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The Majority is Not Always Right in Real Estate

herd mentalityYou are in a rush and you throw caution to the wind and move gallantly to the centre of the road in a bid to cross it. In a few seconds you begin to feel very exposed, immensely vulnerable and you are right in feeling these emotions. Perhaps, you would not have felt the same way if many individuals would have taken the risk with you right at that moment.

The majority is not always right

It is not that you would have thought you had made a wise decision but at least you would have invested in the “safety of numbers” and it is a line of defence we sometimes cling to. Unfortunately the same rule just does not apply to the property market. If you are going with the crowd, you are more likely to fail. Let me tell you why?

How many investors succeed in the market?

How many investors go past their second property? Only a handful I suppose! If the crowd really knew its way, we would have had racks full of “mini-Warren Buffets”. This means that these guys are definitely doing something wrong. To me, their greatest mindset block is their herd mentality.

Word of mouth can do wonders to a sale rack not the property market

Just because a majority is following something does not imply that the idea is in line with wisdom. May be nobody is making the effort of conducting Due Diligence supposing that somebody on their behalf may have either put the hard yards or have got an expert’s opinion on the matter already. This is how a move is copied and soon the buzz and word of mouth carries it from one point to another, making it a contagion of sorts. However, if we look back, was there any evidence of it being a smart move? NO is the answer.

Dynamics of real estate changes very fast

This is why it is crucial to dig your own well and ensure that the water is nothing but sweet. At any given time in the market, thousands of dynamics are working simultaneously. The same investors who are going bonkers after waterfront properties may force it to languish miserably in a year’s time.

Gentrification and demographic changes can make a dead zone move counter-cyclically to the top of the property heap. We have seen all this happen in the past and this is a parcel of property cycles.

Can you make money out of such surprise changes? Yes, only if you are ready to think beyond the box.

Can you narrate an instance where you went against the market and gained from it?