Investing in Real Estate ADVANTAGES Pride of Ownership Personal Control Self Use Competitive Returns Safety of Capital Cash Flow Leverage Tax Benefits Diversification

Investing in Real Estate DISADVANTAGES Need for close management Less Liquidity High transaction cost Significant capital required High research costs Risks Declining property valued Decreasing rents or non-payment Damage by tenants Changes in laws and regulations

Investing in Real Estate RULES OF THUMB Gross Income Multiplier Purchase Price / Gross Income of Property Cash on Cash Return After – Tax Cash Flow / Equity Investment Debt Coverage Annual Net Operating Income / Annual Debt Service Break Even Occupancy Ratio Debt Service + Operating Expenses / Forecasted Gross Rents