The Hartman Risk Evaluator

By Jason Hartman

Staying Power: The Key To Successful Investing

• Who knows someone who has made money in real estate? • Lost money? Why?• Investing is not about speculation (aka gambling) or a get-rich-

quick scheme• Investing is a legitimate process of creating value• Understand that anything without income / rent is NOT an

investment; but rather a speculation• Managing cash flow is key - Rule of thumb - Jason’s “RV Ratio™”

– Rent ÷ Value = “RV Ratio™”– $1,800 ÷ $600,000 = .3%

The Hartman Risk Evaluator™

Land Value

Improvement Value

Improvement Value = Cost to Build +

Builders Profit

Factors Increasing Improvement Value•Environmentalism / building restrictions

•Industrialization of developing countries

•Raw materials cost

• 2004 Inflation 3.3%

• Steel and iron prices surged 34%, lumber was up nearly 17% and prices of gypsum, or wallboard, were up 20%

•Labor and energy costs

Land Value

Improvement Value

$815,000

100%

$156,000

19%

$660,000

81%Land Value

Improvement Value

$1,300,000

100%

$ _______

___%

$ __________%

Risk Area

The Hartman Risk Evaluator™

Land Value

Improvement Value

Improvement Value = Cost to Build + Builders Profit

Risk Area

Land Value

Land Value

Improvement Value

Improvement Value

Improvement Value = Actual

Replacement Cost + Builders Profit

The Hartman Risk Evaluator™Our Recommendation – Have a “Floor”

Asset Deflation Monetary Inflation

Land Improvement Rent OverallMortgage

PaymentBalance

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