More like the ABZ's - Review of the ABCs of Real Estate Investing
I just finished reading "The ABC's of Real Estate Investing" by Ken McElroy, which is part of the "Rich Dad Advisors" series and has been highly recommended on Bigger Pockets.
The reason for the title of this review is because although it is presented as a beginner's guide, I found that it actually mixes very basic concepts with very advanced ones, without distinguishing between the two. It is a great resource if you know enough to understand what applies to you based on your investment focus and experience level (which is probably why people on here love it), but I feel it would likely discourage an absolute beginner because it focuses so narrowly on the author's large-scale MFR investing.
Pros
The guidelines and techniques he presents are very specific and detailed, and although they are strongly focused on buying large MFRs in growing markets, the methods he presents (in terms of evaluating properties, projecting cash flow, etc) are largely transferable to other property classes and deals.
As a small time buy-and-hold SFR investor, I found his information to be very useful. Although he provides many very specific, step-by-step instruction on essential tasks (such as what exactly to look for when you do due diligence, how to select a good property manager, etc.), the most important aspect of the book for me was actually just the normalization of multi-family investing, which is something I would like to step into soon. I can see why people on Bigger Pockets credit this book with taking their investing to the next level, and it might very well do the same for me.
Cons
The way he mixes beginner and advanced topics would be confusing if you were unfamiliar with property investment, and could be off-putting for someone who wants to start small and just learn what she would need to know to pick up a couple cash flow positive SFRs on the side. For example, the book goes through detailed instructions on topics that are essential for beginners (and everyone else), such as how to assess realistic repair costs and rental rates, and how to calculate yields, which in turn inform the value of a property.
It also gives a script regarding how to approach owners of off-market buildings to try to get them to sell, and in the very first chapter he suggests that the reader put together a pool of investors to contribute money to big deals, which to me sound like very advanced concepts that should only be tried after someone has some experience. And although he continuously discusses the importance of putting together a team (and gives great, specific guidance on who needs to be on that team), he never suggests that the reader should think about joining someone else’s team to learn the process and test the skills they learn from the book, before trying to lead big deals on their own.
To me, it seems that the author is so used to successfully carrying out big deals in a specific niche with large, professional firms as partners, that he has forgotten how to explain the steps it has taken him to get there, and does not remember his experience level at each point along the way. He tells a story of the first deal he ever did, a single vacation condo, then immediately jumps to how he does things now, without seeming to really think through the multi-year journey he took to get there.
Ken McElroy’s method is one way to invest in real estate, but is far from the only way. He only gives flipping and other strategies a passing, dismissive mention. If that is his view based on his experience, that is absolutely fine. However, such a strong focus on one single (quite advanced) approach does not seem to be the most appropriate topic of a book that is supposed to present an overview on how to invest in real estate, which the title seems to suggest.
The Bottom Line
If you are an experienced investor who specifically wants to understand how to get into and succeed in large multi-family deals, this book is amazing. However, for a more general audience, Brandon Turner’s “The Book on Rental Property Investing” is a MUCH better guide, whose explanations are appropriate to a much wider range of experience levels.