In the last three days, I've been reading through
Frank Gallinelli's
What Every Real Estate Investor Needs to Know about Cash Flow... and 36 other key financial measures, on the recommendation of a rebel spy I met in a cantina in Mos Eisley.
The first 80-odd pages of the book are an overview to real estate investing. Gallinelli moves quickly from topic to topic, but not so quickly that I felt lost. The tone of the book was phenomenal, and there are a few notable quotations in the book that I think will stick with me for years, like this gem about investing based on fundamentals:
Don't make a decision to buy, hold or sell based on emotional factors. In particular, don't buy a building because you've fallen in love with it; and don't hold because of a sentimental attachment when you really ought to sell. If you need that warm and fuzzy feeling, get a puppy.
On its most basic level, this book explains that the reason to invest in real estate is to purchase the economic benefits associated with the property, which come from cash flow, appreciation, loan amortization, and income sheltering. The author then explains how to go about finding comparable properties and the other data sources necessary to make an informed purchase decision, how to assemble the data into a meaningful overview of the properties, and a discussion of concepts like net present value and internal rate of return that are required to understand the time value of money. It was an exceptionally quick read, because I skipped the last two hundred pages -- they're formulas for things like cap rate and net operating income that are included for reference purposes. Much of the book goes over Excel formulas like PV and FV, so you can get through some of the 80 pages of the real book even quicker if you're already familiar.
I'm glad I didn't buy the book only to find out it was a third as long as I thought. The third of the work that I did read really packed a lot of information in with a light and fun style, and the core message of the book was clear and persuasive. If you're comfortable with the idea of investing and you're willing to look elsewhere for other topics, like tenant screening and real estate law,
What Every Real Estate Investor Needs to Know about Cash Flow is a great quick introduction to the topic.
