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Real Estate WeeklyREAL ESTATE BOOK REVIEW
EXPERT REVEALS HOW TO GET STARTED AND PROFIT BY INVESTING IN RENTAL HOUSES
By Robert J. Bruss
BUILDING WEALTH ONE HOUSE AT A TIME, By John W. Schaub (McGraw-Hill, New York), 2005, $18.95, 225 pages
The reason Building Wealth One House at a Time by John W. Schaub makes such profitable reading is it is written by an expert who shares his more than 30 years of success experiences so you don't have to make the few mistakes he made. This is such an important new book, it should be read two or three times to fully benefit from Schaub's wise insights.
For example, he explains why single family rental houses make the best investments, both from cash flow and market appreciation viewpoints. Another gem Schaub shares is to avoid obtaining bank mortgages when acquiring houses for investment. "I have never borrowed money from a bank to buy a property," he discloses. Then he shows how to get financing from sellers and other sources.
This is a "must read" book for every serious real estate investor. Written in easy-to-understand style, it explains how the author has been a full-time investor for 32 years, raised a family from rental house income, and has lived in the home of his dreams for the last 24 years. Schaub shares why he rented where he lived for nine years to save money for rental house investing while getting started.
The author explains why investing in houses is safer and more profitable than other investments. "A major advantage of investing in several houses rather than one big apartment or office building is that you can diversify by investing in different price ranges. By owning both less expensive and more expensive houses, you can have the safety of the lower-priced houses and the upside potential of the higher-priced ones."
Schaub recommends buying houses close to where you live. He admits to once owning properties in 10 states. But he says that was a mistake because it's too difficult keeping them rented and handling repairs by long distance. Today, he only owns property near his home.
With average annual market value appreciation of 5 percent, the author explains how anyone can become very wealthy because it's the tenants who buy the houses for the investor.
He spends considerable time showing how to select quality tenants who will stay many years. Next, the author shows how to manage those tenants so they won't bother the owner. "I have had to evict only six tenants in 30 years," the author adds.
Schaub reveals how to find and acquire rental houses with nothing down. He explains how he taught these techniques to Robert G. Allen, a former student of Schaub's seminar "Making It Big on Little Deals," who went on to write the best selling book "Nothing Down" based on those methods.
"Not all houses are created equal. Some houses will appreciate more; some will produce more cash flow because they will attract better tenants; and others will require more maintenance and have higher expenses," Schaub reports.
He recommends staying away from slum and very low income neighborhoods. Then he shows why investing in higher priced homes is usually more profitable than acquiring middle-income homes.
As for rising mortgage interest rates, Schaub welcomes them. "As the economy changes, you will borrow at different interest rates. When rates are the highest, you will make your best buys," he explains.
The author emphasizes his top nine sources for finding investment houses at bargain prices, often with bargain-rate seller finance terms also. He suggests buying at least one house per year. "In a normal market, 90 percent of the houses for sale are not opportunities. You are trying to identify that one seller in 10 who might have a reason to make you a good deal," he notes.
The book includes key questions to ask sellers or their realty agents on the phone before even looking at their house. Additionally, Schaub's "seller's motivation scale" shows how to spot a motivated seller who is likely to make a good deal.
The chapter about knowing how to pay for rental houses is especially valuable. The author shares his checklists, including his 10-10-10 rule, which is making no more than a 10 percent down payment, paying no more than 10 percent interest (for an especially good deal), and buying at least 10 percent belong market value.
Chapter topics include How Buying One House at a Time Can Make You Wealthy; Buying the Right House; Finding Good Deals; Making the Offer; Borrowing to Increase Your Profits; Understanding and Using Real Estate Contracts; Secrets of Professional Negotiators; Buying and Selling with Agents; Buying and Selling Houses to Produce Cash Flow Now; Selling on Lease-Options to Generate the Largest Profits; Finding and Buying Preforeclosures and Foreclosures; and Eight Steps to Quitting Your Day Job.
The book concludes with a chapter about helping others build wealth, one house at a time, to eliminate poverty housing. Schaub explains why he has been active locally with Habitat for Humanity for many years; he is now on Habitat's international board of directors. This is one of the very few real estate books which cannot be recommended too highly. On my scale of one to 10, it rates an off-the-chart 12.