Research is King for Success in Investment

Posted on 9/05/2016  
Research is King for Success in Investment

By Terry Ryder

The most common mistake by real estate investors – and the biggest reason for the failure of investment strategies - is an unwillingness to conduct adequate research, according to leading property educator Trent Giumelli.

He says many people who attempt property investment or development achieve inferior results because they fail to understand the critical importance of research.

Giumelli, who runs the Giumelli Group, says there are many key elements to getting it right with property, including having clear objectives, adopting the right vehicles for investment and getting the funding package right. But none is more important than basic research on the area in which you plan to spend your money.

He says: “Goal setting is important. Structure is important. Finance is critical. But research is king.”

Giumelli, a member of the Hotspotting Panel of Partners, says the investors who do best are those who regard investing as a business and are willing to spend money to make money. “If you’re looking at it any other way you’re doing it wrong,” he says.

Giumelli says nine out of 10 people fail to research properly through sheer laziness.

“Only about 10% of investors do the required research upfront,” he says. “They’re people who know where to buy and what to buy, and they want to know exactly what is going on in the target area.

“The rest, unfortunately, don’t do the hard yards on research. Some are lazy and some are arrogant. They use the ‘time poor’ excuse. They’d rather listen to their cousin at a barbecue or they’ll buy locally because it’s a touch-and-feel scenario and it’s easier.

“And that’s where a lot of mistakes are made. Very rarely do people get this right.”

Giumelli Group conducts education courses for investors, such as the Palladium Coaching Program, and has many years of experience in investment and property development.

It uses a multitude of platforms to conduct research, including realestate.com.au, hotspotting.com.au, Domain, Price Finder, CoreLogic, local council websites and the infrastructure.gov.au website.

“Some of these tools cost money but it’s always worthwhile spending the money,” Giumelli says. “It’s false economy not to spend on research. If you don’t, you’re relying on luck to get it right.

“A relatively small outlay on research can potentially save you tens of thousands of dollars.”

Giumelli recommends that investors complement Internet research with speaking to as many people as possible in the target market.

“One of my favourite sayings is that ‘your network is your net worth’.

“You should be phoning people and speaking to them directly – calling local agents, valuers, property managers - people who know their local area and its property market.

“I have always done this. It’s important to read all the research reports but there’s no substitute for local knowledge. You will always get valuable first-hand information from people in the trenches, who are doing business every day in that local market.

“It’s always good to forge friendships and relationships with local people in the areas where you want to invest. If you are open and honest with people, they will give you a bit of their time. Most people are afraid to call professionals, whether through lack of confidence or fear of being sold to, but it’s important to get over that fear.”

Giumelli says a research website may provide a vacancy rate for the overall market in an area but talking to local professionals may reveal different situations in sub-markets – such as high vacancies for four-bed houses but low or zero vacancies for one-bedroom apartments.

"Another method I use is visiting the target area and speaking to local business owners. I speak to the locals who know what’s going on – doctors, shop owners, local councillors - I even go to the local police station and ask about crime rates.”

And Giumelli’s final word of advice is this: “Don’t get bogged down in ‘paralysis by analysis’. You need to do the research but at some point you need to make decisions and take action.

“They say that knowledge is power, but I say that applied knowledge is power. If you’re a doctor and you don’t practice medicine, it’s just useless information. It’s the same with real estate knowledge.”

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