What drives your property investments, gut feeling or cold hard facts?

While the Internet has changed everyday life it has had a dramatic impact upon the worldwide real estate market. In simple terms, any property available for sale anywhere in the world can be advertised both in cold hard facts as well as real-time video links. The creation of an online property community means that information is now more readily available than ever but can you create a portfolio of property investments on cold hard fact alone? Or, is there a need to use your experience and your gut feeling?

Is the trend always your friend?

There is a saying in investment markets “the trend is your friend”. If you look back in history you will see that trends often repeat themselves and it can in certain circumstances be possible to forecast the future direction of markets using past information. However, while the trend most certainly is your friend there are many outside influences today which can impact property markets, therefore you need to be careful.

There is also another saying in the investment markets which is “catching a falling knife” that relates to investment assets which are falling in value. Due to human emotions it is very common to see stocks overbought as well as oversold. When an asset is out of favour the price can fall very quickly and a downward trend emerge. Trying to guess when this trend will turn is the same as “catching a falling knife” because you can get very badly cut.

Experience and gut feelings

If you look back at any investment transaction you carried out, whether this is a buy, sell or even holding onto a stock, did you have a gut feeling about the situation? Have you ever experienced circumstances where the cold hard facts of the day suggested an asset was a good buy but your gut feeling said something else? Using your experience, whether actual or through following markets, can alert you to potential issues without you knowing it.

The property market is no different to the stock market because you need to look at the current situation, review pricing models, consider the medium to long term outlook and how this might impact property prices. The more experience you have in the world of real estate the stronger the gut feeling when considering any transaction. Your gut feeling is not always correct, it can be impacted by emotions and perhaps a bias for or against a particular type of asset, but it should certainly give you food for thought.

Learning from experience

If you have yet to make any mistakes in your investment career the chances are you have taken little in the way of risk and tended to “go with the crowd”. The simple fact is that you will likely learn more from your mistakes, or at least as much, as you will from your successes. How you react to an underperforming investment is as important as how you react to successful investment scenarios. Sit back, consider your strategy, was it correct?

The more successful property investors around the world will likely take in a mixture of cold hard facts as well as their gut feeling based on experience. Nothing is perfect in the investment world, trends do not always repeat themselves to the same extent but there is a lot we can learn from looking back. However, that should not cloud your judgement when looking forward.

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>