Retirement, Interrupted
by Donna Rosato

June 8, 2007

[Continued, page 2]

Putting Faith in Real Estate

Of course, when home prices were rising fast—especially in hot spots like Daytona Beach—the Daimlers' plan to turn a quick profit flipping houses seemed to make sense. Especially since, unlike many hopeful flippers, the couple were experienced home buyers and investors.

The high school sweethearts—Steve spotted Carol at a pizza parlor across from their Long Island high school—bought their first house at 19, shortly after they married. It was in Florida, where Steve was working as a technician at the Kennedy Space Center. When the couple moved back to New York seven years later, they sold the house for a $10,000 profit and bought a fixer-upper. Four years later they sold that house too and bought a more spacious home in northern Virginia, where they settled down to raise their two daughters and son (now ages 38 to 42).

Shortly after the move, Steve changed careers and began selling computers. Eventually he became a sales director, earning about $150,000 a year. Carol focused on raising kids when they were young, later getting her real estate license. By 1991, though, she was working for the state of Virginia as a disability case consultant, raking their income to $200,000 a year.

The family lived well but not lavishly. They saved enough to put the kids through college without loans and steadily put away money for their own retirement too—although not enough, they readily admit. But they weren't worried because they had made a conscious decision to finance their retirement largely through real estate investments. "I know you should have a diversified portfolio," says Steve. "But I believed real estate would give us bigger returns."

In 1986 the couple bought their first investment properties—two townhouses near their home in Springfield, Va.—using money Carol inherited from her mom. In the early 1990s they sold one of the houses and used the proceeds to build a vacation home in the Outer Banks. Current estimated value: $900,000. They sold the other townhouse in 2001 and used the money to add on to their Virginia home, which they sold in 2005 for nearly $700,000.

The Life-Changing Move

The idea of retiring and moving to Florida came to the Daimlers after a family Christmas gathering at their home in 2004. When their grandkids, then 7 and 11, went home to Daytona Beach after the holidays, Steve and Carol were heartbroken. "They seemed to be growing up so fast, and we were missing out," says Steve. Plus, he'd become weary of the extensive job-related travel that kept him away from home for long stretches.

To supplement their savings, the couple planned to launch a sideline business, buying houses in need of a little TLC, fixing them up and then selling them for a profit. "We knew prices wouldn't keep going up like they had been," says Steve. "But we figured with demand from baby boomers retiring, homes in Florida would keep appreciating."

Carol quit her job first, in the spring of 2005. Shortly after, the couple sold their house in Virginia and paid cash for their retirement dream home: a $640,000, 3,700-square-foot house with a game room and an inground pool in a gated community in Port Orange, south of Daytona Beach. The couple took real estate investing courses online and joined the Central Florida Realty Investors Association to network with local experts. When Steve retired in March 2006, their daughter, an area real estate agent, helped them search for properties to launch their business.

Exactly how fast the local real estate market was deteriorating wasn't clear in August when the Daimlers bought two three-bedroom, two-bath houses: one in a Daytona gated community for $235,000; the other in Palm Coast for $120,000. To finance the purchases, they took out a $400,000 mortgage on their home. They spent $31,000 on renovations and listed the houses in September. But since then the market has been flooded with homes for sale, and the Daimlers have been caught in the changing current.

They've tried every strategy they can think of: holding dozens of open houses; offering a higher-than-usual 4% commission to buyers' agents; distributing brochures; running thousands of dollars' worth of newspaper ads; lowering the prices on the homes by $40,000; and offering rent-to-own and other financing options. They've met with countless buyers but have yet to close a deal.

Time and money are running out. The Daimlers only income is the $36,000 a year they get from renting their vacation house in peak season. They're reluctant to tap Carol's small $25,000 lump-sum government pension. Plus, they're too young to collect Social Security. And they have $31,000 in credit-card debt from the renovations of the investment properties. Perhaps worst of all, they're so busy trying to sell the houses, they see their grandkids—the primary motivation for the move—only once a month.

With just $120,000 left in his 40l(k), now all in money-market funds, Steve decided in March to go back to work. He's an energetic man who likes to rock climb and run. But at 61, he's concerned that he'll find it hard to get a job, or earn close to his former six-figure salary. "I know he doesn't want to go back but we don't have a choice," Carol says.

One thing hasn't changed: The Daimlers remain staunch believers in real estate. "If the financial pressure was off, we'd still look for opportunities to invest," says Steve. For now, though, we just don't have the means to hang on."

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