Over-researching Can Harm Real Estate Investments

due diligenceI am sure you are aware of the great real estate investment paradox- in order not to under-research investors tend to over-research before buying properties. This can be referred to as the analysis-paralysis mode. Google has made it possible for us to go to extreme distances when it comes to research. When we start physical follow-up of all that appears on Google, the job becomes herculean. Does the principle yield results?

Caught up between conflicting approaches

In my opinion, it can’t. Soaking in more information than the mind can process can only harm investors. This way, they are caught up between many approaches and sometimes one approach directly confronts another, nullifying both. Both ‘looking wide’ and ‘looking deep’ can have investment repercussions if you do not know where to stop.

Diligence ‘Yes’ over-diligence ‘No’

So what do you do? You need to be diligent, it is but obvious but ideally you should restrict yourself to a few fundamental principles. Yes, you are welcome to explore depth and seek real pearls but that’s only when you have gathered enough experience for such “deep-sea diving”. So let us find out what your approach should be.

Hands-on implementation

Whenever you learn something, reinforce it with practical implementation. For instance, if you have found that banks’ valuation of property is based on comparable sales figure, make sure that you practically test the theory for at least a couple of neighbourhoods.

Follow only a couple of gurus (or three of them)

Do not oscillate between gurus-speak. Follow 2-3 experts whose ideas resonate with yours and add your own little experience to their tide of ideas. This way, you are more likely to succeed. I will tell you why. Let us say there is a Guru who feels prices in Sydney are bloated past sustainability and a bust is near. Let us further assume that there is another expert who feels that Sydney is good for further price escalation without threatening affordability.

Now, these are contrasting thoughts and you might get nowhere following both at the same time. After all, one idea might make you a market bull and another, a market bear. Thus, it is important to prefigure your inclination and follow only those experts whose fundamental approach is close to yours.

Remember, experts are not to help you choose your direction (that is for you to find out), they are there to smooth out the really creased roads on the path ahead.

A great team helps

I would also like to add that you need a great team you can thoroughly trust. Only this way is an extensive and a successful portfolio possible. Your buyer’s agent, sales agent, property manager and tax accountant are all very important cogs in the wheel of real estate investments.

How did you cope with the complexity of real estate investments when you were new to the game?