Among the many famous quips of H. L. Mencken was this: “For every complex problem there is an answer that is clear, simple, and wrong.”

Novice real estate investors – indeed, probably novices in almost anything – long for simplicity. A simple approach is fine if it leads to meaningful and reliable results; but most real estate investments involve serious money and so they deserve a more serious and detailed plan of attack.

Investing in real estate is all about the numbers. I rail about this in my books and articles, and in the classes I teach – from continuing ed through grad school finance. The point I try to make in all of these is that you, as an investor, are not really buying a building, despite what your closing attorney says. You are buying an income stream, the present and future cash flows. Continue reading →