After an interesting comment was posted in response to my “Luxury Living on the Cheap” entry, I mentioned that I would spend some time going into specifics on how to put things into motion and accomplish it for yourself. This is not quite Part 2 of the post, but I feel Neuromancerr’s second comment brought up a good issue and I want to respond with my thoughts on home foreclosures and the basic mortgage meltdown that we are experiencing here in the US.

…I want a permanent place in Dallas. I am targeting mid november for that. With the big mortgage companies filing bankruptcy It is opening up some big foreclosures around here. I need some hard facts and good ideas to work with as I try to get a house for half as much as it’s worth. (Neuromancer, seductiveman.com)

You’ll probably meet up with quite a bit of competition for foreclosures in Dallas’ nicer neighborhoods. Most lenders, even ones heading for bankruptcy, will want to get as much of their investment out of a foreclosure property as they can.

Typically, lenders lose approximately $40-$60k whenever they end up making an REO out of a property.

I’d advise you seek out a homeowner who might be “in trouble” with their payments, but not yet in a foreclosure situation with their bank. Let’s say an example homeowner lost their job or has decided they want to move to Argentina and live entirely off one of their muses — but can’t sell their Dallas home quick enough (because of current market conditions & listing saturation, etc). Using some skillful negotiation and a good knowledge of the real estate market in your area — you will be able to get a property for considerably less than what it may currently appraise for (or sell for on the open market).

This can be accomplished by either assuming their current mortgage loan, or, depending on how transfer of title works in Texas, by taking over their mortgage payment in exchange for full interest in the property. There are a number of resources online that describe such a process in detail.

But, that could be considered a totally different scenario than what my post on “Luxury Living on the Cheap” was using. We’ll save that for Part 2.

Instead, I’ll describe another method for getting some true luxury accommodations in Dallas, that has nothing to do with foreclosures or pre-foreclosures. (And, again, not a scenario that matches my specific situation.)

First off, you’ll have to make some basic assumptions and hopefully have access to an appraiser or Realtor with the ability to check Tax Records. Also, keep in mind that statistics show the majority of homes purchased over $1 million dollars are paid with cash (no mortgage loan).

For the sake of this example, let’s say someone owns a property in North Dallas — an exceptional Preston Hollow estate property — and it is worth approximately $2.9 million on the open market.

Given today’s current buyers’ market, they probably won’t get more than $2.5 million, if they are actually lucky enough to get it sold, and may end up waiting a long, long time for that special buyer to come along.

Though the current owner may have initially purchased the property outright a decade ago, folks’ circumstances often change and they may find themselves taking out a mortgage loan on the property to infuse cash into their business or for some other important reason. This, combined with other aspects of the scenario, creates a picture of a possible opportunity for an individual to step forward and make something happen.

We’ll keep it simple as possible, to ensure everyone will understand the basic concept:

In order to get ahold of some cash and liquidate part of their equity in the home, the owners obtained a mortgage loan on the property for approximately 30% LTV (Loan to Value) — in the amount of $900,000.00 — and therefore have a mortgage payment of approximately $5,250 (at 7% interest-only). One of the reasons they may be hoping to sell the property is to cash out their remaining equity, or, perhaps it is to get rid of that pesky $5k payment that they are responsible for each and every month.

Now, you come into the picture and basically offer the owner a monthly payment of $7,000 (covering their mortgage payment, along with part of their property taxes), in exchange for not only taking possession of the property as a rental/tenant (via a formal TIC Agreement or other contractual legal means) — but also with the caveat that a percentage of the amount you pay will yield you an interest in the property itself. This interest in the property will be directly proportionate to a specific agreed upon amount and, upon sale or transfer of the property, will basically be realized in the form of money back into your pocket.

So, you’ve accomplished a few things here.

Firstly, you’ve released the owner from the burden of payment on their loan and a portion of the property taxes.

Secondly, you are allowing the owners to continue to build equity via further appreciation of the estate over time — thereby keeping their large investment intact, instead of their selling it outright.

And, finally, you’ve just secured yourself a luxury accommodation for less than half of what the typical mortgage on such a property would be (approximately $15,000 per month, according to Realtor.com).

Your payment is immediately half the typical mortgage payment, PLUS you are building interest in the property itself as an investment vehicle.

This is just one of probably hundreds of different ways that people have developed as a means to acquiring true luxury accommodations ANYWHERE in the world, in ANY market.

And, wow, Dallas looks quite nice — I usually stick to looking around Austin/Houston. Although, I have been looking as far south in Texas as McAllen! (By the way, have you seen the amount of home you get for your dollar in McAllen? Geez!)

If you’ve read Tim Ferriss’ best-seller Four Hour Work Week, you know he is a proponent of living really well for not a lot of money.

The idea behind it is that for the cost of “average” expenditures for housing in the United States or UK, you can live like royalty abroad — in luxury accommodations. The philosophy, though, is based upon being more of an adventurous vagabond, taking advantage of lower cost of living expenses in certain countries, rather than being an American homesteader paying as much as 80% of your 9-5 income on a home mortgage (as most residents of California do).

Giving up what most people consider “home” to be — a single residence that encapsulates who you are, defined by what type of nick-knacks and other items that have been picked up along the way — allows you to embrace a different type of lifestyle and develop a new definition of “home.”

A new definition of “home” and what it really means to YOU.

“Every day is a journey, and the journey itself is home.”

Very wise insight by Matsuo Basho, the most famous poet during the Edo period of Japan.

Fantastic. As long as you don’t mind moving to Argentina or Thailand, right?

Well, not exactly. Tim mentioned in his book locales such as Berlin, Tokyo and even San Francisco as places he likes to frequent — but these places aren’t typically considered to be “cheap,” especially not for luxury accommodations. There was a thread on the 4HWW message board, commenting that living in Berlin (in a specific neighborhood mentioned in Four Hour Work Week) was far more expensive than the reasonable cost quoted by Tim. A response from Tim stated that, indeed, the cost he paid was accurate and was based upon some savvy negotiating skills on his part. This point was further discussed by a world-trekking family at Familyhack.com.

In a nutshell, it is often difficult for people to fathom there are incredible opportunities to actually live in luxury accommodations for a bottom-dollar price — even in what some consider to be the most expensive places to live. The reason it hard to comprehend is due to the fact that every opportune living situation is very different and sometimes unique in nature. Your skills in negotiation and critical thinking come quickly into play as soon as you happen upon a such an opportunity.

Acquiring luxury accommodations, whether domestically or abroad, will often vary in cost dramatically — proportionate to where exactly you are looking to live. Of course, Argentina or Thailand will cost you a great deal less to live like royalty — yet, you can apply many of the same ideas and principals for negotiations in more expensive locales, and realize a great discount.

To reinforce what I am saying here and to support the notion that Tim Ferriss is not just out of his mind, I am a perfect example of how you can utilize this type of thinking anywhere in the world.

That’s the view of San Francisco I’m looking at while typing this post. It isn’t a scene from a hotel room or outside on a hilltop vista — it is from a luxury residence that costs between $4,500 and $5,000 per month.

I pay approximately half that amount each month. Keep in mind that I know this amount may far exceed what you currently consider to be “cheap” for luxury living — but it really does come down to where exactly you are attempting to live. This residence, in a town named Tiburon, is located in Marin County — one of the most expensive & affluent counties in the US.

Thing is, many of my neighbors work a non-stop grind at jobs they hate to enjoy the same amenities that I do for half the cost. In fact, I probably have more time to take in the view and enjoy the lovely town of Tiburon than half the neighborhood block!

Zooming in, you see the Tiburon Ferry on its way through the bay. It shuttles people just like you and me, back and forth to work at a job — and many of them don’t have to. They don’t even have to leave everything behind to go live in Argentina or Thailand, either. It actually comes down to recognizing opportunities when they present themselves, as well as seeking out an effective way to do everyday things. It is about utilizing others’ knowledge and harmonizing it into your own life. Reading Tim’s book is probably a great way to start for many people.

Don’t let it end there, though! Use what you learn as a springboard into taking action and taking full control of your life. Start your path towards freedom from the 9-5 grind, as well as financial freedom, and you’ll soon realize:

– the journey itself is your home.