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Real Estate Intelligence

by Andrew C. MacDonald on November 24, 2010

Intelligence is Only as Good as Its Source

Have you ever considered that advice is often worth what you pay for it? Have you ever noticed how broke people love to offer their investment advice? If you take that advice, then how intelligent is your intelligence?

Make it a practice to filter the advice you receive and take a second to note where that advice is coming from. If you’re getting fitness advice, ask yourself whether the other party is in great physical shape. If you’re getting financial advice, is the other person doing well financially? If you’re getting real estate advice, are they a person with a successful portfolio?

In programming there is a saying which is abbreviated to GIGO. The saying is “Garbage In – Garbage Out” meaning poor inputs can only result in poor outputs. When it comes to the information you need for real estate investing, this holds true. You should guard yourself against garbage information which will result in garbage results.

To make good decisions in real estate investing, you need good information. Rather than nodding in agreement to the hot topics and the less than brilliant advice often touted at cocktail parties, you need to be familiar with basic economic fundamentals and become a local expert in your target market. This is the philosophy behind the Real Estate Investment Network (REIN) and is why so many of its members are successful investors.

3 Levels of Real Estate Intelligence

I like to break down intelligence that pertains to my real estate business into 3 categories.

1) Economic intelligence

This is a broad overarching category that looks at macroeconomic indicators. Where is the overall economy headed? Is GDP growing or shrinking and for how long? What are interest rates likely to do? How about jobs, inflation or the dollar? The national economy has a large influence on local economies, so it is important to have a handle on the economic outlook at a national level.

2) Local intelligence

With a good grasp on the macroeconomic picture, the 2nd layer of intelligence offers some perspective. Local intelligence provides context and is what really allows you to make smart investment decisions. It is important to know what is going on where you invest, and anywhere you plan to invest. Even when national GDP is falling, there are individual cities and towns that buck the trend and continue to grow. Look for areas with above average job creation, in-migration, and investment in infrastructure as great places to invest. Within those areas, get to know the neighborhoods and identify those which have a suitable tenant profile and are poised to rise in value.

3) Portfolio intelligence

At the most granular of the 3 categories is your own portfolio intelligence. As you add properties to your portfolio, proper organization and record keeping become crucial. As an investor you can fly by the seat of your pants, or work within a well defined system. One path leads to stress and chaos, and the other allows you to have all the information you need at your fingertips. Do you want to spend your time improving the performance of your existing properties and acquiring new ones, or hunting for misplaced items needed to deal with an audit or your annual tax return? Having the info you need on each property in a well organized system will allow you to identify and deal with problems early on, be proactive in implementing new strategies, and keep any joint venture partners well informed.

Putting Your Intelligence to Good Use

Since intelligence is only as good as its source, you’ll want to ensure you have reliable sources for each of the 3 categories of real estate intelligence. Seek our credible sources of information for both economic and local intelligence, and be sure to implement dependable systems to track the details of your own portfolio.

Knowledge is power, but only when properly applied

Creative Commons License photo credit: jb2.0

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{ 2 comments… read them below or add one }

Joey Ragona November 24, 2010 at 11:38 am

So true Andrew, only take advice from those who have and are doing what you want to have and do. Period. The simplicity of success is that it leaves clues but many are timid to follow, but have formed their own expertise aside from what is actually real.

I commend you for realizing this. You will be one of the successful ones from which others can take advice.

Mike Gillespie November 24, 2010 at 9:40 pm

Awesome advice Andrew. Far too often people take advice from misinformed or inexperienced people. It’s sad really, as people miss out on so many opportunities by listening to the wrong people. Surround yourself with the people that are making it happen.

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