Although going through a strong objective analytical method helps analyze a deal, we cannot disregard the “gut” or the importance of the intuitive subconscious feel.
The internet makes accurate commercial real estate related data easy to find, quickly. Market vacancy rates and rents, potential cost of capital, cap rates, appreciation rates, comparable sales information and detailed demographic information are examples of stats that are always click away. Accordingly, armed with a variety of processes and methods, real estate players can analyze a decision a million different ways—which can be helpful or hurtful. For it to be helpful, thorough objective analysis needs to be a component of the process, but not the complete process. Don’t get so bogged down with analysis that you don’t take the time to understand what your subjective feel or “gut” is telling you.
It’s hard to do. And, it will become harder. As people put more data on the internet, we are constantly nudged to rely more computers make decisions for us. On the iphone, there are plenty of apps that will tell you where to go to dinner, play golf and “connect” with. When a computer makes the decision, your subconscious is not consulted.
Recently, I read some of Malcolm Gladwell’s book, Blink: The power of Thinking Without Thinking, Gladwell argues that spontaneous decisions are as good as—or even better than—calculated/planned decisions. He goes on to explain that the experts opinion can be corrupted by what he or she dislikes, likes, prejudices, stereotypes, and the overload of information.
Another words, if all of your formulas, ratios, and spreadsheets are saying that the deal is a good deal; however, the silent voice inside is saying “No,” trust yourself and pass on the deal. That said, if your “gut” gives a resounding “GO,” do it or someone else will.