{"id":145116,"date":"2022-10-11T13:00:23","date_gmt":"2022-10-11T19:00:23","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=145116"},"modified":"2023-08-08T15:43:02","modified_gmt":"2023-08-08T21:43:02","slug":"think-like-a-real-estate-investor","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/think-like-a-real-estate-investor","title":{"rendered":"How To Think Like A Successful Real Estate Investor"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC6939544014&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">When I first started investing in real estate, I thought I knew what I was doing.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I had not heard of BiggerPockets at the time, but I\u2019m pretty handy with a spreadsheet, could <a href=\"https:\/\/www.biggerpockets.com\/learn\/analyzing-rentals\" target=\"_blank\" rel=\"noreferrer noopener\">analyze deals<\/a>, and found some decent deals and generated solid returns. I was doing pretty well and enjoyed investing.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">A few years later, I decided to merge my full-time career in analytics and my passion for real estate. I applied for and fortunately landed a job at BiggerPockets. It was a dream come true to work alongside experienced investors like Scott Trench, Mindy Jensen, and J Scott\u2014but it was also very humbling. In my first few weeks working full-time at BiggerPockets, I realized how incomplete my knowledge of real estate investing really was. It quickly became clear that I had a few skills but hadn\u2019t yet transformed my mindset to think like an investor.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As an example, over the years, my properties amassed huge cash reserves. I was pretty proud of this and saw it as a huge success. But, if I had been thinking like an investor, I would have recognized these reserves as a failure to reinvest my profits and enjoy the full benefits of compounding. Similarly, my property values were going up and taking my net worth along for the ride, which felt great. However, an expert investor would have seen my return on equity declining and that I was no longer generating <a href=\"https:\/\/www.biggerpockets.com\/blog\/rental-property-cash-flow-analysis\" target=\"_blank\" rel=\"noreferrer noopener\">cash flow<\/a> or deploying my capital efficiently. I was doing okay but needed to change my mindset to reach my full potential.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Over the next few years, I dedicated myself to developing the mindset of a great investor. One that allowed me to fluidly evaluate risk, allocate resources, and generate stable returns over a long period of time.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It took me several years, and I admit I made some painful mistakes along the way. But I can confidently say I\u2019ve adopted the mindset of an investor. Throughout this journey, I realized that these lessons are not so hard to pick up as long as they are explained clearly and organized. I had done it ad hoc, but it doesn\u2019t have to take so long or be so difficult. So, I teamed up with J Scott to teach other investors how to think like an investor, and we wrote a new book called&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-by-the-numbers\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Real Estate By The Numbers<\/span><\/em><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In writing the book, we identified the key elements of thinking like an investor and building your dream portfolio. Here are the five we found:&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">1. <span data-preserver-spaces=\"true\">Learning to Keep Score<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019re going to pursue any goal, you need to track your progress. Imagine trying to lose weight and not being able to weigh yourself and record your progress. It\u2019s pretty much impossible!&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The same is true with investing. You have to be able to track key financial metrics like your net worth and savings rate to know how you&#8217;re progressing against your goals. You need to do the same for each deal by keeping professional records with financial statements like a balance sheet and profit and loss statement.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">2. Financial Concepts&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Every investor needs to know some basic rules about how money works. The most important are compound interest, money&#8217;s time value, and tax strategy. Maybe you\u2019ve heard of these terms, but could you explain them to someone else? To be a great investor, you must incorporate these concepts into your everyday thinking. You need more than a simple understanding of these concepts. Gaining a full understanding of the time value of money genuinely changed my life.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Seriously, it\u2019s powerful stuff!&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">3. <span data-preserver-spaces=\"true\">The Key Metrics<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Every investor needs to be able to evaluate their performance with key investing metrics. Maybe you\u2019ve heard of&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/cash-on-cash-return\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">cash-on-cash return<\/span><\/a><span data-preserver-spaces=\"true\">? But do you know when to use cash-on-cash versus an alternative metric known as cash-on-equity? Do you know how to use advanced metrics like net present value and&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/internal-rate-return-irr\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">internal rate of return<\/span><\/a><span data-preserver-spaces=\"true\">? They may sound overly complicated and unnecessary, but they\u2019re not.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Like me, you might be able to get by for a little without knowing the basic metrics, but to build and manage a sophisticated business, you have to understand what metrics and calculations are appropriate for each question you face.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">That\u2019s how you analyze deals and build a portfolio like a&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/membership-types\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">pro<\/span><\/a><span data-preserver-spaces=\"true\">.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">4. <span data-preserver-spaces=\"true\">Financing&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Very few investors have the capital to self-fund every deal they want to do. Pretty much every single investor raises capital, either in debt or equity form, at some point in their career. In fact, most of us use <a href=\"https:\/\/www.biggerpockets.com\/loans\" target=\"_blank\" rel=\"noreferrer noopener\">outside capital<\/a> for&nbsp;<\/span><em><span data-preserver-spaces=\"true\">every<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;deal we do because using&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/category\/mortgages-creative-financing\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">financing<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;strategically can actually boost your returns. Sophisticated investors don\u2019t view financing as an annoying hurdle to cross but as a strategic opportunity to improve their investment\u2019s performance.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">5. <span data-preserver-spaces=\"true\">Making It Work For You<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Every investor is different. Each of us has our own financial goals, risk tolerance, and priorities. That\u2019s why experienced investors know there is no such thing as a \u201cgood deal.\u201d There is only a \u201cgood deal for me.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For this reason, the most important skill an investor possesses is the ability to think critically through every element of a real estate deal and determine if it&#8217;s a good first for their particular set of resources and goals. The first four elements: scorekeeping, financial concepts, key metrics, and financing, are all useless unless you can apply them confidently to your own portfolio.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Together, these five elements allow an investor of any experience level to think like an investor and level up your game, whether you\u2019re just starting out or have been investing for years. I\u2019m proud that I\u2019ve mastered these elements to the point where I even wrote a book about it. But I really wish I had learned them sooner.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">If you\u2019d like to master these concepts, check out&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-by-the-numbers\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Real Estate By The Numbers<\/span><\/em><\/a><span data-preserver-spaces=\"true\">. The book is designed to teach you to think like an investor in a simple and digestible way and comes with all sorts of spreadsheets and tools to help you along your investing journey.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Learn to think like an investor, and I\u2019m confident you\u2019ll find success as one.&nbsp;<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_64dd5ab97ed79\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-slate-900-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-large-font-size\"><strong>Analyze Deals Like a Pro<\/strong><\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Deal analysis is one of the first and most critical steps of real estate investing. Maximize your confidence in each deal with this first-ever ultimate guide to deal analysis. <em>Real Estate by the Numbers<\/em> makes real estate math easy, and makes real estate success inevitable. <\/p>\n\n\n\n<div id=button-custom-event-block_64138224164cd class='button-custom-event'>\n      <a\n    href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-by-the-numbers?utm_source=blog&#038;utm_medium=marketing_block\"\n        x-on:click=\"window.analytics.track('Blog Block | Publishing: REBTN Book', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/think-like-a-real-estate-investor',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n\n\n<div id=button-custom-event-block_641381f7164cc class='button-custom-event'>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/REBN_cover_mockup_01-e1679000020543.png\" alt=\"real estate by the numbers\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a\n    href=\"https:\/\/www.biggerpockets.com\/signup\"\n        x-on:click=\"window.analytics.track('Blog Block | Acquisition | Free Membership Signup', {\n      referrer: 'https:\/\/www.biggerpockets.com\/blog\/think-like-a-real-estate-investor',\n    });\"\n    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>When I first started investing in real estate, I thought I knew what I was doing.&nbsp; I had not heard of BiggerPockets at the time, but I\u2019m pretty handy with [&hellip;]<\/p>\n","protected":false},"author":108611,"featured_media":145118,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[20,7119],"tags":[],"class_list":["post-145116","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-development","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/145116","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/108611"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=145116"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/145116\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/145118"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=145116"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=145116"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=145116"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}