** 35th book of 2021: Incomplete, Incorrect **
There are many poorly written books on real estate; this is one. The amount of content that relates to motivation and feel good stories is usually inversely related with the usefulness of the book, a ‘chicken soup index’ if you will. Complete guide is about 50/50, and even brings a story direct from Chicken Soup for the Soul.
Perhaps more unique however, is that there are few books whose advice I wholeheartedly disagree with. The author shows a clear disdain for buy and hold: * please forgive my frankness, forget the buy and hold strategy. Have a well defined plan going in, execute, and get out. Yes you can make money by buying and holding, but the real money is made by buying and selling. *
This may have made sense in previous buyer’s markets with stagnant real estate prices and 8-12% cap rates, but is certainly not relevent in 2021, and likely to lead to suboptimal returns . Furthermore, the author relies on cash on cash return and cap rates as the principle barometer of success, but this is where a more professional privaty equity mindset is better suited. Rather than cap rate, or dollar gain in the value of the property, what matters most is the MOIC (multiple of invested capital) of a deal, and more relevant for the party interested in making a purchase decision, the expected MOIC divided by the expected effort to achieve that MOIC. I only have 5 years of experience in the field, but even in the small sample size of ~20 deals I’ve done, flipping an apartment has never made sense due to the immensity of transaction costs (~9%) involved.
I learned two things which can merit the second star:
- Use turnover rate as a means of measuring retention of tenants.
- Using an owner carryback loan to get more leverage out of a deal, i.e. a 75-10-15 strategy.
Still, the majority of advice would mislead newer investors, this is a book best left in the dustbin of history.