How important is mental math?
I’m an analyst at an institutional REIT. I work on development, acquisitions, and asset mgmt/leasing. Our boss is a mental math wizard. He can literally analyze any deal in his head in a matter of minutes. For instance, I spent about an hour building out a pro forma analysis comparing different lease proposal returns with variable TI, esc, free rent, and rate. I mentioned it to my boss and he basically did the full analysis in his head out loud in about a minute. He does this all the time. Do I need to practice this ability? Is it practical? My thought is that there will always be excel and some time to think thru things. I also think that while yes, he is naturally good at math, this is also a product of thinking this way for 20+ years, and many people naturally get to this level. It also seems like most the senior bosses I’ve had possessed this ability to some degree. Is this just what it takes to get to that level? I’m sure I can get better if I repeatedly practice this specific skill. Curious what others have seen/experienced?
It is exceptionally valuable
My old boss could do that too. It’s neat, but it’s more of a generational parlor trick than anything. Does it give you any real benefit if you can properly analyze a deal in thirty seconds in your head versus in a calculator or in excel? Not really.
As someone far more right brained, I’ll always be impressed by people who can do mental math like that. But not being able to do it hasn’t held me back in any real way. I can still look at a few key inputs on a deal and know if it’s going to work or not. I’m not doing long division to get there, but if you did, I’d be correct all the same.
practical from a time standpoint in terms of knowing what passes the smell test and what deals to dig in on
That isn’t your job as a junior though.
If it doesn’t come easily when you’re more senior just make the bullpen UW everything lmao
More window dressing than anything but sure it can be a helpful thought process at times.
All you really need to do is enough to pass the back of the envelope test. That isn't difficult math.
In general, real estate requires exceptionally little math. All the complex underwriting models and whatnot that you see are more or less worthless - if you can't figure out whether a deal makes sense in 5 minutes with a pen and scrap paper, then you're in the wrong industry.
Not important. Pulling out your phone calculator takes two seconds.
I agree with the above. I used to have a boss that would do mental math during Investment Committee meetings and it'd come across as very sleek and polished. Meanwhile, I'm fumbling around in Excel, using a calculator, or promising to 'circle back' with a requested number.
Now that I do more quick screening of deals, I've realised that its less about arithmetic ability and more about spotting patterns with similar deals. For example, spotting that X multiple / cap rate and Y leverage will roughly equate to Z returns, no calculation needed.
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