Adjust Basis- the original cost of an asset such as real estate, plus capital improvements and costs of sale, less accumulated depreciation Depreciation also called "cost recovery" is the amount of the tax deduction that a property owner may take each year until he or she has written off the entire depreciable asset. With real estate, you treat the physical structures called "improvements" as your depreciable assets, but not he land. Therefore, there is no depreciation allowance for the value of the land The exact amount of your depreciation deduction each year is determined by the asset's "useful life" as specified in the tax code.
The useful lufe for tax purposes is not necessarily the same as the actual physical life expectancy of a particular asset.
Oct 29, Rahul Lingala rated it liked it Shelves: Though I learnt a something new, I felt that the book is overpriced. Not really worth a buy if you are already good at understanding basic financial ratios.
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Jan 22, pavana Kumar Varanasi added it. NOI is nothing the important points to not in this book are: NOI is nothing but yearly rent -operating expenses like property tax, common maitenance, insurance etc. It makes sense that when you discount these smaller cash flows, you get an amount that equates to your cash outlay, which itself is also less than the full property value in a leveraged investment. The year where IRR peaks , you should consider selling it then.
First pages worth reading. In summary this book reinforces the fact that capital value of any asset in this case real estate is nothing but sum of future cash flows discounted back to present.
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Apr 13, Matt Zimmerman rated it it was amazing Recommends it for: 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.
Galli Should I buy it or not? 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.
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. Jan 20, Leanne Hunt rated it liked it Shelves: This is a very specific kind of book for a very specific kind of reader.
It came highly recommended from a community of real estate investors, though I admit to not grasping many of the calculations in it. I think you have to work daily with financial spreadsheets to be able to appreciate the advantage that one return on investment calculation has over another. For me, it was informative as a reference but not game-changing. I will still rely on my bookkeeper and financial advisor to help me wit This is a very specific kind of book for a very specific kind of reader.
I will still rely on my bookkeeper and financial advisor to help me with cash flow indicators. Aside from the number-crunching content though, I can confirm that the writing style is fairly easy to take in and the chapters are well laid out in such a way that it is a simple matter of finding the particular calculation you want and applying it.
There are enough examples in the text to make it appetising, although I would personally have enjoyed more real-life anecdotes. Stories always liven up a how-to book and would have been particularly interesting given that the material is for people who buy fixed property to rehab, sell or rent to tenants. No shortage of entertaining tales there! The book is not dumped down. The concepts transfer to stock analysis as well. Sep 08, Douglas rated it it was amazing Recommends it for: Its great to read to master the fundamentals. May 19, John rated it liked it.
Good 50, foot level overview of real estate investing. A good place to start, but does not go into the detail necessary for you to start. Mar 08, Maria rated it liked it. Excellent book, extremely thorough! Lots of great formulas Nice book, I sure it will help me out in the future. I recommend this to an realtor or any one interested in real estate. Feb 26, Chris rated it really liked it.
Useful introduction to financial concepts and handy reference material for various profitability and expense metrics. Alysha Johnson rated it really liked it Mar 29, Roberto rated it it was amazing Nov 12, Gundry Hardcover, Illicit Scheme to Clear Hillary Clinton.. Paperback Books Revised Edition.
Revised Edition Paperback Textbooks. However, while real estate investment may appear to be something that anyone can do correctly in the right market environment, renowned author Frank Gallinelli argues that the application of a few relatively uncomplicated financial calculations prior to purchase can greatly increase the likelihood of making a beneficial, lucrative property-buying decision.
He intends this book to function as a decision-making toolkit for investors who may be intimidated by or unfamiliar with some of the key concepts and terminology in the field. The first five chapters offer brief narrative explanations of some of the basic concepts that are used in the book. Then, the remaining 37 chapters each present a mathematical calculation related to the assessment of cash flow and other values and measurements crucial to success in real estate investment. In this book, Gallinelli presents a number of indispensable rules about the correct management of cash flow in real estate investment, along with 37 calculations that can return precise data that will enhance the accuracy of your real estate decisions both before and after purchase.
His chief assertion is that beneficial real estate investments provide four major benefits to property owners: This book, Gallinelli explains, undertakes an in-depth examination of cash flow and a number of other key real estate concepts for the property investor. He also suggests doing some market analysis by looking at comparable sales in the area, estimating operating costs in the neighborhood, and researching local capitalization rates. Gallinelli cautions that even the seemingly straightforward offered by the seller may conceal some information that could impact the decision-making process.
As such, he sets forth several important investigative procedures that should precede any real estate investment.
Most importantly, the author recommends undertaking an in-depth analysis and comparison of the income and appreciation value of each property that is under consideration. The calculations that are suggested for this process include gross scheduled income, vacancy allowance, gross operating income, operating expenses, net operating income, and annual property operating data. The power of compound interest can help real estate investors grow their wealth in a way that may not be immediately apparent to amateur investors. The author demonstrates several calculations that can be used to estimate the financial impact of compound interest on long-term assessments of value in real estate deals.
Gallinelli recommends the use of Excel software to expedite these calculations. However, for real estate investors seeking to use property investment to grow wealth, the author contends that there are a few calculations that are of particular significance. These include gross operating income, operating expenses, and net operating income. Based on the data obtained through these calculations, the potential investor can make more detailed, accurate assessments of cash flow, taxable income, and appreciation, three factors that should be the primary considerations of the pre-purchase decision-making process.
There are many methods that can be employed to evaluate the success of a real estate investment.
Calculations that he demonstrates include payback period, cash-on-cash return, gross rent multiplier, debt coverage ratio, capitalization rate, discounted cash flow, and internal rate of return.
Related What Every Real Estate Investor Needs to Know About Cash Flow...And 36 Other Key FInancial Measures
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