What role does ‘gut instinct’ play in property?

When you make decisions you think things through and tend to have a ‘gut instinct’ about whether the decision is right. Sometimes a decision might be based on instinct, rather than what the logic of our brain tell us.

‘Gut instinct’ or intuition accesses accumulated experiences in a synthesised way, so that judgments are formed and action taken without any logical, conscious consideration.

Think about when you’ve gone to view a property, you might instantly take a like, or dislike, to it from the outside. It may look old fashioned, ugly and run down from the outside and you may know from past experience that this is a good indicator, that the inside is likely to be in bad shape. So your ‘gut’ or intuition, tells you that, based on previously seeing neglected properties this won’t be for you if you don’t want to do any renovation work.

Yet another investor might be drawn to the ugliest properties, perhaps because based on past experience they can generate the highest yields and cashflow if they are in the right area and serving the right tenant type.  

These situations create an ‘emotional tag’ linked to a previous experience which influences decision-making, more than objectively assessing the pros and cons of a situation. This means that to protect decisions against bias, you first need to know when you can trust your gut feelings, confident that they are drawing on appropriate experiences and emotions.*

So when can you trust your gut during property investing?

We often push ourselves outside our comfort zone to achieve things we haven’t achieved to date. This can sometimes create the same sort of feelings of unease we feel when we are about to make the ‘wrong’ decision.

So how do we tell the difference?

I talk a lot about Due Diligence, in essence doing the research and checking things out before making an investment decision. This can play an important role in helping understand if we are feeling uncomfortable because we are stepping outside our comfort zone or because there is a real cause for concern.

Role of Due Diligence on property investment decision-making

Before you part with any money, or sign any legal contract requiring future payments, then it is key that you carry out appropriate checks not only on your potential investment, but also on anyone you might be investing with and the professionals you might use along the way.

Whether that be visiting the local area and comparing comparable prices, rental returns, taking stock of the infrastructure, transport links, schools and health care or checking out a developer’s or builder’s reputation, as well as all the legalities.

So once you have checked things out and taken an objective view of the investment opportunity you can use this to supplement your subjective ‘gut instinct’ and check if the gut instinct is based on:

  • identical or similar situations and whether you have experienced this feeling sufficiently to know that the gut instinct is sound?
  • whether you learned the ‘right’ lessons in the past or are not remembering the situation accurately
  • over-reliance on someone else’s judgement to form your decision, who will have a different set of experiences and judgments.

There is a place for pushing yourself outside your comfort zone as well as using ‘Gut Instinct’ in property investment. The key is to use due diligence tools and techniques to introduce objectivity to the decision-making process and distinguish whether that gut feel of unease is because you are trying something new or because there is a genuine, logical reason for it.

If you want help on your property investment journey then get in contact +44 (0) 1932 849 536 or e-mail info@property-venture.com

My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the ‘right’ properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

* Strategic decisions: When can you trust your gut?” published by McKinsey Quarterly in March 2010 based on Nobel laureate Daniel Kahneman and psychologist Gary Klein work

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What works for you Commercial or UK Residential property?

The UK residential property market remains buoyant as a result of the various SDLT holiday extensions and the Furlough scheme supporting employees. Yet some investors have turned to the commercial property market to look for opportunities. Recent and further impending planning Class changes from 1st August 2021, relaxing the rules around converting many types of commercial buildings to residential, have meant investors are embracing the potential opportunities this brings.

UK Commercial and residential buildings

But the commercial property sector also has its inflated price challenges. And it isn’t just the private residential rental market where the government has imposed restrictions on landlords over evictions or seeking to claim unpaid rent. It is also in the commercial sector.

Although some restrictions are lifting like the Residential eviction ban was lifted on 31st May, there are other more lasting changes that will endure. For example new ‘breathing space’ laws, which might affect the types of tenants residential landlords want.

Whichever type of opportunity you are seeking, remember there are some enduring principles that work whichever the sector, particularly when it comes to due diligence.

UK Residential and Commercial Property: 6 Tips

Check UK Property Title

This is useful to do early on in the process, to look for Title defects or covenants and to get an idea of the pricing history, all of which is useful information shaping the decision on whether to invest and also with the negotiation stance

Right area?

Whether commercial or residential, this is important. If for example you are seeking to do a commercial to residential conversion, then it is important to check that the area has a sufficiently residential look and feel for. This will increase the chances the end product will work well and be profitable, either as a hold or sell-on opportunity

Sourcing requires similar skills and sources:

Agents – are useful in both sectors although the type of agents differ in their approaches. Commercial agents may talk more qualitatively about the building rather than the numbers, but all agents are motivated to conduct viewings to be actively promoting a property.

Direct to Vendor is a buying strategy for both sectors. For Commercial property tools like LandInsight and Nimbus are used for Land and commercial and can help when checking Title or identifying the owner to approach directly

Google Street views are powerful to show the history of the building for planning and to show how it has been constructed and extended over time.

Checking Property Floorplans

This is a useful technique for ensuring whatever planned building usage changes, the minimum space requirements are met for residential living

Property Tenant checking

Whilst this is important for residential properties, it tends to come at the end of the Due Diligence process. Whereas for commercial it is one of the first priorities to check out the tenant company. This can be done on Companies House if it is a Limited Company to ensure there is a robust income stream and business model to sustain rental payments.

Property Contractual terms

Are important for both residential and commercial sectors, but more so in commercial as the various Lease clauses change the nature of the contract significantly, more so than for a more standard residential Assured Shorthold Tenancy (AST) contract.

If you would like to talk about residential or commercial opportunities, whether that be Student Accommodation or Hotels then please get in contact or email info@property-venture.com

My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the ‘right’ properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

Disclaimer: Property Venture® has outlined information in layman’s terms to enable top line comparisons. Property Venture® is not offering advice. With regard to in-country legislation, letting licences and taxation laws, then you must take appropriate legal or taxation advice during your purchase process, at which time your solicitor or adviser will discuss with you up-to-date legislation and costs

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How to continue UK investing during lockdown?

There is so much uncertainty currently.

The Trump: Biden standoff, not only an unseemly moment for the USA but for Democracy globally.

Surrey Buy-to-let investment property

Due diligence can reduce uncertainty when investing in residential property by spending a significant amount of time researching and doing  analysis before jumping to site visits.

• Can the area deliver your target yields and capital growth aspirations?

•  If it can, is this likely to attract your ideal tenant type?

• And can you afford the type of property you want, whether it be freehold or leasehold, or number of bedrooms?

If you are in rush to beat a deadline, what about the sale status e.g. is there a chain? Has the vendor got other options which means they might be less flexible on price?

All of this before physical site visits, which – for me – are not only to view properties but also to see how professional the estate agent is when conducting the viewing. Are they adhering to best practice Covid guidelines? I tend to use this as a proxy for professionalism. If they’re professional during the sale, they are likely to be professional management agents and serve you well during a lockdown.

If you would like help finding the right buy-to-let properties for you then please get in contact.

My business focuses on helping time-strapped expats and busy business people who don’t have the local presence, or capacity, to acquire the targeted amount of properties for them. Property Venture® is an award-winning, Boutique property consultancy that finds the right investment properties for clients.

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