The old adage in real estate is location, location, location but that’s wrong. The new 3 rules are Calculate, Calculate, Calculate!
As a tax attorney and real estate investor of over two decades and for that I look at things by the numbers. I see people make the same mistakes all the time because they are acting with emotion and not looking at the hard numbers.
When looking at a real estate investment, there are two main components you need to fully understand and be able to forecast: income and expenses. Understanding the key financials of a property allows you to understand exactly what cash flow is.
Cash flow is the amount of profit you bring in each month after collecting all income, paying all operating expenses, and setting aside cash reserves for future repairs. For buy-and-hold real estate investors, cash flow is the primary lever used to increase passive income.
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