The residential real estate crisis started with the subprime sector, so
most accounts of its foreclosure woes focus on working-class and middle-class homeowners having trouble keeping up with their mortgage payments.
But many high-powered, wealthy celebrities are underwater, too. Most recently, hip-hop musician Wyclef Jean’s $2 million Miami Beach mansion
has gone into foreclosure and is set to be auctioned off soon.
Athletes are particularly susceptible. They have plenty of disposable
income and developers like to get them involved with projects, so that
the athletes’ names can be used for publicity.
The W South Beach Hotel & Residences is trumpeting the fact that 25 athletes have bought into the project, buying luxurious residences that increase the stylish hotel’s cachet. W officials declined to name the
buyers, but said they include current and retired players from the NBA,
NFL and Major League Baseball.
Many athletes go too far on home purchases, experts say. “Athletes are among the worst examples in real estate, because they are often conspicuous consumers,” said Tony Decello, director of investment
consulting at Deloitte & Touche in Cleveland, who has advised many
“We push liquid net worth, but many athletes end up illiquid in real
estate and cars,” he pointed out. “Some celebrities end up with three
to four homes and several cars, never looking at the cash flow needed
to keep afloat.”
Of course, if celebrities time their housing purchases correctly, they
can make good money. Basketball star Shaquille O’Neil said he will make
a small profit on the sale of his Star Island home, which he said will
close this month. He bought the house in 2004 for $19 million.
But as the current housing crisis shows, bad timing can cause extreme financial damage.
Troubled ex-Atlanta Falcons quarterback Michael Vick is suffering his
share of damage. He recently filed for bankruptcy protection from
creditors. Vick bought a $3.8 million mansion in Duluth, GA, a condo in
Miami Beach and four houses in Virginia, where he also started building
Athletes are in a particularly precarious position because their peak
earnings period is short. “It’s worse for athletes than executives,
because athletes are usually done by the age of 30 to 35,” Decello said.