Why Real Estate Investing is Hard.

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Think about the math classes you have taken in your life.

Huh?

Think back to elementary school through high school and into college. How did your math classes work? You probably started by learning how to add. Then the teacher got sneaky and threw in a twist to addition and called it subtraction. Shut the front door, where was she going with this? She was leading you into learning multiplication. Multi who? Then came division. Now things had just gone crazy. Where was all of this leading? Most likely it led you to pre-algebra, algebra, geometry, algebra II, pre-calculus, trigonometry, statistics, and calculus. Then, just when you think it is over, you hit college. You may have then been thrown calculus II, followed by III, differential equations and eventually applied calculus. Maybe you didn’t take those last few classes, but regardless, the principle stays the same- you started with addition and ended with something significantly harder. How would you be able to learn calculus if you had never learned how to add? How would you learn statistics if you had never learned fractions which you couldn’t have learned if you never knew how to divide?

Whether we knew it or not at the time, there was a method to the education system’s madness (believe it or not), which was to teach by building upon what we had already learned. Teach addition first, build up to subtraction, slowly add in multiplication and division, and eventually use those fundamental skills to venture into algebra and calculus. Makes sense if you think about it. Granted, lots of people still had trouble with math no matter what building blocks were in place, but that’s fine because it most likely meant they were better at language or history or art or something. We can’t all be fellow math nerds or we’d be living in a really, well, nerdy world.

So how does the math class sequence explain why real estate investing is so hard?

How to Learn Calculus When You Never Learned How to Add

Oh, oh! Now you are seeing it. Real estate investing has a prerequisite, which is money. If you don’t understand how money works, you can’t understand how to invest properly or even why you should invest at all. Ok, money is the prerequisite. Which grade did you learn money in? Oh, ha, that’s right, you didn’t. I went to school in Georgia, which was at the time ranked as having the 2nd worst statewide education system in the country, but I’m pretty sure we weren’t the only ones who weren’t taught about money. Not only did we not learn about money, we were never taught business or entrepreneurship either. Fan-tastic. Understanding money, understanding business, and understanding at least a rote level of entrepreneurship are critical components to being a real estate investor. We were never taught any of these, so where does that leave us? Other than screwed, of course…

Thanks to our formal education systems, we are completely left to our own devices to teach ourselves what I consider to be a fairly complex subject. Calculus is a perfect metaphor for real estate investing- there are a ton of different skill subsets within the general subject, ranging from beginner all the way to advanced, some of which you may never use and some you may use all the time, not everyone is going to understand all of them (if any), and, well, it’s hard! Although there is always that one guy in the class who just naturally gets everything the teacher says and you just want to punch him.

Related: Real Estate Investing Math Pop Quiz: Test Your skills!

A Visual

You decide you have to understand and be able to apply calculus, but calculus isn’t taught in schools (wouldn’t that be nice?). You look up evening classes for it through an adult education program. Each class you can take only focuses on one skill set and is very expensive. Ok, you’re willing to spend the money but how do you know which skill set you want to learn so you know which class to buy? You don’t. There are a ton of calculus experts who will tell you which skill set you need, but what if you pay all that money for the skill set they recommend and you decide it’s totally not for you? The chance of that happening is really high. Better, maybe there are people willing to teach you calculus for cheap or free. Unfortunately, none of the teachers are guaranteed to actually know what they are talking about. There is no real certification they can hold that you can check on to ensure you are being taught correct information. Books are an option, and very affordable so you go ahead and buy a few of those. Some might be interesting, some might be horribly boring, but excitement level aside, none of them really seem to give a step-by-step on how to integrate the rational function to solve for the logarithmic tangent. What the frig? Useless books.

Sound familiar?  You have to figure out how to teach yourself calculus real estate investing all on your own with absolutely no fundamental starting point, no formal course structure to help you build onto a knowledge foundation, and no way of knowing which teachers are legit and which ones are total scammers. Awesome.

Helllllppp….

Since there is no formal education path for real estate investing, you just have dive in and try to learn everything you can. Sorry, that’s just how it is. Start with books, attend seminars, ask around, check out everything on BiggerPockets, reach out to people who are doing things that seem like something you could be interested in, ask questions, meet more people, ask more questions and then just go for it and try something knowing full-well you just might fail. Failure is going to be one of your biggest teachers in real estate, so don’t let it deter you if it happens.

The best way to get the most out of your real estate investing journey is to have good mentors and experience (and get through) failures. The better the mentors, the less failures you will have to endure (as long as you are listening to them of course).

If it makes you feel better, I’d say just about all of the big-time investors, and even us smaller ones, had no initial education on the subject and have just had to figure it out. Welcome to our club. The good news is that the journey through learning real estate investing can be a lot of fun! Frustrating, no doubt, but a heck of a lot of fun. Keep your perspective positive and it will be well worth your efforts.

Any other reason you can think of why it can be so tough to be a successful investor?

Photo Credit: Beni Ishaque Luthor via Compfight cc

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About Author

Ali Boone(G+) recently left her corporate job as an Aeronautical Engineer to work full-time in Real Estate Investing. She began as an investor only two years ago but managed to buy 5 properties in just 18 months using only creative financing methods. Her focuses have been on rental properties and overseas investing in Nicaragua.

22 Comments

    • Very true, Jeff. To really drive that one home, it’s like having to teach yourself calculus and then having to take the test. If you get a question wrong, it will cost you $100,000 (give or take a million). No pressure!

  1. I was fortunate, I did well in math. :)

    And I learned real estate the same way, by starting with the basics and building a stable foundation.

    If it was easy, everyone would be doing it. If you needed no instruction, everyone would be a huge success.

    Thanks for breaking it down into about as basic an understanding as is possible! Great post, Ali.

  2. I really liked your post, Ali. It is so, so true what you say about understanding money, and it not being taught. In my experience, most people just don’t “get” money. Unless it comes from your parents, it is not taught at an age where it really sinks in and becomes part of you (how could it? chances are the teachers don’t get it either). I was lucky in that regard. My Mom taught me that money doesn’t buy happiness, and to be frugal and enjoy the things I have. My Dad owned a shipping company when I was a kid, so he was the business brain in the family. When I was 12 or 13, he discussed with me an idea of instead of receiving an allowance, he would give me a lump sum instead, and the interest would generate my allowance. This was in the early 80’s, when you could get 9% from a savings account. Boy, just having that discussion got the gears turning, and really shaped my thinking about how money works. Now I’m the age my parents were then and I’m trying my best to pass the same things on to my two boys.
    Thanks again for the great article.
    -Harry

    • Ali Boone

      Thanks, Harry! Glad you could relate. That’s awesome your dad taught you that with money. Mine taught me a lot but it only went to the extent of learning to not finance liabilities. I didn’t understand money and currency and returns and all that.

      Definitely pass it to your boys! It’s a shame not more people can pass that type of knowledge on, although they just never learned it themselves most likely.

  3. Nice article Ali. We have always learned with the Ready, Fire, Aim method also. It seems the hard lessons learned are the ones most remembered and applied to our future. School of hard knocks is the way to learn it best. Hopefully the knocks aren’t so hard you can’t get back up, but then again thats the mark of us true entrepreneurs. Getting back up!!

    • Ali Boone

      Haha, Glenn, I just learned that phrase randomly a couple weeks ago and I love it! Yes, real estate investing is very much ready, fire, aim. It makes the experience a total adventure and one that I’m pumped to be on!

  4. Lamart Gomillion on

    Nice article Ali, I believe the book Rich Dad Poor Dad covered areas of the school systems not teaching us about money and how it works. In the end, school teachs you only how to go to work. They plug us all into the “Matrix” at an early age, which is why many people don’t invest in real estate.

    • Ali Boone

      Lamart, you’re dead-on. I learned what I have about money from the Rich Dad books (many past just Rich Dad Poor Dad). Once I learned it I was really bummed that I never got to learn it in school. It’s such a fun topic to me, and to not get the chance to ‘major in’ ‘money’, what a bummer. I’ve never been a big reader my whole life, and now I read books all the time that are about money, business, sales, investing, marketing, you name it. Makes me sound like a total nerd, but I guess better late than never to figure out what will make me sit down and read a book!

  5. Learning is hard work with no promise of reward for your effort. Those of us that live to learn can reap fantastic rewards when we learn to leverage that knowledge. I think a lot of it is a societial problem. Why would someone want to work so hard to learn how to manage money or invest or be an entrepreneur when there is no promise. Society and common sense tells us that we go to college and buy a piece of paper and then employers are to play along and value that piece of paper we purchased and then pay a premium for it. People seem to resist hard work which is sad but also is why there is so much opportunity in this country. This is why we can charge premium rents on well maintained properties and sell homes quickly that have the work done.
    At the end of the day, I believe that learning is a lost art. We teach people to memorize but not learn and think.

    • Ali Boone

      Great points, Kyle. I think add to everything you say the thought of how much government help is out there too. People just don’t have reason to have to learn or work because they know they’ll get handouts if they don’t, so why bother. It does open up big doors for those of us that do want to learn and be able to use our knowledge to be very successful because we just don’t have that much competition! I think you’re right too about the promises aspect- it’s assumed if you get good grades, go to school, get a degree then get a job that you will be good to go. There’s no promise whatsoever with this so-called rebellious idea of working for yourself and investing, so people don’t want to put the effort out. Then add to that, even if they are cool with no promise, one big failure and they are out and done, no thanks. It requires the mentality of just knowing it can be done, and I don’t think everyone is wired for that type of thought.

  6. Not to go off on a tanget (Hahaha…) but I have to say my advanced math classes have proven to be very valuable in my real estate career.

    With classes like Advanced Calculus and Complex Numbers I would have a hard time understanding some of the thigns presented to me.
    Like most of my local wholesalers show me their ARVs and repair estimates and if I didn’t have a good understanding of pure imaginary numbers I couldn’t even read the proposals! :)

    • Ali Boone

      Shaun, you mean you can actually understand less-than-complex numbers after all of those classes? Haha. I have a horrible time with simple math since barreling through calc III and differentials. Although my engineering background, associated with the math of course, has helped me a ton in RE! I can bust out a spreadsheet of numbers formulas without a second thought :)

  7. Brilliant analogy, Einstein! As always, your imaginative perspective and articulation is always much appreciated, especially for us newbies. Thoroughly enjoy your articles – don’t stop writing and don’t lose that sense of humor. A sense of humor can get many of us around obstacles and alleviate stress. All the best to you.

    • Ali Boone

      Thanks, Paul! I’ll definitely try to stay funny :) I agree, humor is what can make bad situations okay, and it makes life a lot more enjoyable.

      As long as you keep reading, I’ll keep writing! (have any ideas for topics? I’m starting to struggle every week for what to write about…haha)

      • Good Morning Ali, Thanks for your reply – as my first venture into RE Investing I am contemplating buying a duplex or fourplex as rental property and also a place to live.
        I thought it would make it easier to oversee the tenants and provide real cheap living accomodations as well – this would free up more income for future RE endeavors. As an alternative, I am also considering moving to Sarasota county Florida and buying a pre-owned double wide in a resident owned 55+ park. This particular park has many resales, and another consideration I have is to buy a few of these to use as rentals. I would like to see articles on these options if in your realm of knowledge or opinions. Thanks for all you do. By the way, you have a very impressive resume – you must be one smart gal. Take Care, Paul

        • Ali Boone

          Thanks Paul! Smart may not be the word as much as, I just get bored easy and seem to always insist on drifting towards harder things to accomplish. And sometimes it isn’t always about being smart as it is being resourceful :)

          Unfortunately I don’t know anything about the mobile home space to speak to that one. The duplex fourplex could be an option. You could always buy those with owner-occupant financing (because it’s much cheaper) and then after a year move to Sarasota and rent out the unit you were living in. Property management doesn’t cost that much so you could keep that one and maybe still even get a couple mobile homes in Sarasota.

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