Those Free Property Reports: Take a Reality Check With What You’re Getting and What Are The Missing Ingredients.
Many investors tend to be overconfident, immodest, underestimate the level of knowledge and information that they need in order to minimize their risk.
They tend to heavily rely on free property investment reports without understanding what they are actually getting and what they are missing.
We all know the saying: ‘when you pay peanuts, you get monkeys’.
This is the truth particularly when you make an investment property decision and you need independent research so you can make a decision what to do, and sometimes, even more importantly, what NOT to do.
In order to understand what you really get, we need to break down the property reports into components
This is basic for property reports and there are dozens of data sources that are used by a company like RiskWise Property Review.
In addition, people are not aware of the costs associated with high quality data sources and a research team.
These costs start with hundreds of thousands of dollars a year, and could easily reach the one million mark.
It is important to understand that the data that the big 4 banks and RiskWise use, is completely different from the data that is included in the ‘Free Property Reports’, and that the amount of data analysis and research invested by companies like RiskWise Property Review is very high.
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Few of the very basic things that an investor should looks for, from a data perspective, are:
- What is the risk associated with poor / negative capital growth for each property;
- How many properties are in the pipeline and what is the additional % to the current stock
- What is the estimated future projection of capital growth
Without this data, the investment approach is often very naïve’ relying only on historical data and assuming that the future capital growth will be very similar to the historical growth – this could be a major mistake.
In Financial Services there is a saying ‘data without information is meaningless’ and the meaning here is that even when we have the data, there is crucial information that we need in order to make a decision.
One of the prime examples is macro-economic factors, and in particular, sustainable economic growth.
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Based on our research, where an area enjoys and is projected to continue enjoying sustainable economic growth, dwelling prices carry a low level of risk and in 83% they also outperform the benchmark.
Another information-related factor is the dwelling preference of owner occupiers for property type and configuration.
Without having this information, the risk of poor capital growth is significantly higher.
We often get ‘Free Property Reports’ and ‘Free Research Reports’ from real estate agents.
This research has been conducted by their ‘Research Team’.
The key questions are:
- who are they – a respectable company NEVER hides their research team
- what their qualifications are – advanced degrees, strong research background, typically from very large companies is what you’re looking for; and
- what have they published lately – that’s what we, research companies, do: share our research results with the public
Many of the free property reports and the free research reports are provided by real estate agents who have a vested interested in the deal.
Therefore, some of the reports might be biased, presenting only the good attributes, ignoring the major risk factors.
A prime example of that is units in Brisbane CBD, that is high on our 100 Danger Zones report.
Research reports that are provided by real estate agents who sell properties in the area do not contain information regarding the high level of risk that property investors are facing.
The answer to this question is very often ‘no’ due to the simple fact that every investor has a very specific investment strategy, circumstances, risk appetite and financial position.
While, from a first view, ‘Free Property Reports’ look like a good source of information, if they are not tailored to your specific needs and circumstances, their added value is very limited.
Top tips on property reports:
- Get your research reports from a research company that specializes in research (that’s why it is called a research company)
- Ensure that each report contains, amongst other information, the risk rating associated with your planned investment and the number of properties in the pipeline and a risk of oversupply
- Ensure that in addition to data, the report contains information, including macro-economic factors on the area
- Check who is the ‘Research Team’, and particularly the Head of Research, and what their education, qualification and experience are, and which articles have been published in the media in the recent months
- Do not rely only on a report that is provided to you by a real estate agent who has a vested interest in the deal
- Ensure that the report meets your specific strategy, needs, circumstances and risk appetite. If you rely on a report that does not meet all of these criteria, by using this report, you’ll run in the wrong jungle.