By 

James M. Dorey Jr. –

  

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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By 

Mariusz Skonieczny “Author” (Schaumburg, IL) –

  

This is a good book on commercial real estate investing. It introduces readers to many different types of income properties, and describes how to get them financed and how to analyze them. While there are certain advantages to real estate, such as control and leverage, no investment is risk-free or recession-proof. There is no such thing. The best way to make money in any investment is to buy it at a reasonable price. I don’t care whether your investment is in stocks, bonds, or real estate, if you overpay, you will lose money. Many are learning this lesson the hard way because stocks and real estate prices have recently plunged. With that being said, I think that this is a perfect opportunity to buy both stocks and real estate because investors are fearful sitting on the sidelines hoping for the economy to recover. When it does recover, the deals will be gone. Commercial real estate suffers from lack of financing availability, which makes it extremely attractive to those who are able to get financing. Follow this book’s advice, but remember that when you are buying a piece of real estate or a stock, you are buying into a business. With real estate, you have the control so you will be running it yourself. With stocks, you have no control so you better pick a company with good management. Either way, you must buy at a good price, and when the business operates and makes good money, the value of your investment will go up and you will make a profit.

- Mariusz Skonieczny, author of Why Are We So Clueless about the Stock Market? Learn how to invest your money, how to pick stocks, and how to make money in the stock market

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