California condo, the Jacksons were able to sell it and buy a home that gave them almost three times as much space in a fast-growing area that will help their investment appreciate in value. Their purchase of other properties in the same area should also give them appreciation gains that will pay dividends in the future. Over the next few years, the Jacksons plan to either refinance their properties or sell them outright.
The couple reached out to Durham financial advisers Fulbright & Fulbright to help them stay on track with their other financial goals, as well as meet the costs of maintaining their properties. Kimberly made about $170,000 in 2004 working as a physician for the Wake Medical Center in Raleigh. Jackson earned about $80,000 in commissions working as a realtor for Century 21 last year, and he hopes to obtain his broker’s license this spring.
Once Jackson gets his broker’s license, the couple will have the opportunity to expand. His long-range goal is to leverage the equity of their investment properties into bigger ventures, including partnering with experienced real estate investors on new construction projects and commercial buildings. Jackson also hopes to open his own brokerage firm, where his earning potential can grow faster by having others work for him.
While he knows he has a long way to go, this is Jackson’s advice to anyone looking at real estate as a long-term investment:
Be patient. “Learn as much about the market as you can [before you buy],” advises Jackson. He didn’t realize new construction projects in North Carolina would compete with his properties for potential tenants until after he bought them. As a result, he has had to keep his rental prices low.
Borrow money cheaply. Jackson says that if you can afford it, a home equity line of credit can be a good resource to finance properties rather than a high interest rate loan. “I financed the first two properties the way I did because I didn’t have the capital or the experience,” he says.
Build a success team. It’s important to find a good realtor, home inspector, and reliable contractors to help you select and rehabilitate your investment properties. Jackson says you can increase your success rate by developing contacts with people in city government who can help you understand economic development in your market, and fostering relationships with mortgage brokers and bank loan officers who can help you with financing. Also, having other experienced investors on your projects can broaden your knowledge of real estate faster. (For more information, see “Choosing the Right Investment Properties,” February 2005.)