Book SummaryThe Book on Rental Property Investing, by Brandon Turner

1-Page Summary1-Page Book Summary of The Book on Rental Property Investing

Brandon Turner’s The Book on Rental Property Investing is an educational guide to effectively locating, buying, and managing real estate properties. Turner identifies the major pitfalls new investors encounter, and he suggests how to profitably overcome these challenges by working smarter, not harder.

Turner is a real estate investor with hundreds of income-earning properties. He’s also a bestselling author and a former host of Bigger Pockets, a real estate investment podcast.

In this guide, we’ll cover...

The Book on Rental Property Investing Summary Introduction to Real Estate Investment (REI)

Before examining specific approaches to rental property investing, Turner addresses the basic principles you’ll need to know before entering the field—particularly the financial approaches, benefits, and risks involved.

In this section, we’ll first introduce the ways properties generate income. We’ll then explore several strategies for getting started in the industry. Finally, we’ll examine some pitfalls to avoid.

How Rental Properties Make Money

Turner recognizes that most people buy rental properties to make money, and he specifies four ways they generate income:

1) Cash flow: This is the money coming in after you pay expenses. It’s usually regular rent from tenants. Turner argues that cash flow is the most vital income source—it creates immediate return on your investment and funds future growth. Therefore, he advises selecting properties that produce cash flow immediately.

(Shortform note: It’s possible to increase your cash flow through revenue streams beyond rent—for instance, through paid parking or coin-operated washers and dryers. However, [experts warn, too many fees like this can ruin tenant...

The Book on Rental Property Investing Summary Members of Your Real Estate Team

Now that we’ve covered some basic background knowledge behind REI, let’s discuss some of the specific steps of purchasing your first rental property. One of the first things to do is to surround yourself with the right people: Turner argues that the real estate team you choose lends consistency, integrity, and professionalism to your enterprise. In the following sections, we’ll cover each type of team member and their contribution(s) to your team.

Your Spouse and Mentors

Beyond including the real estate experts and other professionals we’ll mention below, your real estate team will likely benefit from including people much closer to home. Your spouse in particular can offer indispensable morale and emotional support. In some cases—as in Turner’s—they can become a vital business partner.

(Shortform note: Turner mainly stresses the moral support advantages of including your spouse in real estate endeavors. But what are some of the specific business advantages of this arrangement? For one, your common goals and close relationship significantly limit the risks of taking on less...

The Book on Rental Property Investing Summary Selecting Properties

Now that you’ve assembled your rental property investment team, it’s time to find properties to invest in. In this section, we’ll first cover choosing the location of your rental properties. Then, we’ll discuss different property types. Finally, we’ll explore how to find suitable properties.

Choosing a Location

Neighborhood Classes

Turner argues that when choosing where to invest in rental properties, it’s important to consider neighborhood class. This is a rating based on the major socio-economic features of an area, along with the typical condition, age, and average prices of its properties. These factors deeply impact property values and attractiveness to desirable tenants. While there’s no formal metric for neighborhood classing, landlords generally agree on an A, B, C, and D scale. Individual buildings receive a correlating letter value based on similar criteria.

Higher-class neighborhoods (A and B) have higher employment rates, income rates, and property values, along with good infrastructure—factors attractive to tenants. Both price and demand are typically higher for properties in these neighborhoods, lowering cash flow because you have to keep rents...

The Book on Rental Property Investing Summary Lending Options

Now that you’ve found an attractive property, you’ll need to finance its purchase. Since many early-stage investors don’t have the cash on hand to buy properties outright, Turner states it’s essential to understand the leverage options available to you. In this section, we’ll examine three specific lender types: conventional, portfolio, and private. Then, we’ll discuss tips for obtaining a loan.

Conventional Lending

Turner explains that you can acquire a conventional loan by going to a lender, such as a bank or credit union. These loans tend to be stable and trustworthy. They also provide longer terms and lower interest rates than most other options, giving you longer to pay the loan back.

However, conventional loans have strict application criteria, including minimum buyer credit scores and conditions around how much you can borrow. These criteria exist because many lenders bundle together mortgages they’ve approved and sell them on to governmentally-backed organizations. These organizations want to reduce their risk and ensure the loans they buy are paid back—therefore, they require the lenders to set strict lending criteria.

(Shortform note: Conventional...

The Book on Rental Property Investing Summary Purchasing Properties

Once you’ve found the property you want to buy and have a plan for financing it, you have to buy it. In this section, we’ll explore the process of making an initial offer and the negotiating skills required during the purchasing process.

The Introductory Offer

According to Turner, there’s no set rule for an opening offer, but you should ask two questions: First, how much competition is there for the property? When competition is strong, higher offers can put you ahead of the pack. Conversely, a buyer who’s had a property on the market for a while without an offer might abandon her original asking price, making bidding low a sounder strategy. Second, ask why the owner is selling—for money or expedience? This helps you better gauge a number they’ll accept.

Avoid Lowballing

Even if the answers to the above questions suggest that a lower offer may be accepted, it may be wise not to go too low. Specifically, some experts warn against low-balling: bidding significantly below list price (the price initially determined by the seller).

This practice can bring negative consequences beyond...

The Book on Rental Property Investing Summary Before You Close

Having made your successful offer, you now move into a key point in the purchase process: the period that real estate professionals call “due diligence.” Turner presents this phase, which occurs between striking a deal and closing the sale, as a critical chance to troubleshoot the property and its documentation: Make sure you’re getting what you paid for and that all is legally in order. In this section, we’ll cover both on-site and documentary troubleshooting and how Turner advises navigating them.

The Physical Inspection

First, Turner advises conducting an inspection of the property. He argues it’s best to hire a third-party professional to ensure thoroughness and neutrality, but he recommends attending their inspection to get a hands-on sense of any issues. Remember that if you arranged an EMD with contingencies, you can back out of the sale at this point if you discover major problems.

(Shortform note: Certain types of property purchases—particularly commercial or business ones—[may require inspections beyond those of...

The Book on Rental Property Investing Summary The Nuts and Bolts of Management

You’ve gotten the keys to your new rental property—now, it’s time to run your business. This is the critical time when you need to attract tenants (thus optimizing your cash flow) and learn the ropes of operating efficiently. This will turn your investment into a profitable and sustainable enterprise.

In this final section, we’ll first cover the ins and outs of finding tenants, followed by methods for accepting the best ones. Finally, we’ll delve into issues of upkeep.

Attracting Tenants

Turner recommends making the property as enticing as possible before showing it to prospective tenants. An appealing paint job is one of the best ways to enhance a property’s appeal to potential renters, along with thorough cleanups inside and out.

(Shortform note: A paint job and cleanup may not be enough to attract certain tenants. Another critical way to boost your curb appeal is to ensure the grounds are neatly kept—prospective tenants often react badly to grass or shrubs that are out of control. Also, consider adding exterior lighting to the...

Shortform Exercise: Lay the Foundations of Your Rental Empire

Now that you’ve explored Brandon Turner’s rental property investment advice, reflect on your own real estate investment ambitions and start planning to execute them.

In your opinion, what’s the greatest benefit of hiring a property manager? What’s the greatest drawback? Would you hire one? Explain your answer.