What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures Paperback – September 29, 2008

It's a quick read, well written, full of analogies, and actually kind of funny. There were some other reviews on here whichcriticized the book for not discussing MIRR (modified internal rate of return), perhaps they had an older version because my copy DID cover MIRR. I did a focus on Accounting at UC Santa Cruz, and somehow came away without knowing how to calculate IRR. The book says, and I wouldagree - that a lot of people "Talk about the IRR", but a smaller percentage of these people actually "Understand the IRR", what it means – ... what its limitations are, and how to mitigate those limitations. I for one am pleased to now be in that smaller percentage!In addition to elegant simplicity, the book is full of practical information. If you're going to buy a building, would you not want to be able to value it? Well after you read the book, you'll be able to value a building with several different methods -- and also know when would be the best time to use specific methods. All the fundamentals - time value of money, discount rates, cap rates, the "four ways" to make to "make money" in RE, how loan amortization works. How to interpret financial statements. Things like a Property Income statement – author points out that it isn't always the number's you see, but rather the one's you DON'T SEE. The accounting textbooks I read in college would tell you how to construct a financial statement - but they definitely wouldn't tell you how to read between the lines. An example is you are preparing to buy a building and reading over last year's income statement - you notice the common area Electric expense/unit being very high - all else equal, this could represent an opportunity to upgrade the mechanical systems and quickly add value. How about if there is no common area electric? The author points out that could mean there is no House Meter. And if there is no House Meter, will you be now be required install one when you purchase the building (tag - you're it!) - if so, you ought to discount the price. Also - what are the methods a Seller's will commonly use to deceiver buyers into paying too much for a property..... How can you recognize these practices, and defend against them? This is pragmatic information which I was not used to reading in academic texts. Lastly, the chapters are super short/efficient - and there are these "Test you Understanding" at the end of each chapter which are useful to quickly verify you understand the info, as well as encode the learning more deeply into your brain.There was a quote somewhere in the beginning which captures the essence of why one ought to read this book -– "in any game, when someone wins, someone else usually loses. In real estate investing, the profits and gains that are lost by the 'back of the envelope scratchers' accrue to those who take the time to do the math. The choice is yours"

I just took this book off my bookshelf for a quick reference, and it reminded me of how good it was and the fact that I hadn't yet left a review (despite reading it and re-reading it several times in the past few years). I'm a full-time real estate investor, I have an engineering degree, a math degree and an MBA, and I've written two highly rated books (feel free search J Scott on Amazon) on real estate investing -- so while I may not be a typical of someone who reads this book, I'm definitely someone who uses this type of information on a daily basis. And I can attest that Gallinelli presents what is -- typically -- a very dry subject in a way that is well organized, easy to read and relevant to the real life of a real estate investor. I have spent so much time helping other investors with questions about how to analyze deals that these days, I typically request they buy and read this book before they come to me asking for guidance. Whether you're investing in single family houses, apartments, commercial real estate, notes/lending, seller financing, lease options or any other type of investment that generates a financial return, this book will provide the foundation you need to start asking (and answering) the question of whether the deals you're considering are right for you. - J Scott

This book is simply amazing, and an must have for anyone in real estate or thinking about it.My only gripe is that the book promises free excel worksheets available at the author's site realdata.com where he sells real estate evaluation software. But there are NO free excel sheets to be had. If the book never made mention of the sheets I'd give 5 stars easy. Gallinelli hits it out of the park with this book. I just hate being promised something and then never getting it.Griping aside this book presents invaluable formulas and the common sense behind them to educate any investor, broker, or agent. This is the information people need to know before they flip their first house, or start buying single family homes. If you're more interested in multi-family, besides already being ahead of the curve, this book will really help any one understand the mechanics behind the numbers and how to actually compare one property to another even when they're not the same. Commercial real estate is also included so don't feel like this is a housing book.Don't make the mistake so many people do. Don't just jump into real estate without knowing how deep the water is, trusting the agent and the seller, or using the 50% rule to evaluate expenses to guesstimate cash flow. Buy the book. Do your homework. And win.

I'm a newbie to investing; in fact still just learning about things before trying my hand a that first purchase. This book is very thorough, crammed with examples & applications of the various metrics you're learning. Written at a low level, but this isn't a bad thing. He present everything in a nuts & bolts manner for people who may want to pursue investing (& who may even excel at it) but who have learned to be afraid of math. (btw, I have a math degree.) You'll learn a ton about how to analyze an investment property's value before making a purchase. Being that I'm interested in buying/leasing single family homes (at least at the outset) the one surprise I did find was the book focuses exclusively on multi-unit dwellings (and touches on commercial properties). This does not, however, in any way detract from the process you'll learn. All the concepts will apply to single family homes as well. Overall, this is an excellent intro to taking an investment's pulse before you buy.