At first glance aspiring property investors have got it pretty good when it comes to access to research and data to help better inform their decisions.
The Internet today provides a wealth of resources, tools, calculators, statistics, opinions, communities, videos, and other data formats to aspiring investors.
However, both active and aspiring investors alike often tell me they are feeling more overwhelmed and fatigued than ever before, due to the mounds of now easily accessible property research available causing more data contradictions than ever before.
I’m often asked questions like:
- Is median price data really still relevant?
- How do I weigh up the value of say new infrastructure projects in my chosen suburb against metrics like falling rents or increasing vacancy rates?
- Whose property vacancy rates do I trust?
- I’ve just read two conflicting data sources – and both are backed up by reputable statistics sources and informed experts. Which one is right? What do I do?
The list goes on.
This problem is known as Analysis Paralysis.
It occurs when you conduct considerable research and sift through multiple datasets diligently.
However the deeper you look, the more you encounter conflicting the points of view, datasets, charts, and trends.
This clouds your decision-making abilities.
In a way experiencing analysis paralysis in property investing is a good problem.
It can be a sign that you are scratching below the surface to inform sound property investing decisions.
However, what piece(s) of research do you lead with and trust?
How do you ‘beat’ analysis paralysis?
Sadly, there is no silver bullet to the best research technique; nor is there “one research to rule them all!”.
Analysis paralysis can sometimes be a symptom of over thinking a problem, in that you might have enough data in front of you to make an informed, logical decision, but over thinking results in fatigue and finally, inaction.
From someone who has been in a ‘research rut’ several times in my own investing journey, here are some suggestions of questions you can ask yourself about conflicting data discoveries, to help pull you out of the rabbit-hole and back to sound decision making.
Does this data/metric/outcome help or hinder my overall property investing strategy?
The biggest way to steer yourself back on track is to answer every conflicting-data occurrence by pulling it back to your overall property investment strategy.
If you do not have a sound overarching strategy, then you should not be digging ‘in the weeds’ of data and getting analysis paralysis in the first place.
You need to take a step back and ask “How much will this data finding contribute towards, or steer me away from, my overall property investing strategy? ”
How should I prioritise the value of different kinds of data?
Before even bothering to look heavily at data about any particular topic in property investing (e.g. an actual property listing/postcode/tax/selling strategy/infrastructure etc.), you should first draw up a list that labels every topic-type, or category, of research you can conduct.
This list must be ordered in priority from most important to least.
Keep this list as a go-to whenever data discoveries relevant to topics on that list begin to contradict one another.
It is like “rock, paper, scissors” with your data topics where some should ‘trump’ others based on higher value / worth in your decision-making process.
For example, if you have decided that suburb infrastructure is more important than say renovation potential, then trust this when you encounter a property with attributes relevant to both topics.
The property may not be renovation worthy and on its own this could be a detractive feature (if renovation was in your ‘overall strategy’ to begin with!).
However, the suburb might have infrastructure benefits.
You ought to place greater impetus on this in your decisions if infrastructure was higher in your list.
Distinguishing between hard data and opinion-based data
Another analysis-paralysis complaint I hear is from those who have crunched data, looked at charts, spreadsheets, and other tangible data sources; and then have read or heard conflicting opinions from property experts.
The skill here is your ability to prioritise importance of two different types of data; hard numbers (which is both quantitative and qualitative), and opinion-based data (qualitative).
Ideally, any research or opinions put forward by experts and trusted advisors would be backed up or at least referenced by some data sources.
Both quantitative and qualitative research have value.
You must somehow figure this into your prioritisation list accordingly.
For example, historical data you’ve sourced (e.g. trends, yields, vacancy rates, days-on-market, sales histories, confirmed suburb infrastructure commencements, school catchment zoning maps, etc.), lead you to believe a suburb is worth considering.
Yet an expert may have an X-factor opinion that isn’t tangibly measureable by hard-data, but may influence the outcome or prosperity of a chosen suburb/property type/investment strategy.
Your prioritisation playbook should help here for what data you’ll lead with.
Abandon faith all ye who ‘speculate’ here
Last of all – what of the opinions of everyday folk?
Qualitative data from informed, experienced investors and experts is usually worth at least considering in your prioritised due diligence playbook.
Of course, this kind of opinion is far more valuable than the opinion of just any random person on the street.
The opinion is also likely to be far more valuable than even those of your family, friend, neighbour, or taxi driver.
Just because you know someone well and trust them, doesn’t mean you should trust their casual, in-passing, opinions on property!
Would you take serious medical advice from a five-year old child with a toy stethoscope?
So why would you take advice relating to your long-term financial prosperity from someone’s uninformed opinion?
It is just speculation.
I can speculate who will sit on the Iron Throne at the final end of Game of Thrones, but no one knows that yet.
If, in three years’ time my random guess happened to be right, I’ll be wrongly attributed as being an expert on that piece of popular culture!
How many times when socialising with someone you know, have you mentioned your consideration of investing in property/suburb/type “X” only to have the friend immediately dish out their loose opinion?
Comments like “I heard that place is no good”, or “I think that suburb will do really well”, or, perhaps most commonly “THAT suburb? I’d never live there! You are making a terrible mistake!”
What I like to do when I get given this ‘free advice’ is to stop them in their tracks ask:
“Sure… But, how many investment properties do you own? What experience do you have? How did you get to that conclusion and what data did you discover to inform your opinion”.
A person with no lived investing experience is unlikely to have any research truly underpinning their loose opinion to you, so you shouldn’t listen to them.