Why research matters so much in property investing
Research is the biggest foundation of any property investment exercise.
And the research I'm referring to isn't the due-diligence kind that you do once you've found the target property for purchase (the RP Data, building inspections, recent sales, suburb/street demographics etc.).
No, I'm talking about broad 'industry' research.
In the current climate the topic of the day (every day, it seems!) is a combination of 'housing bubble burst' (which has been harped on about for years) combined with affordability.
One of the most stressful things to uncover when researching such trends is the conflicting opinions by the experts.
Now, I don't question the experts' wisdom and capability in terms of their knowledge, but when two experts are arguing in polar opposite directions on the same topic - and then backing up these arguments with solid stats, data sources, references, and charts - who do you believe?
Even the same website sometimes reports the same topic from two very different statistical opinions, making it hard to form an objective opinion when it comes to data sources.
As someone who delves into statistics in his day job (I work in media, so I pull third-party data on audience trends etc.) I know as well as anyone that you can effectively 'shape' any statistic/chart/data summary towards the argument you are trying to put forward.
I guess the purpose of this post is to highlight that sometimes, even with credible sources using credible data, is that you can effectively be left with more unanswered questions after your research, than before!
So, bubble-burst or never-ending growth rates? Which is more likely?
And as investors, if the bubble bursts on 'values', and rents keep rising as fiercely as they have been, isn't that still an advantageous position for us to be in? Think about it; so properties become cheaper to acquire yet rental returns become stronger; leaving you with effectively a higher-yielding portfolio instead of a capital-growth heavy portfolio.
Research is all about learning more. And the process of learning itself is a funny thing. It seems like the more you learn; the more questions you think of; and then the more questions you ask. But the more questions you ask; the more answers you get (and often, the more contradictory or conflicting these new answers are; in contrast to the old answers you'd got!).
Unfortunately I do not have silver bullet to solve this problem for you. All I can suggest is that before you go out to start researching anything in property investment especially; first draw up a list of your goals or desired outcomes. Why are you investing in the first place?
Are you looking to achieve a regular stream of ongoing income, month to month? (I.e. you are looking at the yield possibilities of property investing). Are you looking less and month to month earnings, in favour of a big payoff years later when you sell a property for (for example) twice the price you paid for it? (I.e. seeking capital growth).
A true understanding and endorsement of one's own goals will ensure that any views, trends, or stats you uncover during your research efforts will always be linked back to "is this new piece of information going to influence my success in getting closer to my goal?".
When it comes to property investing; at the end of the day what matters most is the data and information you collect that will directly influence for the better; your chances of delivering a return on your investment - be it yield, capital growth, or some combination of the two!
