The nature of this book is such that merely reading the following description
of the book will make you a better investor with better understanding
of the real estate investment process.

How to profit from skill and boom markets and protect yourself in down markets

After writing 22 different real estate investment books (64 real estate books if you count editions) and over 5,000 real estate investment articles over 33 years, I finally felt qualified to write a book on the fundamentals of real estate investment. The two missing links were 1. explaining the difference between what the rent and expenses said the buildings were worth and what they were actually selling for in the real world—and 2. managing risk. Two new fields—behavioral finance and financial engineering—came into being in recent years and provided understanding of those two important parts of real estate investing.

Sophisticated fundamentals

Best Practices for the Intelligent Real Estate Investor is the book I wish I had when I started investing in real estate in the ´60s. It is a book on basics and fundamentals, but a sophisticated analysis of those fundamentals.

But not too simple

Most books on real estate investment fundamentals feel they have to make the subject simple. But in doing so, they violate the rule set forth by Albert Einstein,

Make everything as simple as possible, but no simpler.

Sorry, but it´s complex

Real estate investment is complex. Sorry. It´s not my fault. That´s just the way it is. You need to know that. Throughout my career as a real estate investment writer, I have told readers what they need to know, in spite of the fact that it is often not what theywant to hear. The criminal get-rich-quick gurus will say real estate investment is simple because their main goal is to part you from your money. My main goal is to help you make as much as possible.

22 legal specialties

Think about it. Real estate investment involves 22 legal specialties: federal income tax law, state income tax law, state tort law, federal laws pertinent to real estate, securities laws (possibly), bankruptcy planning, estate planning, pension planning, elder law, college financial aid law, landlord-tenant law, partnership law (possibly), trust law with some entities, divorce or family law, foreign law if your entity will be created in a foreign country like the Cayman Islands, HUD law, business law, construction law (possibly), criminal law (possibly), environmental law, labor law, finance/debt collection law. And those are just legal specialties.

Construction, external forces

It also requires expertise in complex building systems like heating, air-conditioning, plumbing, roofs, electrical systems, and so on. Plus, you need to know real estate subjects like property management, due-diligence, marketing, leasing, mortgage finance, and so on.

Real estate investments are affected by external forces like interest rates, the stock market (as an alternative investment that sometimes draws buyers away from buying your building), recessions, depressions, inflation, deflation, and more.

So, to one degree or another, you have to understand all the ramifications of your real estate decisions and all the forces working on your properties.

Table of Contents

1. Overview 1
2. Changing your financial situation 11
3. Your goals 21
4. Skill and luck 27
5. Risk management 35
6. Deedless real estate investing 69
7. Bad instincts for investing 79
8. Sources of real estate value 89
9. Profit strategies 105
10. Vacant Properties 113
11. Leverage 115
12. The history of real estate investment 121
13. Tax Avoidance 137
14. Transaction costs 143
15. Property management 153
16. Litigation 161
17. How to calculate your true return 169
18. The emotional roller coaster 175
19. Negotiation 179
20. Myths about real estate investment 185
21. Property types 191
22. Duration 199
23. Ethics 203


Bibliography 207
Index 209

Change you can believe in

The title of Chapter 2, “Changing your financial situation,” is stated the way it is to help you keep in mind that you can both make money or lose money in real estate investment. In books by other authors, that would be where they tell you