As a real estate investor and author myself, I read a lot of real estate books. Many, if not most, are written by folks who do not invest in real estate themselves; they only write about it. Berges is not one of them. He knows his stuff and it’s clear that he practices what he preaches. I have read three of his books and, I must say, he’s one of my favorite real estate authors. You can trust what he says. Experienced investors may want a bit more detail from Steve, but what he does say is accurate and safe. This is a good book on buying apartments. In fact, in my own book, “Investing in Duplexes, Triplexes & Quads,” I list the best books I’ve read on different areas of real estate. This book is the ONLY book I recommend on investing in commercial multifamily (ie, apartments of 5 units and up) properties.

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