Useful introduction to financial concepts and handy reference material for various profitability and expense metrics.

Excellent reference material for real estate investors. But, sometimes I'm left questioning when to apply tax benefits in calculations, loan servicing fees, and appreciation. These are all basic questions that he usually addresses. But, you have to do a lot of cross checking in different parts of the book to know if an underlying formula includes depreciation, tax deductions, etc.

Frank lays out examples for each calculation, including the sub-calculations that make up larger formulas. This helps a lot.

I'd add that this seems to be a problem in the industry, not just the book.

For example, using the Cash on Cash (CoC) formula, do you include debt service? Some investors do, and that's wrong. Frank explains the purpose of the formula well, and why debt service is not included.

With CoC do you include repairs and renovations in Total Cash Invested? The book doesn't seem to explain why not to include these expenses. From my perspective, this makes an investment appear better than it is.

So, some words of wisdom.

1. Get to know everything involved in the investment analysis. That includes CoC, ROI, depreciation/appreciation, debt servicing, closing costs, renovation costs, ongoing maintenance, the effects of inflation to rent and expenses.

This is even MORE important if you are trusting someone else's reports for your investment. Whether that is the seller, an investment group, or someone offering a "turn-key" property for an investment.

2. Make your own calculations and ALWAYS use them to evaluate potential investments and your existing properties. Are they performing as expected? Are your expenses in line with the building for its location, condition, age, and quality of build/features?

I see a lot of individuals and companies picking up investment properties that just don't have the income potential to support renovation or maintenance. These are properties destined to drag down a neighborhood. I don't want to be a slum lord.

For me, it has to be a good investment property, a good home, and good for the community.

Should I buy it or not? Since buying property is likely the largest purchase that most people ever make, how can you afford not to get educated? If you are buying for investment purposes, this book will give you the tools to analyze your return on investment. Of course, ultimately you are forced to make assumptions about the market that are just that - assumptions, but tools provided here are clearly based in common sense, and a lot of the power of the tools is in comparative analysis. Mr. Gallinelli walks you through and explains how all the analysis is done, then at the end of the books sends you to his website to buy his programed excel spreadsheet that does it all for you. The thing is, if you do make it to the end of the book (I did, but not without starting over a few times on some chapters, and sometimes having to go back further in the book to make sure I had a better understanding of the basics) then you will want to know the numbers before you make investment decisions. Damn, he succeeded in selling me a $400 spreadsheet. Nice work Frank.

So after re reading my review I sound a little too much like I know what I'm talking about - I don't. I'm a novice at this. I get the math, I'm a successful small business owner, but no real estate experience.

Very informative but also very dense.

Must have for any real estate investor's (or investor wanna be) library

Financial analysis 101. The book is not dumped down. The concepts transfer to stock analysis as well.

Great book for the math behind real estate investing. Definitely a book to keep on the shelf as a reference.

An excellent book on real estate investing - I thought I had a decent understanding of these financial measures, but this book (and particularly the first half of it) really helped me to grok them in a way I hadn't before.

Gallinelli is quick and to the point about what really matters in investing, i.e. getting a return on your money. He has a light and joking style that I enjoyed.

A book for nerds

Very thorough book on real estate deal analysis. I have it on my shelve as a reference manual. Must read.