If you are just starting your real estate investment career,and want to learn all the benefits realty investments offer, first read”Real Estate Investor’s Checklist” by longtime investor Robert Irwin.Rather than being a dull book about real estate investments (there are lots ofthose), this is a lively checklist of important topics every realty investor shouldconsider before investing or deciding what type of investment property is best.
When I first began reading this unusual book, I thought tomyself, “This seems like a dumb format.” But after reading severalchapters, I realized what a brilliant idea it is to have boldface questions,followed by brief answer explanations of a paragraph or two. If a topic doesn’tinterest you, just skip ahead to the next topic in which you are interested.
Purchase Bob Bruss reports online.
This new book should be read with an open mind because itbegins slowly with routine topics, such as how realty investors earn theirprofits, getting started, and evaluating the local real estate market. Althoughthe book seems aimed at investors in single-family rental houses, Irwin doesn’thesitate to lightly tackle other investment types such as apartments andcommercial buildings.
The author asks many routine investor questions aboutimportant subjects, like the neighborhood, property condition, and potentialfor a profitable rental.
The one chapter that is either the book’s best or worst is”Do You Know the Property’s True Value?” Irwin, a longtime, veryexperienced real estate investor, places heavy emphasis on the “grossincome multiplier” to determine a property’s value. He surely knows themajor pitfalls of this method, namely its failure to consider a rentalproperty’s expenses, yet he doesn’t warn why gross income multipliers should beused for nothing more than pre-qualifying a property or discarding it fromfurther consideration.
But an especially valuable chapter, which even experiencedinvestors might overlook, explains the importance of transaction costs whenpurchasing investment property. The author emphasizes expenses such as mortgageloan costs, title insurance, and attorney or escrow fees.
Irwin also highlights the property seller’s typical salescosts, especially the real estate agent’s sales commission, unnecessarybroker’s transaction fee (which Irwin labels a “garbage fee”), andother incidental expenses.
As an experienced real estate negotiator, the author explainshow buyers and sellers should think about cutting their transaction costs,especially by attempting to shift these expenses to the other party.
Locating the best investment properties receives heavyemphasis. Irwin even explains how to profit from the foreclosure market,especially for houses, by purchasing before or after the foreclosure auctionsale.
However, the book is not without a weak chapter. AlthoughIrwin surely knows the tax benefits of investing in real estate, especiallyStarker delayed tax-deferred exchanges, and how to maximize investment taxdeductions, the tax chapter contains several errors that, if relied upon, couldharm investors.
For example, he says an investor must complete a Starkerexchange within 120 days (the tax law allows up to 180 days). Also, he says aresidence acquired in a tax-deferred exchange must be occupied by the owner asa principal residence for five years before it can qualify for the $250,000 or$500,000 sale tax exemption of Internal Revenue Code 121. The correctinformation is, although property acquired in an exchange must be owned fiveyears before qualifying, owner-occupancy is only required for 24 of the 60months before sale.
Chapter topics include: “How Will You Make YourProfit?” “What Do You Need to Get Started?” “Did YouEvaluate the Market Before Entering?” “Will the Property Make aSuitable Rental?” “What is the Condition of the Property?””Do You Know the Property’s True Value?” “Where Do You Find GoodInvestment Homes and Properties?” “Do You Have a Good Agent?””Do You Know What is Involved in Being a Landlord?” “Have YouLined Up Your Financing?” and “Flip Versus Serial Investing.”
As the title implies, this is a very complete checklist ofimportant questions to be answered by prospective real estate investors. Theprovocative questions should raise “red flags” in the reader’s mindabout possibly overlooked pre-investment considerations. Despite its slightdefects, such as the tax chapter, on my scale of one to 10, this excellent realestate investment book rates a solid 10.
“Real Estate Investor’s Checklist,” by RobertIrwin (McGraw-Hill, New York), 2006, $18.95, 182 pages; available in stock orby special order at local bookstores, public libraries, and
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News