Why Overanalysis Can Never Be a Good Thing

January 7, 2017


By admin

Why Overanalysis Can Never Be a Good Thing
Posted on Saturday, January 7th, 2017

When you are new to property investing the thirst for knowledge can be overwhelming. You want to know everything is to know about everything and this is where it can become tricky to take the first steps. You want to make sure the decisions you make are the right ones and this is where it helps know your numbers before fronting the funds. At what point though does it become too much? When does analysis turn to analysis paralysis? The point where you realise you are never taking the plunge because every conceivable scenario you are analysing becomes too risky or perhaps just not as profitable as you were expecting.

There is no such thing as risk free

Coming across an investment opportunity you see as too good to be true usually ends up being the case. You may come across properties that stand out as the perfect first step towards growing your portfolio only to find out the garage isn’t practical or the bathroom is too small. While these things aren’t exactly deal breakers, they aren’t part of the perfect purchase you envisioned where you would start. Any property deal will come with it’s baggage and your skill as an investor will come with how well you can turn these challenges into opportunities. Never making the first move because you fear risk factors will cripple your progress and set you back on your goals in property investment. Instead, analyse the numbers and have a reasonable figure in mind to determine your return on investment. Calculate any risk factors into the feasibility analysis and if your figures add up, then move onto the next stage.

Seeing what you want and not enough of what you don’t

In some cases the numbers and research you analyse may tell a certain story. Whether this story is for or against what you have in mind, some investors have been known to have tunnel vision for seeing only what they want the numbers to tell them. For example you might be waiting to invest in a new unit development, seeing high potential in the area for young professionals who are perfectly suited for multi unit dwellings. What you might not prefer to ignore however, is the five other developments just around the corner. Not only will these be competing stock, they will likely raise the vacancy rates in the area making it difficult for any resale to potential investors. Ultimately, this can disrupt the values of the dwellings and can put you in hot water. Despite your thorough research telling you it is a viable investment, there are plenty to the contrary and this is when it comes in handy to few a select set of data and make a decision from there.

Seeking Advice in the Wrong Places

This isn’t to say your Uncle Tom isn’t going to give you great advice when making your first property purchase. It does however make a point that different advice should hold different weight when it comes to your due diligence. Family members may have your best interest in mind but chances are they may not be experts in many cases when it comes to investing in property. The same goes in a professional setting. Real estate agents and developers may have great knowledge of the local area but their advice is usually skewed in their favour. This isn’t necessarily a bad thing but once again, their advice should be appropriate placed when collecting information. The reason why too much advice can affect your efforts in investing is that in many cases it can be conflicting, opinionated and bias. The best way out of this situation? Seek advice from independent, unbiased professionals who receive no kickbacks from developers, agents or any other parties. When they work for you and only you, their advice is generally much more in your best interest and even better, they know their stuff.


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