The first step is by far the hardest.
Like many investors, we started with a book on the basics, and went shopping. Our first purchase provided zero financial value over the six years we owned it, but it was an invaluable teacher that guided our subsequent purchases that have doubled in market value over four years while providing us with a 10% annual return on our cash investment.
Three Simple Rules
Make a Plan.
In the beginning, we had money and financing, but no knowledge of what exactly we were shopping for, or our strategy for the asset. The result was an overwhelming choice of options, no way to clearly sift through them, and no financial performance thresholds, long-term plans, or an eye on market factors. No surprise that our initial condo purchase was a poor performing asset.
Once the housing market recovered, the opportunity for strong returns on single family homes waned, and I focused on multi-family properties. Our last purchase was a Victorian four-plex in a great location, but in poor condition. Again, we invested a lot of time and effort into improving the property, and have enjoyed rental rates far in excess of what I had hoped for, and extraordinary neighborhood appreciation.
With a defined plan, our strong returns were not by accident or luck; we knew what we were shopping for, and purchased and improved accordingly.
Hope for the Best, but Prepare for the Worst
Before purchasing anything, I run a very conservative financial analysis based on researched data. I don't guess on numbers or hope for the best. For example, if the property needs a roof, I get a few estimates and use the highest one. For rental income, I use a worst-case, must rent it today rate, not the rate I hope to get.
After the property is purchased, you have to keep the faith and know that with perseverance you can and must ride out the storm. I have had days and weeks where I wanted to run and hide, but by keeping things in perspective, we have passed through these dark times to enjoy the rewards of our efforts.
Hi! I'm Christine Kwasny.
Why Fall Line?
Fall Line sums up what we live for - skiing and mountain biking. The goal is to maximize our ability to follow our bliss through work that is personally and financially rewarding. So far, so good!