[Note: To follow is an excerpt of an interview with William A. Lederer, author of "The Ultimate Real Estate Investing Handbook," "The Ultimate Landlord Handbook," and "The Ultimate Property Management Handbook." To listen to the show archive or download an MP3, go to www.IncomePropertyInvestmentTalk.com/040809.]

Mosca: What was your motivation for putting together the book "The Ultimate Real Estate Investing Handbook"?

Lederer: My wife and I are real estate investors. We had been small landlords and probably had an experience much like other people who start out in real estate investing: we were spending an awful lot of time running around trying to figure out what this was all about, what different tools and resources were necessary and learned many tough lessons. It struck us that other people probably were facing the same thing. After we had been at this for a few years, we determined that maybe we would put together a Web site and put together tools including things like leases and contracts and different ways of helping ourselves and other people automate the small landlord, "do-it-yourself" rental real estate investing practice.

Mosca: Let's talk about the first chapter of your book, "New Investors: Why and When to Invest in Residential Income." Who are these new investors and why and when would it be best for them to invest in residential income property?

Lederer: Typical investors in this space could be anyone -- and it is everyone. The market is enormously large. There is no other investment market bigger than the real estate business with regard to both the dollars that are involved and the number of participants. The typical investor is the average guy, just like my wife and myself, yourselves, your clients, the average landlord and real estate investors within the residential space that are pursuing income property number well in excess of seven million according to the IRS. This year, they will collect between $260 and $275 billion in rent. There are about 39 million rental units, whether its apartments or condos or homes. When you are talking about over 7 million different people that are involved, it's pretty hard to generalize. One thing that we know for sure is that those people who got in this to flip income properties quickly have found in the last five or six years that a lot of the assumptions on which they got into the business and they bought their properties turned out to be pretty challenged.

Mosca: That's one reason why we feel it's very important to reach out to those professionals who do this and do it well and do it for a living. How do you feel about relationship building?

Lederer: If don't have a good, solid team around you, don't get in, or stay in the business. It is extremely important whether you are going to do your own property management, whether you are going to have a broker's license and try to buy on your own, if you don't have a solid team around you this is not the right field to be in. Take the time. I think it is absolutely critical.

Mosca: Who else is a part of the team of success?

Lederer: This is the kind of investing where due diligence upfront before you make the investment is more critical than virtually any other variable we are talking about. Have a separate appraiser, a separate inspector, somebody who really you can trust that you can work with continuously over time, multiple brokers who understand the difference between real estate for investment purposes versus real estate for other purposes. I am also very big on the idea that property should be held in a separate corporate entity, creating as much of a liability shield as possible and helping you to be able to transfer wealth over time in a way that is profitable for future generations. You have to get these things taken care of up front. Other people that you might want to consider adding to the mix might include an interior decorator, someone who has a knowledge about how to make things look good inside and outside and of course contractors, plumbers, and a locksmith. I guarantee that you are going to develop a personal relationship with a locksmith. You need that strong team around you. That is landlording. This is not a typical 9-5 kind of business. You need people who are flexible and understand that you may be calling them after hours and on the weekends.

Mosca: In Chapter 2 of your book you talk about getting your financial house in order. That could not be any more prescient in today's climate. Can you talk to us about not only getting your financial house in order but getting the best deal when negotiating financing or refinancing?

Lederer: Monitor your personal credit. Unless you have created a corporation that has substantial assets, it is entirely likely that the institutions that you will go to for financing or refinancing will take a look at your own financial situation. It is important that while you may have separate corporate entities for your properties, that you have got a clean understanding of what your current situation is. To get the best possible financing today, you need a relationship. It is not sufficient for you to be filling out forms and sending them in blindly. It has become more and more important to be working a relationship with multiple financing sources. In addition to working the brokerage community, it's important to understand that if you are working with local lenders, what is the composition of the credit committee and the decisions that will be made associated with your application and your ongoing relationship with that institution. There is nothing that compares to having a strong personal relationship with a source of credit. It is not easy to do that with larger organizations and there is a lot of turnover in financial services but this is part and parcel of any good real estate investors toolkit.

Mosca: What are some other ways we can help our listeners who are either investors now or looking to deal with this challenging economy?

Lederer: The first thing is time horizon. Too many of us have made money in easier periods of time by refinancing or flipping properties. I think you need to think about a longer horizon. The tax man will benefit you. I believe that there is a significant coming inflation that we will benefit from in the real estate industry in two ways, higher values of properties, particularly in the types of income properties as well as having inflation esentially reduce the economic impact of the debt that we carry on properties. You've got to let time work it's magic.

Mosca: On the break, Bill Lederer has offered to you a free, no obligation, 30 plus page downloadable report called "Rental Property Management Secrets" and it's going to give you weekly and investing tips and over 60,000 property investors and landlords have this package already. If you go to our Web site at incomepropertyinvestmenttalk.com/040809, we get you a copy of "Rental Property Management Secrets." What are some other ways our listeners can deal with this challenging economy?

Lederer: Next up, let's make sure that you've got Uncle Sam and your state and local taxing authority working for you just as hard as legislation and tax statutes allow. Real estate is a blessing from the standpoint of what government has available to you. Make sure that you have not missed any of the tax benefits that are available to you. I suspect that long-term capital gains will become more and more important in terms of the difference between short term and long term, the possibility of indexing for inflation or over time.

Mosca: Are there technological or Web based tools that are available to help investors be better at what they do?

Lederer: One of the great things about being a real estate investor is that you can have a balanced life. The Internet is there 24 hours a day, 7 days a week and there are tremendous tools that are available. It's important to understand what the current market conditions are that are local to your properties. Often times even at the zip code level it's too broad. You really want to get block by block and really understand what's happening, how the market is changing because conditions are changing rapidly and the Internet is a great place to do that.

Scott (a caller from Wichita, Kansas): My wife and I are just getting into investment properties. We haven't started yet and are trying to inform ourselves as best we can and I just wanted to know if you could mention something about the neighborhood stabilization program and how that might benefit investors?

Lederer: Neighborhood stabilization might be quite beneficial for you but if you're talking about buying a property, the question that I would ask is if you don't have those dollars available to you, if the new programs that are coming out of the Obama administration are not sustained for whatever reason, do those economics still look attractive to you? You've asked the general question so it is a little bit hard for me to make this more specific about what I would say is if there wasn't a program there, is this something that would still have the same enthusiasm from your standpoint.

Mosca: What is your golden nugget for today?

Lederer: Know your customer whether these are properties that you are going to manage yourself or others are going to. Ultimately, whatever you get out of your property is directly a function of the quality of the underlying tenants that are producing the income for you in those properties. You've got to know who these folks are, where they come from, what their challenges are likely to be, the way in which they are likely to treat your property and this is no different than the securities industry where the first lesson and the last lesson they teach securities brokers is know your customer. It's the same thing. Tenancy is awfully important and it can make for just a tremendously satisfying experience personally and professionally or it can be a tremendous challenge. Know your customer. That's my nugget for the day.

Published: May 7, 2009

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Peter L. Mosca is president and founder of BAK Communications, Inc. He has over 22 years of communications and media consulting experience, serving a variety of nonprofit organizations, including the CCIM Institute and the REALTOR Association on all three levels – national, state and local. He is the Spokesperson Trainer for the CCIM's Jay Levine Academy and trains hundreds of residential REALTORS nationwide to be effective industry spokespeople. He is consistently ranked as "excellent" by about 90% of those who attend his presentations. While his principal consulting focuses are public speaking and media relations development and content delivery and management, Peter is also the host of the Voice America Network's weekly radio program, "Income Property Investment Talk," a one-hour program that brings the powerhouses of commercial and residential real estate to property investors every Wednesday at 11 a.m. EST. Peter is married 17 years to his wife Barbara. They have two children: Ashley, 15 and Kelli, 12. Hence, the name BAK Communications, Inc.