Soon after Scott and Mandi Leonard were married in 1996, they took a big risk. Scott quit his job as a stockbroker and started his own financial-planning business. He had no clients, no income and a big mortgage -- the Leonards had just put a 10% down payment on a $320,000 house in Redondo Beach, Calif.
For three years, Scott and Mandi lived on the income from Mandi's jobs with technology companies. Employed by Oracle and PeopleSoft, she earned valuable stock options during the go-go years of the late 1990s.
By 2000, Mandi wanted to quit working: Son Griffin was a year old and Jacob was on the way. Her PeopleSoft stock, for which she had paid $6 per share, had risen to $43, and Scott was getting nervous. They decided to sell the stock, trade up to a bigger house and stash some of the money in the bank. Says Scott, "Having a safety net was more important to us than trying to get an extra $10 per share on the stock." And a good thing, too. Within a year, the price had dropped into the teens.
The Leonards also made a smart real-estate investment. They sold their first house for about $500,000 and moved up to an $800,000 house in Hermosa Beach. With an ocean view and a rooftop deck, the house was recently appraised for $1.45 million.
Meanwhile, Scott's business began to take off -- he now manages about $100 million in assets for his clients -- and once again the Leonards decided to invest in real estate. About two years ago they paid $1.25 million for a historic but dilapidated house overlooking the water in Redondo Beach. They spent about $250,000 -- mostly in cash -- to renovate the property for Scott's business. That building was recently appraised for $1.8 million.
Having astutely ridden California's real-estate surge, the Leonards have enough home equity plus savings to put them comfortably in millionaire territory. They also have about $175,000 in 401(k) and IRA retirement funds invested in stocks, which they plan to beef up now that they have renovated their business property. "I'm very much in favor of diversifying investments," says Scott. But if the real estate market turns soft, he'll take the opportunity to "look hard at picking up another property."
The Leonards owe their success to knowing the difference between a calculated risk and a gamble. They felt more confident about starting a business and investing in real estate than about hanging on to their tech stocks. "Stand back and figure out your strengths and weaknesses," says Scott, "and keep your eye on your long-term goal."
TIP #3: Know what you do best. Scott and Mandi Leonard ditched their tech stocks to concentrate on real estate.
Saturday, 10 May 2008
Автор: Patricia Kramer, Chartered Financial Analyst на 19:00