Review of Investing in Income Properties: The Big Six Formula for Achieving Wealth in Real Estate (Hardcover)

I am a 30-year old experienced real estate professional that was thoroughly disappointed in this book.I'm a commercial real estate analyst for a national firm in a large U.S. city.I also own five rental properties of my own.It is rare that an "entry-level" book such as this will catch my attention anymore.However, as it had a one-page write-up in the National Real Estate Investor magazine, it caught my eye.Looking further at the reviews on Amazon.com, I saw 19 reviews - all were 5 stars.So I purchased the book.

However, it is disappointing.For one thing, the author makes the claim that commercial properties are recession proof.Really?For the un-initiated, commercial properties are typically purchased based on cap rates.You'll take the Income that a property produces and divide it by an appropriate cap rate to determine what you will pay for the property, or what market value for the property is.As a result of the current credit crisis, risk has been re-assessed and cap rates have risen significantly across the board.

There is no doubt that cap rates have risen.Take for example a property that produces an annual income of $100,000.If you use a cap rate of 6.5% (fairly typical about a year ago), the result would be a value of approximately $1.5 million.Cap rates have risen consistently approximately 200 basis points over the past year.That same property would sell today w/ a cap rate of 8.5%.Using this cap rate results in a value of approximately $1.2 million. That is a value loss of $300,000, or approximately 20% of your value.Typically an investor would put 20% down.So if you bought this property a year ago w/ a 20% downpayment, your investment today would be gone and you could potentially be bankrupt.Does this sound like an investment that is "recession proof" to anyone?

I know my comments here sound like I am a nay-sayer.I actually am not.However this authors angles on things are simply not accurate and are clearly written to an audience that can't counter the author's points.It may be a good read for someone looking to learn more about the real estate industry.However, anyone with any existing knowledge and experience in the industry should skip this one.



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