Financial Decision Making
When it comes to their finances, it's no secret that people don't make decisions based on raw data alone. National and global events, investors' impression of a situation, emotions...all of these things and so much more go into the decisions people make when it comes to their money. Because data and information can sometimes be fuzzy..., we need to surround ourselves with more than just one source of information. We also need to consider that sometimes people let their own agendas influence the way they deliver information to their audience. Sometimes sources of information don't really care about the truth or about data. They care about how they can shape the data and the story to meet their own agenda. Nothing is more dangerous for someone making a financial decision - especially in real estate - than a source with an agenda!
And this isn't just the case when the data is fuzzy. Sometimes there is clear, verifiable data that something is one way, and folks will believe the exact opposite. For example, a recent Memphis Business Journal article entitled Are We Still in a Recession? points out that nearly a third of Americans think the economy is still in a recession – or even a depression. The article goes on to mention that according to the National Bureau of Economic Research, the U.S. pulled out of the recession four years ago.
Of course, this doesn’t mean that everything about the economy is a-okay, but still…a third of the country is a lot of people. So what does this mean for us as real estate investors?
In short, it’s a wake-up call that we need to be up-to-date on money matters. It is a wake-up call that we need to be in-tune with where we get our information and ask more questions. Real estate is a huge part of the economy, and the economy affects real estate, so we need to stay on top of financial news. We need to stay on top of market news and real estate data and who we listen to when it comes to trends. Lastly, we need to remember that data is just that...a set of numbers in a given time and space. They could mean everything and they could men nothing. In short, being uneducated or under-informed is simply unacceptable. Here are a couple of key reasons from your favorite Memphis real estate company on why this is the case and how to stay informed the right way.
1. The better informed we are, the better financial decisions we make.
When we’re up-to-date on the latest economic news and aware of financial trends, we have the tools with which to make the best decisions possible. Knowledge is power, as they say, and we want to equip ourselves to be as powerful as possible. There is always more than one side to any story and data can be looked at in lots of different ways. That is why we have always advocated investors reading blogs, paying attention to local news resources and investigating what you are being told. If you saw us speak in 2012, you heard a phrase that we have said over and over again, "take nothing on faith".
No matter who you are dealing with, before you have a working relationship with some history behind it, you cannot afford to take anything on faith. You have to build a trust first and a history of getting good and accurate information before you can let any amount of faith take over your decision making.
2. Armed with accurate information, we can answer real estate investing questions
“I can certainly understand your concern and views, but according to (insert source here), the local real estate market is actually poised to (insert promising real estate info here).” What a great way to be able to react to someone who asks a question or makes a statement that may not be rooted in all of the facts. "This is actually something that we track internally and for the last (insert number of months, weeks, years) our data tells us that this is the average, or this is what you can expect". How great would it be as a real estate investor to hear a company respond to your questions or concerns in that way? Rather than being ridiculed for your questions or made to feel like your questions are sill and unimportant, you actually hear someone give you real information from on the ground.
3. Forget all the "Lists" and stick with Due Diligence
I have a problem with lists. Why? Because anyone can make one up for any reason what so ever. Case in point - The Memphis Grizzlies were recently named as the "Best Franchise In Sports". It was a pretty reputable magazine that made the list too. I LOVE the Memphis Grizzlies. They have given this city a great reason to cheer and the smiles they bring to the city with all of the outreach is incredible. But, even I cannot go along with the Grizzlies being named "The Best".
When it comes to real estate, there are reasons people put out lists. To get attention. Lists are like data and if you release it, you are looking to get media exposure or worse...to get paid. The simple truth is that many lists in real estate have no real value. You will see cities get ranked as the best of this or the best of that and all calculated with proprietary formulas. It could be that someone's girlfriend's parents live in a city and now that city is a Top 5 for real estate investing...using a proprietary formula of course. There are worse examples to go into, but I think you get the point.
The due diligence that you do when buying real estate counts for a lot! You need to meet vendors. You need to inspect cities. You need to understand financial data and ask for back up to the data you receive. As real estate investors, we need to spend out own time researching and asking questions and then let the experts that we surround ourselves with help us make good decisions. Simply hearing that a market is good or reading about a market on line or elsewhere, is not good enough due diligence.
It should go without saying that honesty and integrity are important in this business. Unfortunately, like many industries, there are characters in real estate that will try to lead real estate investors in the wrong direction. They will make up facts or twist numbers that say one thing to mean another or worse; try to steer you in one direction instead of another because it fits their personal agenda. So pay attention to where you get your data and your information on markets and companies as well as the over-all health of the market. Use multiple sources and do your research and always remember to take nothing on faith until you've built a solid relationship.
Follow those tips and you should be fine!
Do you feel like you’re up-to-date on money matters? Are you prepared to make the most well-informed financial decisions possible? Please share your answers in the comments.