Primer aids real estate investors

If you are thinking about investing in real estate, first read William H. Pivar’s “Real Estate Investing From A to Z.” It is not a get-rich-quick book but rather a get-rich-soundly read.

As the title of this third edition indicates, the author includes virtually all the basics that real estate investors need to know. He begins by explaining the primary reasons for investing and why property is usually superior to such other investments as the stock market. He believes in using leverage (i.e., borrowing money) to control property, which is likely to appreciate in market value.

“If you purchase real estate on which you owe $2 million and hold on to it for 15 years, you should be a millionaire. With only an average 3% inflation rate, within 15 years your equity for average purchases should give you your million-dollar equity,” the author explains.

Then he proceeds to show why a 10% cash down payment is more profitable than a 50% down, thanks to leverage. “Real estate investments can buy themselves,” Pivar explains, meaning the tenants will provide the rent money to cover the mortgage payments and buy the property for the investor.

Pivar doesn’t overlook realty investment risks. He explains the negatives, such as illiquidity, personal liability, negative cash flow and management. Then he explains how to overcome these potential drawbacks.

Pivar uses many examples, plus follow-ups to show what recently happened to the example investor’s properties. The book’s section on tax benefits is updated, including reference to the 2003 Tax Relief Act, which reduced the federal long-term capital-gain tax rate to a maximum of 15% and even lower for taxpayers in low tax brackets. Pivar devotes a chapter to explaining the investor benefits of tax-deferred exchanges.

He also includes creative financing techniques that can be especially important to “beginner” investors and provides a personal example of how he traded price for terms when buying his new home and obtained $21,000 of upgrades from the builder at no extra cost.

Pivar suggests avoiding investments in large homes converted to apartments; in abandoned, unrepaired or fire-gutted buildings; and in neighborhoods with lots of graffiti. The author also discusses how to handle potential negatives, such as asbestos, formaldehyde, lead, radon, toxic mold and sick-building syndrome.

You won’t find a better basic book on realty investing than this one.