Retire Rich From Real Estate

Nowhere in Marc W. Andersen's book, Retire Rich in Real Estate, does he mention whether he has retired a wealthy man. That's what I want to know. He might be too young. At last he doesn't come off sounding like those get-rich seminar guys. According to the publisher, the author has been investing in real estate for more than 20 years, and that experience is adequately reflected in the book.

Tips for Working with Real Estate Agents

• Working with the Listing Agent.
  Andersen claims buyers might have an edge if they work with the listing agent and, in many cases, it's true. It's clear that he understands agent motivation. An agent who operates in dual agency makes more money than a buyer's agent and has every reason to work harder to get the offer accepted, regardless of ethics.

• Excluding FSBO Listings from Buyer's Broker.
  It is also true that if FSBO properties are not excluded from a buyer's broker agreement, the buyer will pay a commission to buy those properties. However, Andersen neglected to point out that a strong negotiating buyer's agent could very well save that fee for the buyer through a discounted sales price. The trick is in hiring the right agent.

• Negotiating Listing Commissions.
  Andersen mentions a key factor that is often overlooked when sellers negotiate commissions: including a reasonable fee for the buyer's agent. He points out that if the fee offered to the buyer's agent is much less than others on MLS, your home will receive reduced showing activity.

Tips About Property

• Types of Property.
  Andersen prefers multi-family dwellings over single family and reasons that if a single-family home is vacant, you will have 100% vacancy, versus one-quarter of a vacancy on, say, a fourplex. This is all fine and dandy except for the fact that in many parts of the country, a fourplex will cost two to four times as much as a single-family home.

• Location.
  Everybody knows that real estate is about location, location, location, but few really know what that means. It's more than not buying next to a railroad or under a flight path. The author points out that a rental home on a busy street can be an advantage, because a For Rent sign will be noticed by more tenants. It also would more than likely be located closer to public transportation, which tenants want, than a home tucked away via zigzag streets in a new subdivision.

• Pricing.
  Besides explaining how to analyze comparable sales, the book details how to compute gross rent multipliers and capitalization rates in easy-to-understand terms that any math-challenged person can follow. Moreover, it discusses the three common approaches to determining value and how to read an appraisal.

Financing Properties

All smart investors use leverage because the dollar return on an investment is typically much higher on smaller down payments, and the author is a proponent of leverage. He also talks about amortization and how to finance those hard-to-finance properties such as commercial or fixer homes. Here are his five tips for financing:

• Put down 20% minimum.
  His reasoning is otherwise you will pay private mortgage insurance, but if it cash flows with PMI, that's OK in my book.

• Choose fixed-rate mortgages.
  In most markets, it makes no sense to use an adjustable-rate loan.

• Don't use an ARM for less than five years.
  Obviously, if this is your only financing alternative, waiting five years for an adjustment is better than a loan that adjusts every six months.

• Invest cash flow in maintenance or buy more real estate.
  Andersen advises against paying down the mortgage, which makes sense.

• Utilizing interest-only loans.
  Interest-only mortgages, he says, are used if you plan to quickly resell the property, providing you will have enough equity at that point to still net profits.

Making the Offer

How to make an offer is not discussed until the middle of the book. It's a very short chapter and could have used more in-depth tips. Surely, after 20 years of buying investment properties, the author could have shared a bit more knowledge and insider tips than he did. Likewise, home inspections and contract contingencies are quickly glossed over.

Property Management

The remainder of the book is devoted to how to advertise your rental property, collect rents, screen tenants, make repairs, obtain insurance and figure your tax savings. A very short chapter at the end covers 1031 exchanges and how to sell your rental.

Conclusion

This book is a thorough, step-by-step guide to buying, holding and eventually selling rental properties. It's chock full of excellent tips and advice that only a person who has actually done it can impart. I rate it a 9 on a scale of 1 to 10.

Buy Retire Rich From Real Estate

:

_{Retire Rich From Real Estate, © 2008 by Marc W. Andersen, Ph.D. Published by Sphinx Publishing, 233 pages, including glossary.}