Title: "Buy and Hold Forever: How to Build Wealth for the 21st Century"
Author: David Schumacher, Ph.D., and Steve Dexter
Publisher: Schumacher Enterprises, revised 2010; 380 pages; $21.95
For this column I’ve reviewed more than one book exploring the new world and new rules of real estate, after the bubble. But in a number of ways, post-crash, everything old is new again. "New" developments like downpayment requirements and having to document your income to get a home loan are actually just a reinstatement of some age-old, fundamentally sound lending practices.
And so it is with the fundamentally sound real estate investing practices explored and explained in this 10th anniversary revision of David Schumacher’s classic real estate investment bible, completed posthumously by his longtime investing student, Steve Dexter.
Schumacher’s strategies run about 180 degrees from the "no-money-down, flip-this, that-and-the-other" house-type teachings you see on infomercials and at expos. They run more toward the smart, strategic long-term portfolio-building view, which, though it seems less sexy, is actually also espoused by that much more flamboyant anti-flipper, Donald Trump.
In fact, Schumacher and Trump both prioritize three foundational steps on the path to real estate riches: choosing properties carefully for their profit potential; analyzing neighborhoods to project and pick those that will be hot in the years to come; and making your money at the bargaining table — cutting a shrewd deal up front to ensure the profitability of every investment, rather than relying on your ability to speculate about how much you’ll be able to get for it in the future.
"Buy and Hold Forever" is a plain-English primer of exactly the steps Schumacher took and the lessons he learned while parlaying a "modest" investment into a $20 million portfolio of real estate holdings. It’s not about tricks or fast moves; rather, it’s about the basics, and working them well.
Schumacher and Dexter, who owns 27 investment properties himself, start out with a brief macroeconomic discussion of why they feel real estate done right is a superior investment, even in a down economy. They then cover various property types, from residential to commercial to multifamily and industrial, and even including some specialty property types, like shopping centers and mini-warehouses.
After reviewing the pros and cons of different property types, they offer checklists of attributes to look for in each. They explore the question of whether real estate is an investment, a speculation or a gamble, and how readers can manage the risks of their real estate investments, while still aiming at realistic goals and objectives.
Schumacher and Dexter then educate us about how national and regional trends affect real estate growth, nationally, regionally and at the city and neighborhood levels. Next, they turn to how to use Internet resources in starting your search and educating yourself about listings and the market.
Then, the authors turn to projections and forecasting the growth of your investment, taking timing considerations into account, and planning the long-term course of the investment at the time you negotiate the purchase price and terms. Logistics are up next, including the basics of smartly negotiating seller financing and how to use the services of a real estate broker to your best advantage.
Moving on to portfolio management, Schumacher and Dexter tackle the tough topic of growing your portfolio using your initial investment without overextending yourself, and managing to get the maximum yield from your investments. They move on to cover the real estate investor’s tools of refinancing and 1031 exchanges, as well as to offer tips on protecting your real estate investment. "Buy and Hold Forever" wraps up with an ode to California’s planned high-speed rail system and the impact it will have on the national economy (and smart real estate investors’ picks) when complete.
"Buy and Hold Forever: How to Build Wealth for the 21st Century" concludes with a compendium of Schumacher’s investing axioms, bullet-point rules of thumb and memorable lines of wisdom that are real estate’s closest thing to a nursery rhyme. Even if your inclination is to turn your investment properties over more quickly than every decade or so, there’s lots of meat about understanding and analyzing the market and individual properties and investment strategies that you will find here, although it does read as a bit overly simplistic about human nature and, especially, tenants (!) than today’s zeitgeist warrants, in my opinion.
So, I’ll leave you with one of Schumacher’s real estate axioms, which actually applies to life in general and bears repeating these days: Never overextend yourself. If you’re able to control your finances, you’re able to control your destiny.