Real Estate Investment Requires First Hand Info — ‘Empirical’ Isn’t Just a Word

Posted @ 11:25 pm - Filed under Investment Lessons, Purposeful Planning, Real Estate Investing, Real Estate Markets

Real Estate Investment Requires First Hand Info — ‘Empirical’ Isn’t Just a Word
BawldGuy Talking Yesterday at 11:25 PM BawldGuy
How many times in our lives have we gathered ‘all the pertinent information’ about something important to us, only to find out we only had 80% (or less) of what was available? Think about it in terms our computers. 98% right doesn’t make it. They demand we are totally correct in all we do or the results often resemble what the dog left in the yard.

Keep that thought.

How many real estate investment opportunities have we missed over the years ‘cuz we opted out? Speaking for myself, most of the time I passed was due to a lack of verifiable data. Sometimes I learned that data shortfall had caused me to miss a nice capital gain. Or worse, how ’bout when we’ve invested in the past with the erroneous idea we had all the info there was to know? What’s the difference between missed opportunities and losing money?

Neither one leaves a good taste, that’s for sure.

I use phrases like ‘empirical evidence’ ‘boots on the ground’ ‘documented proof’ and the like. There’s a good reason — the common thread is — first hand knowledge as opposed to second hand hearsay. The black & white world of ‘empirical’ can be comforting. When dealing with my clients’ money and property it’s important to them and me that the information was obtained first hand. If Purposeful Planning is based upon anything, it’s empirical data — about the client’s status, the market(s) and the properties themselves.

I should be able to look them in the eye and tell them, ‘I was there, I saw for myself, I inspected the documents, I interviewed the (fill in the blank).’

In the last couple weeks or so I’ve run into a continuing conversation thread. Seems there’s been a lot of research going on. Real estate investors have been typing and clicking — and much of it researching the various Texas real estate markets. That’s the good news. The bad news? It reminds me of the famous gunslinger and his prize student.

The student had been learning for quite awhile, and decided he wanted to be King of the Hill. As he challenged his mentor to a final gunfight for all the marbles, he made a statement based upon a misunderstanding of what he’d been taught.

He said, “Old man, you’ve taught me everything you know, and now it’s gonna come back to haunt you. My youth and quickness, along with the hundreds of practice hours make me better than you are now. Get ready to meet your Maker.”

The gunslinger replied, “Son, you’ve got it right except for one detail — I taught you everything you know, not everything I know.”

Whereupon he drew without warning and gunned his cold blooded student down where he stood.

Back to all the internet research going on.

Folks are telling me the rents they’re finding online aren’t nearly as high as the rents our properties are regularly and easily obtaining.

Here’s where I tie the internet to the gunslinger.

Like the gunslinger, the internet gives you all the info you’ve ever learned about an area. The problem? It doesn’t give you all the info there is to find.

Big difference.

How big? How many investors didn’t go to Phoenix when it was the right time ‘cuz they researched only the areas they’d heard about from water cooler talk? Or the people who missed out on Boise ‘cuz, well, who goes to Boise?

When you’re investing in property in long established areas — and the subject property is years old — you’ll be forever in the dark when it comes to the new developments and their values & rents.

It’s an old story. Think about why new property is even built in the first place. Demand. Same thing for rents. In fact many times it’s even better.

I look for projects not looking to add to a low supply, but rather those properties which bring something to the local market not yet in existence — but in high demand.

An example would be good to excellent locations with 3 bedroom 2 bath units on both sides of a brand new duplex. The research will show rents of $800-975 a month. Yet these new units are renting consistently and relatively quickly at $1,195 apiece. Why? ‘Cuz they offer what nothing in the area ever has before — a brand new unit with a fully equipped modern kitchen and an attached 2-car garage.

That hasn’t been available until now. It has virtually no competition. You won’t find it while researching online. Or if you do, it’s not what it seems. Of course you wouldn’t know that ‘cuz you haven’t spent days on the ground doin’ the whole Columbo thing.

And that’s how our clients do better than those who go it alone. See? We know stuff.

We know ‘cuz we go there ourselves and see with our own eyes. Ask folks the hard questions and don’t accept silly answers. Make folks show us documented empirical evidence of their claims. ‘That’s nice — please show us the leases you say you’ve signed up in the last seven days.’ Sometimes that’s when the stuttering begins.

Research not including boots on the ground almost always ends with a false sense of the complete picture. Online, ironically, gives an old tech picture — our boots on the ground combined with nearly 40 years experience give the High Def Big Screen picture you’d much rather have.

Makes sense, doesn’t it?

This entry was posted on Tuesday, March 11th, 2008 at 11:25 pm and is filed under Investment Lessons, Purposeful Planning, Real Estate Investing, Real Estate Markets. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.