Unusual book compares stock, bond and realty investing
By Robert J. Bruss
Tribune Media Services
Tuesday, April 23, 2002
VALUE INVESTING IN REAL ESTATE, By Gary W. Eldred (John Wiley and Sons, New York, 2002), $24.95, 268 pages. Available in stock or by special order at better bookstores, public libraries and www.amazon.com.
It's hard to explain Gary W. Eldred's scholarly tome "Value Investing in Real Estate." In it, he attempts to justify why real estate surpasses stocks and bonds as a long-term investment. The author has documented his research well, even going so far as to conclude investors will eventually flee the stock market for real estate investment.
As I studied this creative real estate book, I tried to figure out where Eldred was heading and what he was hoping to prove. He begins by explaining the investment theories of the famous Benjamin Graham and historic reasons why people have bought stocks. Though the first few chapters have virtually nothing to do with real estate, don't get turned off. Be patient. The book gets more interesting.
The author does slam many theories about the stock market, such as its purported 11 percent average annual return. He even revives the scandal of the Beardstown ladies whose false 24.4 percent annual stock market return, which sold more than 800,000 of their books, was really only about 9.1 percent annually.
Finally, in Chapter 3 the author begins explaining "The Case for Real Estate." After several pages of boring charts, which lose all but the most diehard engineer readers who love details, Eldred eventually comes to the conclusion, "Value investors should choose real estate."
This new book reminds me of my college days at Northwestern, where we were constantly writing term papers. After receiving a few B's and C's, I learned the key to earning A's was a lot of footnotes showing I had done "research." Eldred seems to follow the same formula, with many footnotes to show the sources for his statements.
In Chapter 5, the author makes a dramatic change in style, from professorial theory to practical reality. He shares some personal real estate experiences to justify his bias toward real estate investments. Eldred starts using phrases like "the magic of leverage" and even the worn-out "location, location, location."
Eventually the book gets to topics such as "The Ins and Outs of Market Value," referring to real estate, not stocks. By the second half of the book, Eldred has evolved into a "born again" real estate investor. Why he spent the first few chapters talking about the stock market in boring detail, when the book's topic is obviously real estate investing, is hard to understand.
Eldred is a superb author of some of the best practical "how-to" real estate books about home buying and real estate investing. But this one is dramatically different from his earlier books. His goal is obviously to prove real estate investing is more profitable over the long term than stock market investing. But he bounces between the stock market and real estate so often it's hard to keep track of what he is trying to prove or disprove.
This is a thinking-person's real estate investment book. It is not for the "how to make a million dollars by next Friday" crowd. One especially profound statement that caught my attention is "all properties are fixers." By that the author means virtually every property needs some work that will add to its market value.
In today's real estate market, Eldred suggests the best way to profit from real estate is to add value by fixing up a property. That is what he means by real estate "value investing." "Value investors don't wait for market appreciation," Eldred profoundly says, adding, "Through savvy purchases and property improvements, real estate investors can create their own appreciation."
Chapter topics include: Value Investing: The One Best Way; The Case Against Stocks for Retirement; Real Estate Risks and Returns; The Enterprising Investor; The Ins and Outs of Market Value; Is the Property a Good Buy?; Look Beyond Market Value; Predict the Future; and Create Value Now.
This is one of the most unusual real estate books I've ever read. It can easily be used as a college textbook in a real estate investment course. Or, it can be a personal guidebook for novice and experienced realty investors who want assurance they are doing the right thing to add profitable improvements to increase property market values. On my scale of one to 10, this excellent book rates a 10. |
