Real Estate Investing interests me and I’m always looking for more information on the topic. Here is an article that I found this morning. (marketwatch.com)
Realty investing books; what about seminars?
By Lew Sichelman
Last Update: 7:28 AM ET April 8, 2005WASHINGTON (MarketWatch) — Issues on people’s minds this week: What books are standards on real estate investing, are realty seminars worth the money and do rental-investment numbers add up?
Q. It appears that “A Random Walk Down Wall Street” (Malkiel) and “Stocks for the Long Run” (Siegel) are standards on equity investing. Do you have any recommendations for books on real estate investing? Noel Serrano, Cerritos, Calif.
Answer: I have been writing about real estate for a long, long time, and the one thing I have yet to do is review books. Honestly, I just don’t have the patience, which is why I have never written one, either. However, I do keep a large library as references. And what appears to be one of the better tomes I’ve added of late is “Real Estate Investing for Dummies” by Eric Tyson and Robert Griswold.
This one ought to get anyone started — or, as the authors suggest — stopped. “Real estate investing is not a fail-proof guarantee for wealth,” says financial counselor Tyson. Bet you won’t read that kind of admonition in many other books, especially those by the get-rich-quick con artists who say anyone can become a millionaire practically overnight by investing in real estate.
Q. With all your experience in real estate investing, what is your opinion regarding home study courses and infomercials regarding real estate investing? Eric Paba, Arlington, Texas.
A: Frankly, I don’t have a high regard for most of them. Near as I can tell, those who aren’t in jail or haven’t declared bankruptcy are making more money — lots more — buy selling seminars and books that they ever did in real estate.
My favorite guru grump is John T. Reed, a newsletter publisher and not-so-successful (if I read him correctly) former investor who has been quoted far and wide on the topic. Check out his website — www.johntreed.com — for his thoughts. They are both enlightening and entertaining. Visit the site.
Q. I am one of those people who has been investigating the sanity of making a first investment in some type of rental property (specifically, a single-family detached home). So I asked these same folks to work up a hypothetical investment home in an affordable area, like Arizona. On a $300,000 home that I keep for 10 years, assuming hefty appreciation of 10 percent a year (by no means guaranteed) and taking into account the seemingly-unavoidable fact of running negative [cash flow] even with a $50 per month increase in rent each and every year, zero vacancy periods, no tenant nightmares, a management company that takes about 10% to12% off the top of the rent, etc., here’s what I keep coming up with: An investment in such a rental property will pay the same as putting about $1,200 per month into some kind of indexed mutual fund that provides an average return of 6 percent annually over a 10-year period. I admit that saving $1,200 a month is no easy task but it may be no more difficult than everything that goes into the “best-case” investment property route. Am I nuts? Do I need to take an accounting class? Dave Wiener.
A: The numbers don’t lie, and you are not nuts. Except that the mutual fund does not offer any kind of guarantee, either, and house-price appreciation could top 10 percent. Also, think of all the fun you’ll miss out on by not being a landlord.
Several other flaws in your thinking, at least as I see it: One, do you have the discipline necessary to put away $1,200 each and every month? Two, a $300,000 house doesn’t cost you $300,000, only what you put up in cash. After that, your only cash outlay — other than for spot repairs and the like — is the difference between what you earn in rent and your mortgage payment. Three, your tenant is paying your property taxes and interest, yet you get to deduct them. Four, your gain should be figured on your cash outlay, not the total cost of the property. And finally, five — a thought which bears repeating — think of all the fun you’ll miss out on by not being a landlord.
Nationally syndicated columnist Lew Sichelman has been covering the housing market for 35 years. Because of the volume of mail he receives, he cannot answer individual questions, nor can all questions be answered in this space. E-mail lsichelman@aol.com