LUCK vs SKILL

[Logan M.]

I want to tell a story that I think a lot of us will relate.

In 2018, a partner and I purchased a new construction home in a town called Eagle Mountain, Utah. We did a 15% down loan with a 3.5% interest rate. 

When we rented it out we were able to make a couple hundred dollars a month and that has increased to about $750/month over time. The real gain has been from the appreciation. I warn any investor against buying because of appreciation, it is not guaranteed and it is impossible to accurately predict with a short-term perspective, the best math is looking at historical trends and those are not guaranteed.

Nobody could have guessed that COVID would have impacted real estate values like they did and that is my point more than anything. 

BEWARE of projections for appreciation, do your math based on the numbers you control and if the risk is too high don't buy!

This home was purchased for about $330,000 with a finished basement and today is worth about $525,000-$550,000, not a bad return for a buy-and-hold investment but so is the debt paydown now owing less than $260,000, the Depreciation and interest write off saving us thousands a year in taxes and the strong cash-flow.

The moral of my story is this, look at the big picture and invest for your future, not to pay your grocery bills today.