William Benke | Joseph M. Fowler
1 Good for a start
I agree with the previous poster that the book is good in covering some aspects of financial analysis and profitability, but isn't a general book on real estate investing. However, the author does point that out in the book, that you will need to further study on the topics this book doesn't cover.
The main strength of the book is in the profitability calculations and time value analyses of investment capital in real estate. There are detailed calculations to examine a property's projected profitability, and these range from simple calculations designed to give you a quick and dirty figure as a first approximation, such as the pre-tax operating cash flow, which is just gross income minus loan service and operating expenses, but doesn't take into consideration such things as the owner's tax bracket, depreciation, and so on. So it is much inferior to the total internal rate of return calculation, according to the author, but as I said, is useful for a rough idea and to filter likely properties for closer examination.
The book discusses the pros and cons of the different types of investments, such as single family dwellings, duplexes, triplexes and qaudriplexes, and undeveloped land, in terms of their potential profitability.
For example, many new investors start with a duplex, which are easier to rent than a single family home (such renters are probably on the verge of buying their own home), and which can be managed easily by a neophyte investor. Progressing onto something like a four-plex, this offers greater profit potential but requires much more management knowledge both in terms of people skills and accounting and organizational skills and so on, negotiating with contractors for repairs, and so on. Single family dwellings usually have a net negative cash flow until sold, but offer greater capital appreciation than apartments, but apartments usually have a positive cash flow during the holding period.
So overall, a good book for some aspects of real estate investing, but you'll need a more general book to fill in your knowledge of the other areas, especially the day to day and practical aspects of management, how to set up the various bookkeeping chores, which will require separate books for tracking expenses and operating costs, rental payments, gross and net income statements, overall profitability, and so on. For a recommendation for a better general book, I preferred the one by Milt Tarven, but unfortunately I don't recall the exact title.
2 Focuses on profit analysis
I've read the 2001 edition, and I must say the title is rather misleading. (1) The coverage is not complete by any means. It focuses on rental houses, apartment houses, and land. Leaves out many other types, plus details on REITs, etc. (2) The book is about profit analysis. There's a chapter on negotiating and another on financing, but both are very short and not very enlightening. Instead, you are fed a lot of time-value math. This is actually good stuff, since as a RE investor you should be very clear about your profits and the impact of leverage and macro factors. I just wish the title accurately reflected the book's content.
