Are there any math impaired RE investors here? :)

General Real Estate Investing
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Are there any math impaired RE investors here? :)

Julie Hill
Denver, CO · Member since 2017 · 102 posts · 48 votes

First of all, I consider myself very smart.  I run a very successful company, have always excelled in everything I do (including school), and have even been pretty successful with RE investing & flipping so far (with my husband) but what holds me back is MATH.   It is super frustrating because I cannot conceptualize or visualize math at all.  I can't think in terms of percentages or ratios, and can't "see" what other people naturally "see" when it comes to numbers.  And I don't mean mathematicians, I mean normal everyday people.  THIS is what holds me back in real estate investing.  I am a creative and massive problem solver.  I see all the opportunities in front of me and all the different scenarios but the math part stops me short.  I literally would be UNSTOPPABLE if I could conceptualize the math of these deals/situations.  

I was listening to a Clubhouse chat with Grant & Elena Cordone and Elena said she doesn't do any of the math because she can't think that way.  She let's Grant handle all of that.  And I was like... OMG THERE'S SOMEONE LIKE ME???!!  So that gives me hope.  I feel like if I had a RE Math coach, who would practice with me every day, I might get better at it but I don't think such a person exists.  I really need to learn one concept really really well so that I actually understand it and then move on to the next.  Just like learning a language or an instrument.  Ho hum.  

I was talking with a lender today and he asked me some questions that I just felt... stupid answering.  I definitely wasn't confident.  Anytime I'm chatting with anyone in RE I just feel dumb.  Just a Friday rant I guess! 

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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
5y

You're not alone. I used to tutor math, and I can tell you that you are not one of the few, you are one of the many. The concepts of math are actually very simple, but math is taught wrong in school...and it has been for years (decades,...maybe centuries). PM me, and I'll give you some tools to help you. REI is nothing but math with dollar signs in front, so it's kind of important. Trust me, I can help you.

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  • George Munoz
    Real Estate Agent · Fort Lauderdale, FL · Member since 2018 · 360 posts · 213 votes
    5y

    Julie, I am with you... I suck at math, and must of my life was a C, D student.  Though is not that hard on RE to be honest, (  you could go hard core with stuff) but in reality , just dominating as few formulas , will get you by  and you can always double check them with people that have more dominion on the topic.. try to meet more local investors, and humble yourself like you are doing now, and asking if they can show you how they do their calculation, analyzing deals etc.. 

    Also the more you espouse yourself to deals the better. 

    2 recommendation;

    1st: you could accelerate the process by working full or part time with a (legit wholesale company )  This people see dozens of deals per day and they can train you for free ( and plus you can make some money and have first dips on a property you like. 

    2nd: try to  network (also with a legit wholesaler) and by legit I mean , HE gets his OWN deals directly from the seller , spend his own money for marketing..  Again , if is is legit he might need help analyzing those deals..

    Just a suggestion ...

    0Reply
  • Grant Avise
    Member since 2021 · 3 posts · 0 votes
    5y

    @Julie Hill You may want to look into Dyscalculia. It is a type of math learning disability. I have it and it makes numbers leaving me baffled. I have become better but it has taken lots of practice. Finding out that there was a reason for my struggles, rather than "just not getting it" made me feel better and it helped me find additional tools and resources to help learn specifically to what works for me. Something to think about. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y
    [email protected]301-893-4635Podcast Guest on Show #192
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  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    5y

    My wife is math-averse also, but an outstanding investing partner.  Her risk meter isn't broken like mine. Her spidey senses for neighborhoods and tenants are awesome, too.

    We can't all be all about the numbers all the time. I'm often surprised at the critical questions she'll ask me after her eyes are done glazing over and I'm sure I lost her interest. 

    What's the expected cash-flow?  Time and cost to fix it up? Value when done vs now?  Value in 5 years? How long do we want to keep it for? 

    I then do research and get back to her. She may not know what ARV is or ROE or price to rent ratios, but she knows how to ask that makes sense to her and to me.

    Basic 6th grade math will answer most questions so don't be anxious about it👍

    1Reply
  • Stephanie F.Pro Member
    New to Real Estate · Houston · Member since 2019 · 19 posts · 15 votes
    5y

    @Julie Hill

    Does it help if you have a calculator or even the you can’t visualize ?

    0Reply
  • Stephanie F.Pro Member
    New to Real Estate · Houston · Member since 2019 · 19 posts · 15 votes
    5y

    @Julie Hill

    Interesting. In

    Trying to understand because I think I might be the same as I can’t do math in my head. I can use a calculator but mental addition/subtraction / multiplication is NOT my thing.

    But once I know the numbers, I do have some visualization of what they mean. If someone shows me a proforma, I can see the deal BUT I go back and check their math and assumptions.

    I’m really wanting to understand where you struggle but I am not getting it. I agree that online tutoring tools are helpful, especially the ones that use visuals to teach.

    0Reply
  • Troy Albers
    Rental Property Investor · Fleming Island, FL · Member since 2019 · 85 posts · 104 votes
    5y

    @Jim K. best post I’ve read on here in a long time.

    2Reply
  • Devin Creek
    Rental Property Investor · Boise, ID · Member since 2016 · 28 posts · 23 votes
    5y

    Why do you feel you need to visualize the math of any given deal?  That’s the beauty of real estate and why spreadsheets are so great, you are never going to have to have the answers to any analysis question in five seconds. Even in hot markets you have at least a day:-)

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  • Nick ScapellatiPro Member
    Lender · St Augustine, FL · Member since 2019 · 58 posts · 12 votes
    5y

    @Julie Hill I think without math REI is impossible. I have read some of the responses and I believe that terminology might be the bigger issue. I teach math. From 6th grade through precalculus.

    When I have a student that is struggling usually it is because they don't speak what I call the language of math. Terms in math and in REI are subject specific. You usually don't hear them in other conversations and their meanings are often not understood. Once you understand the term the computation are usually not very difficult. I think you would benefit by learning meaning behind the terms in finance and investment. If you do know what the terms mean the calculations become much easier.

    0Reply
  • Yenika M.
    Wholesaler · Philadelphia, PA · Member since 2016 · 37 posts · 4 votes
    5y

    @Carlos Ptriawan as a newbie, this post scare me because im horrible with math.

    0Reply
  • Tushar P.
    Member since 2019 · 332 posts · 171 votes
    5y
    Originally posted by @Carlos Ptriawan:

    @Tushar P. : the difference between real estate investing and stock investment is we're speculating on the real economy in our specific market. You are not speculating based on future. If you invest in Ohio or in California, your return for the next 5 years is already known, there's no magic. 

    If you invest a high equity growth stock, you're speculating on the future, the sky is the limit, we don't know which share will appreciate more whether it's Tesla or Nio for example.

    The 1.5-2.0 EM in the Real Estate world is very easily to be achieved.

    The real estate investment is very good for common classic investor that understands the risk. 

    Agree completely. But I’m neither an expert in real estate nor in stock picking. I’m relying on experts - professional syndicators for real estate and full-time analysts (like ARK) for growth stocks. For the latter, the only thing I have going for myself is that I have the capacity and means to handle the volatility (I rarely sell what I buy). I’ve lost money in the stock market, but that’s negligible compared to the gains.

    I understand that the risk adjusted return in real estate is better. I may put more money in real estate as I get closer to the retirement age (still a few decades to go) and when my primary focus becomes capital preservation rather than capital growth. In the meantime, I want to stay diversified with higher weight on stocks. Having a big allocation in diversified assets (total market, S&P500, REITs) as a backbone allows me to do that. Only time will tell if this is a good strategy or not.

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  • Mark Scarola
    Developer · San Diego, CA · Member since 2014 · 294 posts · 70 votes
    5y

    Judging by the reseponse you've gotten in just two days, you're obviously not alone. Math is definitely a problem area for a lot of people, but there are some things you can do. For example, if your husband or someone else on your team is good at math let them handle that aspect while you focus your time and attention on what you excel at.

    The other thing is that perhaps you could put some time (when you're not feeling pressured or down on yourself) to jot down some rules of thumb. That is, you could research some common ratios and what's considered good/bad. For example, what's a good profit? Maybe you feel that below 5% isn't worth doing a deal, 6-8% is a low return, 9-12% is average, etc. Then when someone says they have cap rate, an LTV, NOI, etc. of whatever.... you can consult your cheatsheet and have an idea of if that's good/avg/poor.

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    5y
    Originally posted by @Tushar P.:

    @Jon Q. Luckily I haven’t had any bad experiences because it has been less than 2 years since I started looking/investing into real estate, and have only invested in ~20 syndications so far (none have exited yet, some are 10 year hold opportunity zones) - expected equity multiples of 1.5-3x for 3-10 year hold periods. I have looked into investing in rentals, only for using the rental depreciation loss to offset the passive gains from syndications, but I feel it’s not worth it. It is in fact experiences of others shared on biggerpockets which has taught me most of the swindling tactics.

    20% annualized return for 20 years will be ~40x, while many stocks have yielded 20-30x in the last 10 months. Of course, that is not repeatable all the time - it was a lifetime opportunity only for those who have the stomach to handle the volatility. I had one stock yield 35x in 5 years (it was under water for first 3.5 years) - if I had held on to it, it is now at 47x in 8 years.

    I entered the workforce ~10 years ago, so I have only seen bull market. Except 2018, every year has provided 15-25% average return - while some individual stocks have yielded much more. Now I’m diversifying into lower return (but less volatile) real estate. Going forward, concentrated risk in real estate may yield better than the average stock market return, as there is no guarantee for anything.

    The only guarantee is your hard work and wisdom, which comes with experience.

    In real estate, you’re able to generate a return through these... your hard work (sweat equity) and your experience.  So those doing this for a while are often able to generate consistently strong (20%+) returns no matter the market condition.  

    That’s very hard/impossible to do in the stock market.  The only one creating sweat equity in stocks are investors like Warren buffet who’s strategy is to buy large + hold large chuncks of high quality companies, which I may do at some point in my life.

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  • Karl Schmidt
    Investor · UT · Member since 2020 · 35 posts · 16 votes
    5y

    @Julie Hill I recently had a stroke after a crazy spinal issue I recently experienced. The spinal experience left me an incomplete paraplegic but the stroke left me feeling a little slow and feeling almost like my brain is in a fog.

    Math be id the worst. Best advice... math books relearn the concepts. Life is about constant learning. Sometimes we need refreshers. Nobody knew how to walk years ago. It took years.

    You can do it.

    0Reply
  • Jaquetta T Ragland
    Real Estate Agent · Winston Salem, NC · Member since 2014 · 486 posts · 303 votes
    5y

    @Julie Hill I bought Frank Gallinellis book several years ago. I’m going to go book and reread it to refresh myself on real estate math. It’s good to try to understand the basics.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    Hello @Tushar P. : regardless if the syndication is being executed by the Bill Gates of Real Estate world vs new kid in syndication, the result will not be much different because almost all the variable are known from beginning: wage growth, rent growth, appreciation, range of occupancy and management expense. If the operator is good then you're in good hands.

    The big factor of syndication is the local economic market condition. Everything is almost like a straight line. If your economy makes money you make money , vice versa.

    If you want to compare the relative return of syndication with public investment, the closest would be apartment REIT or NNN REIT. Both has dividend yield of 4-6% and decent return from FFO. One shall not compare syndication with investing at TSLA, it's like comparing investing at walgreen NNN and comparing with new invention :)

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  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    5y

    @Julie Hill after years on these forums, I have observed that many investors are math challenged and that is a major problem. If I asked you to calculate the loan payment on a 4.8% loan for $230,000 with 20% down for 30 year term, could you do that without Googling "mortgage calculator"? If I asked you, is a mortgage front end loaded with interest or evenly loaded based on amount owed, which would you choose? What if I asked you the difference between compounded interest and regular or simple interest? Does a mortgage have compounded or regular interest? What does amortization mean in context of a mortgage? Can you explain the difference between COC return, ROI and IRR? Is a deal better just because there is more cash flow? Do you include carrying costs in your calculations?

    Any investor should be able to answer these questions. These are just finance questions. I didn't even get into accounting, statistics or taxes.

    Real estate investing is just one big math problem. I challenge you to find a decision that isn't math related.

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  • Michael Temple
    Rental Property Investor · Toledo, OH · Member since 2017 · 262 posts · 215 votes
    5y

    @Lauren Ruppert Great, I appreciate the feedback. I also didn't do that great in algebra or geometry either. The good news is that I haven't found any real estate math that complicated where I needed to bust out algebra or geometry. My financial calculator (10bii) has been just about everything I needed along with visualizing how to structure the deal, which in my mind is more about what I could make work than anything else.

    0Reply
  • Nick Peters
    Specialist · New York City, NY · Member since 2019 · 400 posts · 168 votes
    5y

    If you're bad with math, you still have plenty of solutions that can help you with that in your real estate investing journey. BP's calculators are one, excel spreadsheets are another!

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