Quantitative Versus Qualitative Real Estate
February 2nd, 2009 categories: For Sellers, Rants & Riffs
I am reading a book about Warren Buffett’s life called “The Snowball”. I haven’t counted the pages, but I am on page 300 and not yet through a third of the book. It was a Christmas gift from my mother-in-law and, at first blush, I thought it might be a boring book. Nothing could be further from the truth; Mr. Buffett has led a focused and very interesting life. His initial focus on finding companies that were statistically very, very good buys served to make him a very large fortune. In his thirties, he shows his genius by his willingness to invest in companies that may not have the quantitative numbers to justify investment, but they had something that was immeasurable (qualitative) that brought current and future value to the table. How does this apply to investing in Honolulu real estate?
Certainly, there are aspects of every real estate purchase the can be quantitatively measured and placed in a spreadsheet. Things like: active, pending and sold prices; cost per square foot; capitalization rates; median prices over the last 2 years; average prices on the entire island; days on market; remaining inventory and much more. But there are other aspects that harder to get your arms around: quality trend of a neighborhood; quality of neighbors; the amount of street parking available and/or being used; community perception of an area; which areas in a community are considered good or bad; what social trends are occurring that could impact values; how much noise is present on a Saturday night after 8:00 and many more.
Both quantitative and qualitative aspects are important to any property you buy. The spreadsheet stuff is easier to find and analyze. The qualitative generally requires experience and methods for discovering elusive information. As a broker with 26 years experience in real estate, I can provide you with an endless supply of numerical information to confirm a price (many other agents can do this too). My real value lies in my understanding of the wisps of smoke that provide many of the qualitative measurements that can support the value in a decision. If I don’t have the information, I know proven ways to discover answers to questions that don’t reside in the statistical analysis.
Here are a few lessons.
1. An experienced real estate broker should bring hard and soft information that will help a client make good decisions.
2. When hiring a real estate agent, it is important to like and trust them, but be sure they can provide the necessary information to help make good informed decisions.
3. There may be value (or future value growth) that cannot be quantified with hard numbers.
4. It is important to add both types of information to your decision making process.
As always, feel free to call me at 808-737-2093 or 877-737-2093 to discuss your questions or concerns.
OTHER POSTS WORTH READING.
Loans For College Condos
The Value Of A Realtor
Realtor Code of Ethics
Determining Offering Prices
Pricing Your Home
Long Term Investment Makes Sense
Honolulu Schools
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