Rental Houses for the Successful Small Investor

Rating:
Summary: Realistic Look At Real Estate Investing
Review: "Rental Houses for the Successful Small Investor" by Suzanne Thomas is a great book to help people who want to become financially independent get started in real estate investing. Cash flow from real estate rental properties, Thomas writes, can be your ticket to early retirement, allowing you to live the kind of life you want.

So, why isn't everyone becoming financially independent by investing in real estate? Thomas explains that most people don't understand the principle of compounding wealth. Because of this, people don't remain committed to real estate investing.

To make the point, Thomas asks us to consider taking a 35-day job where we can be paid either one of two ways. First, we can be paid $1,000 daily. The other option is being paid only a penny the first day. Then, for each of the next 34 days, our income will double. The temptation is to take the $1,000 per day for a total of $35,000. But, via compounding, the penny-a-day option grows into an amazing $343,597,363.21.

Similarly, Thomas observes that many people who get started in real estate investing abandon it after only two or three years because they feel they aren't generating any noticeable dollar return on their real estate investments. Thomas advises, "You should make at least a five year commitment to real estate if you want the chance to experience substantial financial rewards."

Most people abandon real estate investing when they only see the pennies in the first few days.

Thomas says that each rental property you acquire will probably take about two to three hours per month to administer and that real estate investing can be the ideal home business. She points out as few as five rental properties can provide a core, livable income in five to ten years.

The Chapter, "Rates of Return on Rental Real Estate," is especially valuable. Thomas shows new real estate rental investors how to calculate the rate of return they are achieving on their rental properties.

This rate of return, Thomas explains, is composed of three main parts. First, there is the potential property appreciation. Second is the rental cash flow from the properties. Third is the "principal paydown," i.e., as the years pass you acquire more equity in your rental real estate. Thomas also allows for the tax saving acquired because the IRS lets you depreciate rental real estate from a tax standpoint, even though your property is probably actually increasing in value.

The Chapter, "Rates of Return on Rental Real Estate," calculates the rate of return on one of Thomas's actual, Colorado rental properties showing how it achieved a 30% annual rate of return. Rental real estate returns tend to decrease slightly with time, Thomas explains, because as you own the property longer, more and more of the principal on the loan is paid down. Hence, you are using less and less financial leverage. So, while the return on a rental property just purchased might be 30%, the rate of return on a fully paid-for property might only be 12%.

Partially due to this factor, Thomas likes adjustable rate mortgages over fixed rate mortgages for her rental properties. While prepaying a fixed rate mortgage has the tendency to shorten the length of the mortgage, it does nothing to reduce your monthly mortgage payments, she explains. We want to keep our rental properties leveraged to increase returns, so shortening the length of the mortgage isn't fully beneficial. And, it costs money to extract cash by refinancing properties in which we already have much built-up equity, so that we can invest the money in different, and more highly-leveraged, rental real estate.

But, when we prepay on adjustable rate mortgages, Thomas explains, the effect isn't to reduce the length of the mortgage, but rather to reduce our monthly mortgage payments. This increases the investor's cash flow and allows the money to be reinvested in new real estate properties (or, as Thomas did, allows you to retire earlier).

Thomas also discusses the risks associated with choosing adjustable rate mortgages for real estate properties. She doesn't view adjustable rate mortgages as being as risky as many people think they are. Thomas says this is partially because, as interest rates rise, more people won't be able to afford home buying as an option, and there should be more renters. So, rents will probably increase with increasing interest rates.

Thomas recommends making extra payments toward principal on your rental properties' adjustable rate mortgages. This has the effect of reducing your monthly payments without shortening the length of the mortgage. Thomas shows that, by making extra payments toward principal, you can reduce your monthly payments so an increase in interest rates won't overwhelm your capacity to pay down your real estate mortgages. By reducing your monthly payments via prepayment, you will create a buffer to help shield you from increasing interest rates.

Thomas suggests that you can also diversify your real estate mortgages by having some fixed rate mortgages along with some adjustable rate mortgages.

"Rental Houses for the Successful Small Investor" also gives the real estate investor useful information about:

--Finding The Down Payments For Your Properties

--Selecting Rental Real Estate Properties

--Rental Real Estate Loans

--Qualifying Potential Tenants

--Day-to-Day Details Of Running Rental Properties

--The Lease And Important Clauses To Protect Yourself And Your Rental Properties

--1031 Tax Deferred Exchanges Of Real Estate

The chapter about reducing your taxes, via 1031 Tax Deferred Real Estate Exchanges, and the information throughout Rental Houses for the Successful Small Investor about reducing your taxes on real estate investments is especially valuable.

If you are contemplating investing in real estate and, in particular, investing in rental properties, I highly recommend buying a copy of "Rental Houses for the Successful Small Investor" by Suzanne P. Thomas. The book is highly readable and packed with useful information to help you get started in real estate investing.

Peter Hupalo, Author of "Thinking Like An Entrepreneur" and "Becoming An Investor"

Rating:
Summary: Good Basics Book
Review: I read this book shortly after deciding to rent my first home instead of selling it. My family has been in the Real Estate Rental business for generations, so I am not new to the industry. I grabbed the book while on a business trip and a read it cover to cover in a very short period of time. It is an easy read that covers the basics of renting homes. As other reviewers have said, there are many strategies to make money in the Rental Market. Ms. Thomas has chosen one approach that has been good for her. Some people do not agree with her strategy of buying single family homes. That does not make the book a bad one. The strategy is just that: one of many possible strategies. The book covers the basics and gets you ready for your first experience. I think you should look at this book as what it is: a basic introduction to the rental market. As such, I think it is worth every penny.

Rating:
Summary: A sensible approach to real estate investing
Review: I have read many books on R.E. investing, many say the same thing and some make wild promises. Suzanne has put together a book that is both different than others and at the same time, does not promise that you will get rich overnight.

Suzanne covers many of the pitfalls associated with Real Estate Investing as well and I like that. Too many others make it appear as though R.E. Investing is a slam dunk, invest, rent your property and wait for the checks to come rolling in. Not so.

Overall a good book by Suzanne. Great for novices and experienced alike.

Rating:
Summary: Special Book on Investing in Houses
Review: After reading this book, I sold two condos on a 1031 exchange and bought a single-family house. It was a great decision and Rental Houses for the Successful Small Investor helped me make it. The author brings a refreshing approach to the topic of real estate investing. First, the equation of money with freedom: a seemingly simple point but compellingly presented. Second, the courage to say that multi-family investment properties are overrated, sold at a premium, and often located in unpleasant areas. Third, an aesthetic commitment to find, create, and maintain properties in which the owner would want to live. Fourth, a steely-eyed assessment of tenants willingness to lie, neglect, and take advantage, but a commitment to structure the lease to preserve the property and ultimately do right by all parties. Those who put down the seeming simplicity of this book are missing the deeper message. This is a way of living and investing based on a genuine love for houses as both homes and engines of wealth creation. The technical points are in there (they are stated clearly, once, for intelligent readers). Bragging? I have very little interest in reading advice from an author who is not successful and justifiably proud of that success. It takes courage to play this particular game, especially in the era the author began investing. If this book seems simple, read it again.

Addendum: Last summer I bought a beautiful single-family rental home in Irvine, CA by selling two condos and re-investing my equity using a 1031 tax-deferred exchange (very easy). This book helped me tremendously to get my mind right and steer clear of shabby "income" properties like duplexes (although I did look at a couple). I like my tenants, I love the house, and it's the kind of place I could live in myself. In fact, it's right down the street! Am I bragging? Yes. I'm proud of the house and proud of myself for making it work financially and aesthetically, both for me and my tenants. And I'm grateful for this book, which I read over and over as I contemplated the exchange.

Rating:
Summary: Reasonably good book
Review: If you're a beginning real estate investment junkie, then you'll probably enjoy this book. The author does a small amount of inspirational cheerleading, but also provides a decent amount of useful & actionable information. It's also a very light read. I suspect that more seasoned real estate pros will find it boring.

The chapter on 1031 tax-deferred exchanges contained a good overview, but contained many typos, misspellings, and awkward grammar. The author also didn't do the proper level of research for some of her claims, as evidenced by her "guessing" about the rules for setting up depreciation schedules on the 1031 replacement properties. She should have consulted with an experienced real estate attorney before writing a "guess" into this book.

Overall, I enjoyed reading this book and picked up a few nuggets of wisdom that I'll use in the future.

Rating:
Summary: An okay book---but not great
Review: Interesting contrast of opinions on this book. Personally, I think Suzanne Thomas has written a good, but not great book on real estate.1 star reviewers; are you reacting to the five star reviewers comments or the actual content of this book? I have read some of the book recommendations you 1 star reviewers have made and agree they are good choices and in many ways similiar to what Suzanne offers here.5 star reviewers are too bullish on this book. You guys sound like a child who goes into a candy store for the first time. Most of this is basic, so that tells me a lot about your experience in real estate.Overall a good book by Suzanne Thomas and I recommend it. In another regard, hats off to Suzaane for her patience with the 1 star reviewers. The fact that Ms. Thomas does not delete these reviews like some other self publishers also tells me that Suzanne is a person of character and not afraid of either fact or opinion about her work!Goodbook Suzanne, I am looking forward to your next book.

Rating:
Summary: Rental houses for the Successful Small Investor
Review: My husband and I have read so many real estate investing books you'd think we'd be experts by now. This was the first book that expained things in a down-to-earth, practical way. Everything from types of loans and how to use them to your advantage, when to leverage one house to buy another, and management methods is covered from her own experience. There is none of the pep-talk without details as in other books. We are now closing on our second investment property using this book as our guide.

Rating:
Summary: Confidence Building
Review: I am just getting started with investing. This book was a fabulous introduction to the subject and the book is far more approachable than any of the others I read, as a matter of fact I've read it twice & some parts 3 times. I was very interested in the section of ARM and am considering using information on my first purchase, where I hadn't seriously considered it before.

Contrary to other reviews, I found the subject of leverage clearly explained. The author's point was that the more leveraged you are, the more at risk your position is. She picks a level of risk she is comfortable at and adjusts her investing style around that. She knows how much she wants to make, and tries to get there while minimizing her risk with equity in the properties.

The major strength of this book is that it's plain explanations and anecdotes help convince one that it isn't rocket science and that mere mortals are capable of doing it. That alone is worth the purchase price to me.

Rating:
Summary: Bad Advice Abounds
Review: Having been an independent real estate investor for more 20 years, I can tell you that some of the advice offered in this book is, without a doubt, poor investment strategy. For example, the author claims that she could be financially independent with 5 paid off rentals. By paying off any real estate, which I've personally done multiple times, the results are:

1. Losing the benefits of leveraging. The actual return on the money you have invested in the property is the same as the apprectiation rate, or about 5.5%. But if you invest only 25% of the value of the property, then the return on your investment is 4 times the appreciation rate, or 22%.

2. Paying excess income tax by getting income instead of equity. Income is taxed, equity is not.

I should write a book.

Rating:
Summary: A Novice who liked it !!
Review: My wife and I, had been thinking about investing in realestate for a very long time. After reading this book it convinced us to do it. Now, I've found how much I still need to learn; but I thought the advise was simple and practical. It is a major reason we started with our first rental house. Even if you already own property, I'm sure you'll find it useful. Many of my friends have asked borrowed this book.