Book Review: Retire Rich from Real Estate
Sphinx Publishing contacted and provided me with a free copy of the new book "Retire Rich from Real Estate" by Dr. Marc Andersen for review. It came at the right time as I'm contemplating putting more of my money in hard real estate assets.
Although the book is based on investing in the U.S, the lessons provided in the book are relevant for real estate investors everywhere. "Retire Rich from Real Estate" is just that, it explains from start to finish how to successfully invest in rentals. It's not one of those get rich quick type books, the opposite really. The book focuses on the rental real estate investing strategy and how lucrative it can be for the long run.
I'm assuming that the author Dr. Marc Anderson is fairly academic as some of the content in his book is fairly technical in nature. His conclusions are based on research from national real estate investor surveys, demographics and his own experiences.
Who is Dr. Marc Andersen?
Dr. Marc Anderson is a real estate investor who has 20 years experience buying homes and renting them out for profit.
Here is a snippet that I got from the publisher:
Marc W. Andersen and his wife have been actively buying, renovating, building and managing rental property over the last 20 years. He holds a B.A. from Virginia Tech and a Ph.D. from the University of Virginia. He and his wife live in Raleigh, NC.
What are the main points made by the book?
This book is unique in the fact it's more of a real estate investors handbook/instruction manual. It gives the reader instructional content on how to succeed in rental investing from start to finish. Below are the topics covered:
- Looking for properties
- Choosing a location
- Investing in high priced markets
- Understanding cash flow
- Determining market rents
- Valuing property
- Financing your investment
- Closing the deal
- Managing your investments
- Maximizing your tax advantages
- Selling your properties
One point that the author emphasizes is that the key to successful rental investing is to make sure that the property is cash flow positive from day one (a key rule that I follow).
What I liked?
I appreciated all the little tips and tricks in the book with every step of the rental investment process. For example,
- From his research and experience with student rentals, he finds that renting to boys means less maintenance calls but with higher chance of damage. Whereas renting to girl students means less chance of damage, but higher occurrence of maintenance calls.
- On advertising for tenants, his research shows that signs in the yard are just as effective but much cheaper than putting an ad in the paper.
As I have a mathematical background, I personally enjoyed the calculations that he explains in the book to determine valuation. He talks about the 10% rule and how it may not be practical in todays market place.
What is the 10% rule? It's a rough calculation to determine if a property will be cash flow positive after all expenses. When looking for property to purchase, many real estate gurus state that the annual rent should be at least 10% of the asking price. For example, if annual rents for an area is around $15,000, and the asking price is $150,000, then it would pass the test. If the asking price was $200,000, then the property would not pass the initial 10% rule.
- (annual rent)/(asking price) >= 10%
Obviously, this rule is not very practical in expensive cities like Vancouver, Calgary and Toronto. However, it's a useful benchmark when doing quick scans of rental properties when investment house shopping.
What I didn’t like?
- There isn't anything in particular that I didn't like in this book. However, the analytical chapters on determining gross rent multipliers (GRM) and other calculations might not appeal to everyone
- Definitely a book that's worth the money for new or experienced real estate investors. It gives the tools for successful investing from calculating cash flow, to the most cost effective means of marketing for tenants. I've picked up quite a few tips that I will be applying to my next deal.
- Even though the book is meant for the US market, most of the techniques and strategies apply to the Canadian investor as well. There are only a couple of chapters on taxes and insurance that I skipped over.