The Full Guide to Trading Apartment Structures
Whether you?re a novice genuine estate financier or a skilled expert, The Total Overview of Buying and Selling Home Structures assists you map out your future, find home structures at a reasonable cost, finance purchases, and handle your homes. Now modified and broadened, this Second Edition consists of tax planning suggestions, study of real acquisitions, and appendixes that include detail to the huge photo. Plus, it consists of a helpful glossary of all the terms investors require to know, help
List Price: $ 32.95
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The Basics,
If you are looking for Real Estate Investing 101, this is a good choice.
If you already understand Cap Rates and NOI, and are confident in your ability to estimate the value of a property based on its financial statement, then pass on this book.
All in all, the book is good but basic. Unfortunate that the tables presented in the text are not explained fully–the author prefers, I think, to sell you the software separately.
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4.5 stars for another good book by Steve Berges,
Having given those accolades, here are a few of my constructive criticisms:
1. On pages 37 and 38, Steve gives nice charts illustrating the long-term financial benefits of investing in multifamily properties. On page 39, however, there is an error in referring to the big numbers shown. The reference is made to Investor A’s “equity” of $2.1 million and Investor B’s (the multifamily property investor) equity of $92 million. I just don’t think Steve caught this, but those numbers don’t refer to the investor’s equity, but to the fair market value of his collective assets (his properties). The investor’s equity might be in the range of 20% of that. I do like the charts, however, and I used a similar analysis in my recent book. One other note on the charts – they presume selling and buying exactly at the end of one year – a difficult task as Steve would surely admit. On average, I think 18 months to two years is a better time frame for flipping apartments.
2. Refinancing – Steve didn’t give a chart showing the long-range effect of the “buy, hold and refy” strategy (using proceeds to buy again, but retaining the first property). In addition, Steve only mentioned the general banking guideline that you can only pull out cash up to 80% of the new appraised value (i.e., the bank has an LTV of 80%). However, you can get around this. I’ve done it. It requires a second lender giving a second mortgage, with a CLTV (combined loan to value) of up to 90%. As such, you can pull out much more cash.
3. GRM – gross rent multiplier. In his financial analysis section, Steve doesn’t give much detail or provide real life examples on this crucial analysis factor. Granted, the cap rate is the analysis primarily used for commercial real estate, while the GRM is the one used for residential multifamily (2-4 units) real estate. Since many owners and selling brokers will “fudge” on expenses, a cap rate can be very hard to verify. The GRM, however, is fairly simple – just look at the lease agreements.
4. Lack of coverage on residential multifamily apartments. In fact, this is why I wrote my book on this topic. If Steve had covered it here, I would not have written mine. I like Steve’s writing style and he knows his stuff. But for investing in small multifamily properties (certainly on residential, but probably up to about 10 units), we really have to cover valuation and selection of properties using the GRM. That and I felt like the “buy, hold, and refy” strategy needed much more coverage.
But for investing in commercial multifamily properties, I recommend this book as the only good one on the market.
Larry Loftis
Author: Investing in Duplexes, Triplexes and Quads: The Fastest and Safest Way to Real Estate Wealth
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Solid,
Covers the numbers (which is the only way these types of properties are evaluated,) how to create value, locating properties, due diligence and negotiating, financing and when and how to sell.
The market is flooded with marginal tomes on flipping single family houses, buying rental houses, no money down deals, ad nauseum. This is a breath of fresh air.
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