After I purchased my first real estate investment property I figured I should get my act together and actually understand how to make money on real estate investing. That led me on a search for book recommendations. After reading four or five, I wanted to write brief summary of my favorite three, with three takeaways from each.

Building Wealth One House at a Time

John Schaub is the most widely known residential real estate investor. In his classic book, he argues residential real estate is the most simple and stable real estate investment. This stability comes from the small down payment. Banks would lend so much against few other investments. The additional long repayment terms also means you can lock in a low interest rate over the life of a long term loan.

The book discusses everything from identifying lending sources, to building a sustainable passive income stream. My personal favorite part of the book are some of the best practices and tips Schaub recommends for new buyers. 

• 10/10/10 rule: Schaub recommends that the best way to make money on a residential real estate investment is when you buy, you make no more than a 10 percent down payment, pay no more than 10 percent interest, and buy at least 10 percent below the market value. If an investor pays 10 percent under the market price he immediately makes 10 percent profit on the purchase.

• Rule of 72: This is a simple way to answer how long an investment takes to double. It assumes a fixed compounding annual rate of interest. Dividing the annual rate of return by 72 offers a rough estimate of how long it will take for the initial investment to double. It is not a perfect proxy (see graph below). However, it offers an excellent ballpark estimate of how long it will take for an investment to double. When you look at housing prices, the increase varies by city. But knowing the average annual appreciation can give you and idea of how long it takes an investment to double.

• A landlord’s top considerations: What is really important when a landlord is considering a new tenant? A landlord wants (1) someone who will pay the rent on time, (2) will take care of the house, and (3) will stay “forever.” If someone is paying the rent on time, the landlord is spending less time pursuing late payments. Repairs are not needed if the house is taken care of. That saves time and capital. If the tenant stays forever, the house will never be vacant and the landlord will have a uninterrupted revenue stream.

Retire Early with Real Estate

Chad Carson’s concise book combines the characteristics of a self-book that describes a number of real estate investment strategies. There are technically five sections, but I would break down the book into three parts. 

Part one is a traditional self help book; stop doing bad things and visualize a positive future. It explores financial independence and challenges the reader to think about what their life would be like if they no longer needed to work a traditional job. This section also explores savings needed to retire, how to increase income, and the math needed to retire early. There are real estate specific components, but the majority of this section is about retaking your life and developing the habits to retire early. 

Part two describes real estate investment tactics to achieve financial independence. The first half of this part is useful to an inexperienced real estate investor with limited financing. This part also discusses scaling these entry level strategies.

Part three focuses on a diversified investment portfolio and living post-financial independence. It closes with a five step call to action. Set a goal, calculate your retirement number, determine your life stage, choose a real-estate investment strategy, and get started. 

For me, the most useful component of the book focused on the tactics and strategies for scaling a real estate investment portfolio.

Choose a tactic: A chapter is written on each investment tactic.

• The House hacking plan: the idea is to turn a primary residence into a rental property. The book explores the idea of purchasing a duplex and living in one half while renting the other. It also discussed leveraging Airbnb to rent a bedroom in a primary residence. 

• The live in then rent: The idea here is to purchase a primary residence (ideally with preferential first time homebuyer financing) and live there a few years while saving up another down payment. Purchase a new primary residence and convert the previous residence into a rental property. 

• The live in flip: Purchase a fixer upper in an up and coming neighborhood or a property that needs work in a nice neighborhood. Live there for a few years, do your own repairs, and sell. The seller pays no federal income tax on the profit when the property is resold for more than the original investment.

• The buy, rehab, rent, refinance, repeat (BRRR): This strategy is pretty self explanatory.

Combine tactics: The below plans explore how the tactics can be employed to achieve financial independence. 

• Debt snowball: The idea is to leverage low interest, long term debt to buy multiple rental properties, take the net rental income from all properties and apply it to one of the mortgage to accelerate pay-down. Once one property is paid off, apply the same strategy to the others.

• Buy and hold: Buying property with break even net revenue, hold for 10, 15, or 20 years, then sell to reap to equity gains from appreciation. 

• The trade up: This plan leverages the benefit of appreciation over time and explores how to defer capital gains taxes by executing a 1030 tax-free exchange.

What Every Real Estate Investor needs to Know about Cash Flow

The other books on this list offer excellent qualitative analysis. Frank Galinelli book is focuses on the quantitative analysis of residential real estate investing. He breaks down the full spectrum of costs for owning a real estate investment. The book encourages the new real estate investor to break the emotional attachment that sometimes comes with home buying and instead think of a property like any other investment.

This is not a book for someone who has a passing interest in real estate investing. It reads more like a math textbook or case study guide than an easy weekend read. The book challenges readers to analyze available information and predict what pieces are missing to approach each new investment with open eyes. 

Each case includes a detailed set of numbers and formulas to help the reader understand and apply these concepts in real life. His website offers a number of these tools for free with subscriptions for others. 

Instead of three takeaways, with this book you get four. Each is a core concept of the book. 

• Cash flow: Cash flow is the idea that cash will come in as revenue and go out in the form of expenses. The book highlights the revenue streams and most common expenses that residential real estate investment cover. Doing well in real estate is simple from a cash flow perspective. You want to bring in more money than you spend on expenses. If you’ve read my article on how not to manage a real estate investment you are familiar with the concept of (poorly managed) cash flow. 

• Appreciation:  Appreciation is the growth of value of a real estate investment over time. It has a simple formula: the current market value of the property less the purchase price equals appreciation. The book also explains that most real estate investors look at steady and increasing net revenue (revenue after expenses) as appreciation as well. 

• Loan amortization: Most residential properties are paid for with debt (a mortgage) borrowed from a bank or other lender. A investment property has a tenant paying rent, that rent is put toward the debt which is paid down over time. Loan amortization is the elimination of mortgage debt through the application of installment payments over time. More specifically, it is the amount after interest payments paid off on the debt each year.    

• Tax benefits: An income property investment can shelter some of its own income from taxation and can sometimes even shelter income received from other investments as well. As the owner of an investment property you take in taxable rental income and pay out tax-deductible operating expenses. These deductions come in two main forms. Mortgage interest is the cost associated with acquiring the property and the amount of money paid in interest each year. Depreciation is a tax benefit that assumes that the buildings on the property are wearing out over time and becoming less valuable. This can be calculated as a number that is applied each year to offset taxes.