Investing in Real Estate

ISBN-10: 0471741205
ISBN-13: 9780471741206
Edition: 5th 2006 (Revised)
List price: $19.95
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Description: A new and improved Fifth Edition of the classic real estate investor’ s bible Now back and better than ever, the new Fifth Edition of Investing in Real Estate remains the investor’ s go-to source for unbeatable advice on winning in the real estate  More...

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Book details

List price: $19.95
Edition: 5th
Copyright year: 2006
Publisher: John Wiley & Sons, Incorporated
Publication date: 11/18/2005
Binding: Paperback
Pages: 352
Size: 6.00" wide x 9.00" long x 0.75" tall
Weight: 0.638
Language: English

A new and improved Fifth Edition of the classic real estate investor’ s bible Now back and better than ever, the new Fifth Edition of Investing in Real Estate remains the investor’ s go-to source for unbeatable advice on winning in the real estate game. Easy to read, full of examples, and packed with tools and tips for every investor, the book covers such topics as financing, valuation techniques, maximizing cash flow, fixing and flipping properties, buying foreclosures, and lease options. All the tried-and-true advice readers expect is here. Plus, new information for the new century covers fresh topics like finding properties outside the investor’ s home market; how to find the next hot real estate market; using the new financing technique called " option arms"; and using the limited liability company as a form of company ownership. Up-to-date and more informative than ever, Investing in Real Estate remains the ultimate resource for investors young and old, just startin out or well on their way to moguldom. Packed with smart advice and practical information, this book remains the only guide investors need to start building wealth immediately. As syndicated columnist and real estate author Robert Bruss said: " This is the best of the how-to-invest-in-real-estate books currently available." Andrew McLean (Evansville, IN) has broad real estate experience and has written six other books, including The Ultimate Guide to Residential Real Estate Loans (cloth: 0-471-61714-8; paper: 0-471-61713-X). Gary W. Eldred, PhD (Gainesville, FL), is a realtor who has served on the graduate business faculty at Stanford University and the University ofIllinois. He is also the author of the Make Money series, Yes! You Can Own the Home You Want (cloth: 0-471-09946-5; paper: 0-471-09978-3), The 106 Common Mistakes Homebuyers Make (and How to Avoid Them) (0-471-12658-6), and The Complete Guide to Second Homes for Vacations, Retirement, and Investment (0-471-34967-4).

Prologue: Does Investing in Real Estate Still Make Sense?
Why Real Estate Offers Your Best Route to a Prosperous Future
A Dependable and Growing Flow of Income
Property versus Stock
What about Bonds?
Don't Fall for the Annuity Sales Pitches
Are Rent Collections Dependable?
Why Rents Will Continue to Increase
From Baby Bust to Echo Boom
New Construction Can't Keep Pace
More Good News for Property Appreciation
But First, the Reckoning
The Relevance to Property Appreciation
The Interest Rate Kicker
Reason, Not Faith
You Can Still Win with Properties (for Now)
Financing: Borrow Smart, Build Wealth
The Birth of "Nothing Down"
Should You Invest with Little or No Cash or Credit?
What's Wrong with "No Cash, No Credit"?
Leverage: Pros and Cons
What Are Your Risk-Return Objectives?
Maximize Your Leverage with Owner-Occupancy Financing
Owner-Occupied Buying Strategies
Homeowners, Too, Can Use This Method
Why One Year?
Where Can You Find High-LTV Owner-Occupied Mortgages?
What Are the Loan Limits?
High Leverage for Investor-Owned Financing
High Leverage versus Low (or No) Down Payment
Creative Finance Revisited
Are High-Leverage Creative-Finance Deals Really Possible?
What Underwriting Standards Do Lenders Apply?
Collateral (Property Characteristics)
Amount and Source of Down Payment and Reserves
Capacity (Monthly Income)
Credit History (Credibility!)
Character and Competency
Compensating Factors
Automated Underwriting (AUS)
Appraisal: How to Discover Great Properties
Make Money When You Buy, Not Just When You Sell
What Is Market Value?
Sales Price Doesn't Necessarily Equal Market Value
Lenders Loan Only against Market Value
The Three Approaches to Value
Property Description
Subject Property Identification
Neighborhood
Site (Lot) Characteristics
Improvements
The Cost Approach
Calculate Cost to Build New
Subtract Depreciation
Lot Value
Estimate Market Value (Cost Approach)
The Comparable Sales Approach
Select Comparable Properties
Adjusting for Differences
Explaining the Adjustments
The Income Approach
Income Capitalization
Net Operating Income
Estimating Capitalization Rates (R)
Comparing Cap Rates
The Paradox of Risk and Appreciation Potential
Always Compare Relative Price
Valuation: Final Words
Appraisal Limiting Conditions
Valuation versus Investment Analysis
Maximize Cash Flows and Appreciation
Will the Property Yield Good Cash Flows?
Arrange Alternative Terms of Financing
Decrease (or Increase) Your Down Payment
Buy at a Bargain Price
Should You Ever Overapy for a Property?
The Debt Coverage Ratio
Numbers Change, Principles Remain
Will the Property Yield Above-Average Appreciation?
Low-Involvement versus High-Involvement Investing
Compare Relative Prices of Neighborhoods (Cities)
Undervalued Neighborhoods and Cities
Beverly Hills versus Watts (South Central Los Angeles)
Demographics
Accessibility (Convenience)
Improved (Increased) Transportation Routes
Jobs
Taxes, Services, and Fiscal Solvency
New Construction, Renovation, and Remodeling
Land-Use Laws
Civic Pride
Sales and Rental Trends
Summing Up
How to Find Bargains
Why Properties Sell for Less (or More) than Market Value
Owners in Distress
The "Grass-Is-Greener" Sellers
Stage-of-Life Sellers
Seller Ignorance
List Your Screening Criteria
Bargain Sellers
Networking
Newspapers and Other Publications
Cold Call Owners
Agent Services
World Wide Web
Seller Disclosures
The Disclosure Revolution
Income Properties
Summary
Profit From Foreclosures
The Foreclosure Process
Lender Tries to Resolve Problem
Filing Legal Notice
The Foreclosure Sale
REOs
Buy Preforeclosures from Distressed Owners
Approach Owners with Empathy
The Difficulties of Dealing Profitably with Owners in Default
Prequalify Homeowners and Properties
Finding Homeowners in Default (Prefiling)
Networking
Mortgage Collections Personnel
Driving Neighborhoods
Finding Homeowners (Postfiling)
Meeting the Property Owners
Two More Drawbacks
Vacant Houses
Satisfy Lenders and Lien Holders
All Parties Are Better Off
Sometimes Losing Less Is Winning
Profit from the Foreclosure Auction
Why Foreclosures Sell for Less than Market Value
Make the Adverse Sales Efforts Work for You
How to Arrange Financing
The Foreclosure Sale: Summing Up
Profit From Reos and Other Special Sales
Buy Direct from a Mortgage Lender
Buy Safely
Why a Lower Price?
Finding Lender REOs
Follow Up with Lenders after Foreclosure Sales
Locate Specialty Realtors
HUD Homes and Other HUD Properties
Homeowners versus Investors
"As-Is" Condition
Potential Conflict of Interest
Buyer Incentives
The Bid Package
Department of Veterans Affairs (REOs)
Big Advantages for Investors
Fannie Mae and Freddie Mac REOs
Agent Listings
Investors Accepted
Federal Government Auctions
Buy from Foreclosure Speculators
Probate and Estate Sales
Probate
Estate Sales
Private Auctions
How to Find Auctions
Quick Profits Through Fix and Flip
Fix, Flip, Profit!
Looking for "Fixers"
The Browns Create Value in a Down Market
Research, Research, Research
Improvements to Consider
Thoroughly Clean the Property
Add Pizzazz with Color Schemes, Decorating Patterns, and Fixtures
Create More Usable Space
Create a View
Capitalize on Owner Nearsightedness
Eliminate a Negative View
Enhance the Unit's Natural Light
Reduce Noise
Required Repairs and Improvements
Plumbing
Electrical System
Heating and Air-Conditioning
Windows
Appliances
Walls and Ceilings
Doors and Locks
Landscaping
Storage Areas
General Cleaning
Safety and Health Factors
Roofs
Major Improvements and Alterations
Can You Improve a Location?
The South Beach Example: From Derelicts to Fashion Models
Community Action and Community Spirit Make a Difference
Many Neighborhoods Offer Potential
What Types of Improvements Pay the Greatest Returns?
How Much Should You Budget for Improvements?
Beware of Overimprovement
Other Benefits
No-No Improvements
Budgeting for Quick Resale Profits
Estimate the Sales Price First
Estimate Costs
Sales Price Less Costs and Profit Equals Acquisition Price
Comply with Laws and Regulations
Should You Buy a "Fixer"?
Too Little Time?
Put Your Creativity to Work
More Techniques for High Yields and Fast Profits
Lease Options
Here's How Lease Options Work
Benefits to Tenant-Buyers (An Eager Market)
Benefits to Investors
The Lease Option Sandwich
How to Find Lease Option Buyers and Sellers
A Creative Beginning with Lease Options (for Investors)
Lease Purchase Agreements
"Seems" More Definite
Amount of the Earnest Money Deposit
Contingency Clauses
Conversions
Condominium Conversion
Tenants in Common
Converting Apartments to Office Space
Master Leases
Assignments: Flipping Purchase Contracts
Summary
Negotiate A Win-Win Agreement
Win-Win Principles
The Purchase Contract
Names of the Parties
Site Description
Building Description
Personal Property
Price and Financing
Earnest Money Deposit
Quality of Title
Property Condition
Preclosing Property Damage (Casualty Clause)
Closing (Settlement) Costs
Closing and Possession Dates
Leases
Contingency Clauses
Assignment and Inspection
Public Records
Systems and Appliances
Environmental Hazards
No Representations
Default Clause
Summary
Managing Your Properties to Increase Their Value
The 10:1 Rule (More or Less)
Think First
Know Yourself
Know Your Finances
Know Your Capabilities
Smart Strategic Decisions
Local Markets Require Tailored Strategies
Craig Wilson's Profit-Boosting Market Strategy
How Craig Wilson Used Market Information to Enhance the Profitability of His Property
Overall Results
Cut Operating Expenses
Energy Audits
Property Insurance
Maintenance and Repair Costs
Property Taxes and Income Taxes
Increasing Value: Final Words
Develop the Best Lease
The Mythical "Standard" Lease
Your Market Strategy
Search for Competitive Advantage
Craft Your Rental Agreement
Names and Signatures
Joint and Several Liability
Guests
Length of Tenancy
Holdover Tenants (Mutual Agreement)
Holdover Tenants (without Permission)
Property Description
Inventory and Describe Personal Property
Rental Amounts
Late Fees and Discounts
Multiple Late Payments
Bounced Check Fees and Termination
Tenant "Improvements"
Owner Access
Quiet Enjoyment
Noxious Odors
Disturbing External Influences
Tenant Insurance
Sublet and Assignment
Pets
Security Deposits
Yard Care
Parking, Number, and Type of Vehicles
Repairs
Roaches, Fleas, Ants
Neat and Clean
Rules and Regulations
Wear and Tear
Lawful Use of Premises
Notice
Failure to Deliver
Utilities, Property Taxes, Association Fees
Liquid-Filled Furniture
Abandonment of Property
Nonwaivers
Breach of Lease (or House Rules)
No Representations (Full Agreement)
Arbitration
Attorney Fees (Who Pays?)
Written Notice to Remedy
Tenants Rights Laws
Tenant Selection
Property Operations
Evictions
Landlording: Pros and Cons
Possibilities, Not Probabilities
Professional Property Managers
Sell for Top Dollar
Agent Services
Obstacles to By-Owner Sales
Cost of Brokerage Services
Listing Contracts
Obligations of the Sales Agent
Obligations to Your Agent
Prepare the Property for Top Dollar
Compliance Issues
"As-Is" Sales Still Require Disclosures
Attract Buyers
Advertising and Promotion
Negotiate The Sales Contract
Pay Less Tax
The Risks of Change and Complexity
Homeowner Tax Savings
Capital Gains without Taxes
Rules for Vacation Homes
Mortgage Interest Deductions
Credit Card Interest
Rules for Your Home Office
Depreciation Expense
Land Value Is Not Depreciable
Land Values Vary Widely
After-Tax Cash Flows
Passive Loss Rules
Taxpayers in the Real Property Business (No Passive Loss Rules)
Alternative Minimum Tax
Capital Gains
A Simplified Example
The Installment Sale
What's the Bottom Line for Sellers?
Implications for Buyers
Tax-Free Exchanges
Exchanges Don't Necessarily Involve Two-Way Trades
The Three-Party Exchange
Exchanges Are Complex but Easy
Are Tax-Free Exchanges Really Tax Free?
Section 1031 Exchange Rules
Reporting Rental Income and Deductions
Tax Credits
Complexity, Tax Returns, and Audits
Use a Tax Pro
Property Taxes
Summary
New Trends and Developments
Lower-Priced Areas
What about Property Management?
Tenant-Assited Management
Property Management Companies
Emerging Growth Areas
The Creative Class
Implications for Investing in Real Estate
Right Place, Right Time
Emerging Retirement/Second-Home Areas
Where to Invest
Income Investing
Commercial Properties
Property Management
The Upside and Downside
Opportunity for High Reward
Commercial Leases Create (or Destroy) Value
Self-Storage
Mobile Home Parks
Profitable Possibilities with Zoning
Tax Liens/Tax Deeds
Localities Differ
Are Tax Liens/Tax Deeds an Easy Way to Make Big Profits?
Discounted Paper
What Is Discounted Paper?
Here's How It Works
Broker the Note
Do Such Deals Really Occur?
Due Diligence Issues
Should You Form an LLC?
Different Strokes for Different Folks
Insufficient Court Rulings
One Size Doesn't Fit All
An Income for Life
Less Risk
Personal Opportunity
Internet Appendix
Index

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