Current commercial real estate technology and real estate investment risk has always been at the forefront of every real estate investor. What are some of the false assumptions that investors make in assessing their investment risk, and what have we learned? Without proper evaluation of real estate investment risk, profits or strong ROI is just an illusion.
FALSE ASSUMPTION – Current commercial real estate technology is adequate to properly access real estate investment risk and ROI of real estate portfolios.
Current real estate technology to access risk and rates of return on real estate portfolios rely on assumptions that are based on general trends and prices that reflect past activity more than the property’s real future prospects. They tend to place insignificant attention on the location of the property and critical local-level Block Group factors that influence real estate markets. Therefore, because these systems often rely on expectations of future risks and not current real estate investment risk per-se, and returns based on the past market conditions, they need to be updated to comprise less accurate and less timely local-level trends and prices, that what any investor really needs.
All Real Estate Investment Risk is Local.
Local market conditions with various factors affecting supply and demand, and thus prices represent a major determinant of the risk associated with property ownership. When the local market conditions are stable, property investors tend to perceive the real estate investment risk and risk of property ownership as lower and, consequently, require a lower rate of return.
What is the best Real Estate Investment Property today?
Real Estate Investment Opportunities or Investment Property or even the Best Real Estate Investments, is easy to access, if, (IF) you have access to the latest real estate forecasts, latest leading economic indicators, latest real estate technology with real estate maps, and access to local growth to all the 367,000 markets….all updated at least monthly and/or quarterly. Once you have access to the core components or risk / reward, investing in just as simple as selecting the top local markets, and matching properties within these local markets, all in a few clicks.
In this context, the local economic factors, such as employment and income, have a major impact on the property ownership risk and the required rate of return.
This is so because local real estate markets usually move in tandem with the local city block economy. As a result, a prosperous local economy will entice property investors to consider a property located in a thriving market less risky, and, thereby, to require lower rates of return. The opposite would apply to properties located in the communities whose local economies are struggling. As a real estate investor, it is all about risk or gains. Profits or losses are from cash flow or future appreciation, is your ticket to profits.
With all this in mind, Growth Maps serves as an exceptional tool that integrates diverse economic and social-demographic variables so as to facilitate investor’s assessment of risk and rates of return on local markets AND property investments. It also provides local leading economic indicators that are more reliable than those applied by the current systems used to calculate required rates of return. Thus, Growth Maps is tool that can help investors select those properties that boast the highest return potential.
Begin challenging your own assumptions.
Your assumptions are your windows on the world. Scrub them off every once in a while, or the light won’t come in. Quote from Isaac Asimov.
The state of today s real estate market and our economy gives us the opportunity for 20/20 hindsight.
We can play the blame game, or let’s get lucky game, and dissect all that created the current state of affairs, OR we can learn from the mistakes that were made and choose to correct them where possible. As my blog addresses, one of the biggest mistakes was an information void that, if filled, might have alerted all participants about upcoming market trends and declines. Knowledge is Power, but only if used and if the data is current.
With the kind of information that Growth Maps makes available, we can roll back time and speculate that all past real estate losses, might have been greatly neutralized. More importantly, going forward in time, we can now use this magic tool to really focus on the variables that affect current and future value down to the block level.
For more information, watch our free demo video on our homepage, and download your FREE eBook titled: “What’s Next for Commercial Real Estate Technology: Leveraging Technology and Local Analytics to Grow Your Commercial Real Estate Business” at /free-ebook/
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