Categorization and classification are deemed integral activities by humans to organize complex ideas and objects for simplification and to get better clarity of the world around them. The acquirement of skill equips humans with efficiency to deal with the tasks at hand. But in the due process of learning, debates arise about whether having dexterity is a result of innate talent, or a calculated analysis to master it. This dilemma has been posed in the world of real estate and how to label the work of a realtor- Is successful property investing an art or a science?
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The adept choice of investing in a property is a result of amalgamating the skills acquired by scientific analysis, and the creativity instigated in our minds as a form of art. The truism around proficiency in investing goes, “Good investors know the science behind real estate investing, while great investors have mastered the art form of that science.” If one has ever looked into the nitty-gritty of learning a performance art, the path to acquiring the skill is navigated by having knowledge about the resources around you, subsequently, moving around by making considerate steps that require coherent strategies to equip the skill. This proves that craft is an integration of art and science- indeed, the amount of analytical approach can be infinitesimal. If the goal is to make money, having a scientific mind is essential for a lucrative turnover from investing in property.
Planning is the detailed and optimal utilization of the available resources for the execution of tasks. The biggest names in real estate investors like Donald Bren, Sam Zell, and Leonard Zen were not only because of the play of fate but deriving huge money requires the quantitative aptitude to measure and calculate risks and financial success. Mathematical formulas allow for the analysis of recorded investment, and statistical analysis provides a technical examination of the target at scrutiny.
The reason why conflicting grouping of property investing into divergent groups arises is because of the different approaches investors undertake while determining their business moves. Based on this, we divide them into:
- Passive Investor: who buys properties at the spur of the moment, and relies heavily on their emotions, and gut feelings regarding a property, spending minimal time to go through the due diligence regarding the investment. They aren’t interested to learn about the intricacies and allow their emotions to impede their investment decisions, which can lead to failure in their venture.
- Analytical Investor: Converse to passive investors, they believe in a thorough analysis of the data, completing due diligence, learning about the market, and building a property portfolio for a viable transaction; because of this, this can take over a long period of time.
- Active Investor: they allow the interplay of their cognitive sides, along with taking help from experts in the field who are accomplished in their understanding of the complexities in the market, and the ideas around the functioning of finance, which saves the investor time.
While relying on data can be the most optimal method because it facilitates an understanding of the current scenario, and a projection toward future trends, there are two problems:
- Data cannot be reliable, meaning that the collated data can be incorrect frequently, either because of the methodology used to collect data or because the collected information can be outdated. It is reported that “the most widely published data — median price data — is extremely untrustworthy.”
- Different Interpretations of the data and experiences can be subjective.
As a solution, a thriving investor requires synthesizing the imagination opened due to the experience, which creates an artistic framework, as well as calculative decision-making by understanding the statistical configuration as an extensive study is akin to a fortune teller to a good extent. To make the most informed choice, perspective and data go hand in hand. We enjoy a coerced categorization, but what if it cannot be simplified into one, but has attributes of both? At a high-stakes game, expertise prevents downfall. The knowledge acquired over the course of years by professionals enables them to consolidate their intuition. Thus, for an active enterprise, we need active cooperation from both parties.