The concept does have it's limitations. For starters,we are at the upper end of the rental market here and I don't think I could do this for my Cheektowaga home. I would need to rent that one for $2000 per month just to break even and I have never seen any houses advertised for that rate here (although there must be some available through re-lo offices of local Realtors). Preuss also talks about getting $5k to $10k as option money, but that is too high for our area. $3000 seems about right. The rent and option money really drops the number of qualified people significantly (95% self-eliminate when they find out the terms) at the price range I am charging.

The courses I have taken talk about focusing on "bread and butter" homes. It seems that this house is such a house for our area. The other 2 are either too highly priced for their location or the location is so bad no one wants them. Modifying my house buying criteria might help me turn a very negative year around next year.

Selling My Fixer Upper - Real estate turns sour

I purchased a fixer upper using a short sale in February thinking I could make several thousand dollars. I initially priced the house at $25k FSBO and was probably too greedy. I had an interested buyer the first month but would not reduce my price sufficiently for him to bite.

After a couple of months I put the property on the MLS using a flat fee listing service. I got one bite from a NYC investor and thought we had an agreement to sell at $17k. But she backed out.

Last week I tried listing the house on EBay with a starting bid of $12,700. But I had no bids. Tomorrow I will list with a full service Realtor. The main problem is that local Realtors charge a minimum of $3000 commission. I bought the house for $5k but with closing cost, attorney fees, back taxes and ongoing tax and clean out I have $11k into this property. My dream of making several thousand dollars profit has been eliminated and I am just hoping to break even now.

Unfortunately, this past weekend a drive-by shooting occurred one block away with 2 people dying and several more injured, so I am not too optimistic about selling.

I got into real estate last year so that my wife could stay home, but with neither of the houses selling after 7 months, she has been forced to find work. Our other 2 properties are vacant which drains $3500 per month from us. A few more months of this situation and we will start facing the fate of the people that we have been buying from.

9/11 - Not a Tragedy

Much is being written today about the "tragedy" that occurred 6 years ago on 9/11. I can remember clearly the morning of that day while visiting my parents in Massachusetts. A friend had just rang the door bell and told us an airplane had accidentally hit the World Trade Center. We turned on the TV in time to see the second plane dive into the other tower. At that moment I knew this was no accident and hence not a tragedy, but an act of War.

Today some 40% of the population is in total denial about the threat of Islamo-fascism. And an equal number thinks that the attacks were an inside job. These people are so demented that they overlook basic science (how is steel made?, what is modulus?) and cling to hatred of President Bush over all reason.

But, like Hitler, the threats from Bin Laden and Ahmadinejad are real and to be taken seriously at our own peril. Some point to the fact that we have not been attacked since 9/11 as "proof" that this is not real. The facts are that Al Qaeda has not attacked us because they can't. Our offensive and defensive campaigns have neutralized much of their capability. However, if they see an opening, they will attack again.

And there-in lies the problem. The left is so intent on bringing down opposing views that they are willing to do whatever it takes to bring another attack on the US. The ad in the NY Times (General Betray US) is one of the most despicable, treasonous things I have seen in my lifetime.

During the McCarthy hearings, the Senator was asked "Do you no sense of decency?". This ended McCarthys credibility. Moveon.org and DailyKos have gone way beyond decency and literally make me ill.

The one fact that those who oppose this fight fail to realize is that we are dealing with evil. Evil cannot be ignored, only defeated.

Foreclosure auctions

I attended my first foreclosure auction this morning. I had bought some houses before foreclosure earlier this year but have never been to an actual auction. After I saw a real estate transaction for the first house I tried to do a short sale on (which sold for $26k after I had tried to buy for $47k by negotiating with 2 banks that did not bid at the sale), I decided to attend an auction.

This was for the nicest property yet that I have tried to buy using short sale techniques. The home is in my area where houses typically sell for $110/sq for (this was a 2500 sq ft home). I had negotiated a deal with the second mortgagee to take $12k for their $30k note, but decided not to follow through when the payoff of the first changed from my estimate of $203k to $212k. The home needs a little work and the owner is intransigent (so it will take some doing to get him out). I figured the home is worth ~$215k.

There were 2 auctions this morning. The first was a property in the next town that was owed $112k. Bidding was furious and ended at $191k. I figured that the property I was interested on would have an equal interest.

However, there were only 3 of us interested and I did not even bid. The second lien holder had sent a young scruffy man to bid on the house and he had announced that he was going to bid $240k. So no one bid on the house. Obviously, no one believes that it is worth $250k at this point. I was the only one who had been inside the house and knew the condition.

I've sent a note to the second lien holder and offered to buy it at $217k. They are a West Coast investment group that bought the note from a major bank. Obviously, they have a distorted view of real estate and especially are unfamiliar with this market. This will be an interesting one to watch. I think that they will lose their lunch on this house. I have yet to work on a foreclosure where the bank did not lose more money by going through with the foreclosure rather than accepting my offer.

People (investors) often don't know when to cut their losses. It's probably the hardest thing to do is sell when you are going to lose money. I have faced the same dilemma with stocks. Bought $50k of my company stock at $66 per share, watched it go to $84 per share and then drop to $38 per share. It took me 5 years to sell it at $48 per share and still today it sits at $46. I missed a great stock run-up holding on to a loser due to an unwillingness to take a loss. It's hard to admit a mistake.

Saving over $456k on cars

Consumer Reports wrote how y0u can save $31K by buying a car and driving it for at least 200k miles. Many people are looking at ways to save nickles and dimes while ignoring a potential windfall by buying and maintaining their cars correctly. Most people look at cars as too costly or feel a need to get rid of them when they reach 100k miles.

This is really an outdated view of the quality of today's cars and reflects thinking from the 60's. Some say "they don't build them like they used to". Well thank God for that. Today's cars are vastly superior to what was built in the 60's and 70's. Most cars today can easily go 200k miles and many probably 300k. Most cars today need only minimal maintenance before 100k miles (like oil changes). I think all cars can go over 100k without a tune-up which is a big switch from the days I bought my first car. I have written here and here about how I save money on cars.

Of the dozen cars I have owned I have only had 2 that I sold before they had 200k miles - a 92 Ford Club wagon and a 98 Dodge Intrepid. I would have kept the Intrepid. It was in great shape, I loved the design and when it was running, it ran very well. Unfortunately, it had 3 sudden electronic failures while I was travelling several hundred miles from home and it cost me ~$3k each time to have it fixed since I had to rent a car, travel home and then drive back to pick it up. So I unloaded it mostly out of frustration. The Ford was just a poorly built vehicle.

So how do I save more than $31K on a car? I only buy cars with at least 90k miles on them. So I avoid the following costs:

• I pay cash (I buy on Ebay), so I have no interest charges (saves $10k per Consumer Reports)
• I buy after the car is nearly completely depreciated. So I pay $4k Vs $30k. If I only keep my used vehicle 7 years, I pay $8k to compare with the CR example - a savings of $22k over 15 years
  
• I don't carry fire, theft or collision ( I pay less than $500 a year for liability coverage on my 2 vehicles - this saves $1000 a year (that's $15k in CR's example)
• By maintaining my vehicles I avoid costly breakdowns (e.g. changing the timing belt)

I also use synthetic motor oil, which I believe substantially reduces engine wear (and improves gas mileage). The biggest obstacle to keeping a car here is rust (they use a lot of salt on the roads in Buffalo!)

The best (and cheapest to maintain) cars I have had were Honda's, Toyota's and Cadillac's. My 2 Chevy Ventures have also done well. I think the Honda could have gone 500k miles.

Based on the CR example of saving$31k, I save an additional $45k over the 15 year example period for a total of $76k. So if you are the average family that has 2 cars for 45 years that is a savings of $456k that you can bank for retirement. This is big money. Maybe you can afford to splurge on a couple of Latte's to reward yourself and stop clipping coupons.

Update:
Is my math right? Some question it.

First, I am assuming Consumer Reports math is right. If so, that's $93,000 of savings per car over the 45 year period that is my base case (your working years). The average American family has 2 cars simultaneously during that time so that's $186,000 in savings based on CR.

Second, Consumer Reports states that you pay $10,000 in interest per car, so if you pay cash for a used car you will save another $20,000 every 15 years. As cars get more expensive and people finance them for longer periods this will go up. For the 45 year period that's $60,000 in savings. So we are up to $246,000 in savings.

Third is purchase price. I assumed that you bought a new car for $30,000. I own a mini-van and a 4 door Toyota Camry. The van retails for $35,000 plus sales tax, while the Camry retails for $24,000 plus taxes (Sales taxes would add another $5k here in NY, but I''ll ignore that for now). On average, ~$30,000 in 2007. I purchased my van on EBay for $3500 and the Toyota for $4000 - no sales taxes. Now to get the same mileage, I'll probably have to buy 2 used cars rather than the one car CR uses in their 15 year example. So my savings over 15 years is ~$44,000. During the 45 year period the price of a new car will inflate much faster than the prices of used cars. But to be conservative I'll keep the differential the same. For the two cars I will own simultaneously, that's another savings of $132,000. Now my total savings is $378,000.

Fourth is savings on auto insurance. I never buy collision or theft insurance. But if you have a loan you must carry it. How much you pay for collision insurance depends on the type of vehicle you drive, where you live, your age, gender, driving record and even credit score. So, I am only guessing about the extra cost here. But for most people, I would guess the surcharge may be $1000 per year. This will also increase as cars get more expensive. But for my example, this is $45,000 in savings.

Total savings is now $423,000 over the typical way people buy cars. Will I pay more in maintenance. Maybe, but except for 2 cars that has not been the case. The only non-routine maintenance I did on my Honda Prelude was to replace a water pump which I drove over 250,000 miles!