Are You Focussed On Your Gist?

[our obsession]

The times I have found myself reliant on sheer emotional/gut instinct has bought me some property deals, well under market/asking price.

Not that I don't do due diligence, I love to research, learn, ask, study...even been known to crunch some figures within my ahem, slightly modest mathematical skill-ability.

I am still trying to define, or kinda narrow this particular emotion down, but it is very quick, very strongly developed and finely tuned. Not just used for property investing either.

Anyway, was interested to read this:

Deal Or No Deal? The Role Of Emotions In Negotiating Offers

16th Oct 2008

Source:
Barbara Isanski
Association for Psychological Science

Excerpt: "We all negotiate compromises every day, but it often seems that certain people always get their way. Do these skilled negotiators simply go with their gut instinct every time or are they just extremely calculating, figuring out all possible outcomes before settling on the best option? Behavioral studies have shown that emotions play an important role in decision making. However, it was not known to what extent our negotiating skills depend on our emotions."

Link to article:

http://www.medicalnewstoday.com/articles/125670.php

 

[wylie]

The times I have found myself reliant on sheer emotional/gut instinct has bought me some property deals, well under market/asking price.

Not that I don't do due diligence, I love to research, learn, ask, study...even been known to crunch some figures within my ahem, slightly modest mathematical skill-ability.

I think gut instinct is a very strong, usually reliable instinct. We use it to vet tenants, and it is our first and foremost way of judging a potential tenant. Many people will be absolutely horrified by this, but in 30 years of finding tenants it has never let us down. The couple of times we have had problem tenants have been when we have needed cashflow FAST and have gone against our initial gut instinct, instead of passing and waiting for a better "feeling" applicant. This has lead to less than one handful of problem tenants over all that time, so I believe in listening to my "gut instincts".

Regarding due diligence, does taking the dog for a walk and coming home with a house bought at auction count?

 

[our obsession]

Wylie:

Regarding due diligence, does taking the dog for a walk and coming home with a house bought at auction count?

LOL! Yes mate, it does in my definition, I was only headed to get an icecream and bought a house.

 

[katy1111]

Interesting. I can see how trusting your instincts when you are ''judging'' people would work well. Our brains take in a lot of information about them very quickly based on all we can see of them and hear from them, ie hair, smile, clothes etc... Also it would be interesting to know, what percentage of the population are generally good people, I suspect that is most of the population if they feel they are being treated fairly.

But I find it difficult to understand how our emotions could help us make good decisions about a product or deal. I will be reading to see if anyone comes up with ideas about this.

 

[our obsession]

Katy1111:

But I find it difficult to understand how our emotions could help us make good decisions about a product or deal. I will be reading to see if anyone comes up with ideas about this.

I feel the same way sometimes, so much to learn, but it's also fun ya know? I love the learning-stuff.

 

[BayView]

But I find it difficult to understand how our emotions could help us make good decisions about a product or deal. I will be reading to see if anyone comes up with ideas about this.

I start off being fairly emotionless about a property or a business, but when it becomes painfully apparent after crunching numbers that it's going to make money; I find it hard not to get excited.

Conversely, if there is no feeling like this and a little doubt; it's all off.

So I think there needs to be a little bit of emotion, otherwise you probably wouldn't ever get excited enough to pull the trigger.

 

[kum yin lau]

Hi, i used to call it the little voice. It was so seldom wrong. It prompted to check out Aussie commercial property while I was very busy running a business overseas. I was really irritated because it kept reiterating 'check commercial check commercial'. I snapped 'How?' And it said 'www.realestate.com.au'

I shortlisted 5 & the top of the list was Belair Rd 4 shops + 1 residence. Today redeveloped with Cheesecake Shop & KFC or some such tenant. Worth maybe 2m.

2nd one was 45 ...rd Highgate

#3 was the one I wanted to buy.

Commercial property went through the roof next year & I asked how did the little voice know. The answer is below if anyone is interested.

A hunch - also known as intuition - is really subconscious knowledge. Note it is real knowledge. Usually empirical.

From high school science, I remembered empirical is measurable & observable.

Aha, that was a ka-chg moment. What did the eyes see that the brain registered but I didn't realise I knew?

All over the city of Adelaide, if one looked up, one'd have seen cranes. It went on from 2000 to 2005 & beyond. They were busy converting towers of former office buildings into apartments.

So therefore commercial space would be squeezed. Any wonder that next year commercial property went berserk?

I'm not too bad. I did pick up 2 for little more than a song but sigh! I could have bought 184 Wright St had I trusted that little voice more.

Unfortunately, I can't command little voice to come to me.

I'll go for ice cream everyday from now on.

Share with y'all how I bought a property for sub-division. My former PM told me they [the govt] signed the MOU to move the sailing club to the Swinging Basin. We brought out the street directory & drew a circle near where the new ramp would be. Then we went driving around the area. I saw a handmade for sale sign in the window of 2 derelict shops.

The rest is history.

Did I really have that much fun with property investing?

KY

 

[Loki]

Hi. Lurking for little while, time to join. Saw another group here, smart people that do stupid things. I'm one of those stupid people that do smart things sometimes. Thank god for spell checks too. lol.

Investing all instinct (gist?) for me. I don't know what population growth means, good or bad, more or less than other places? 10000 new people moving into town in next two years. How many too other towns? These people have money for rent, for buying? Too hard. Don't know if one tenants job more stable than other tenant. Know some things tho. Try to learn more, pay attention but forget sometimes. Just bought some blocks of units, make them better, sell some and pay off loans. Twelve units left now. Better than shift work, lol. Renovate so price better faster, not wait for other people to make price better. Sometimes other people make price worse. Sharemarket gone down from other people.

 

[kum yin lau]

Hi, me again. The troublesome little voice has been saying look @ stocks. I just realised that it's been going on for 3 weeks. But it also occasionally said I have a lot of time & can watch & wait.

Today I realised I'm not quite as emotional as I thought. Method in the madness. I put together a list of big cap stocks & ended with 62 to investigate further. I'll look at the P/E ratios next.

So I do analyse & quite mathematically too but to tie in with this topic, the seemingly unscientific hunch beats the crap out of any analytical method.

It might be a good idea to stop irritating property investors & look for a shares forum!
KY

 

[our obsession]

Another interesting read, (found while waiting for a flight @ Tullamarine, sipping on my Idealist-Left- Wing-Latte) :

(from Australian Institute of Management November/December 2008)

http://www.aim.com.au/DisplayStory.asp?ID=690

Better, Faster Decisions

"The ideal of lengthy, considered and purely rational decision making is not only unattainable but unworkable, says Dr Ken Hudson. You've got to keep the emotion in.


Frank Lowy, self-made billionaire and co-founder of the Westfield Group, was recently quoted in BOSS magazine saying, "I don't need long interviews to hire staff. I can sum up in five minutes whether I will be able to work with someone.

This insight prompts a number of interesting questions which beg investigation. Can important decisions be made quickly? Does 'quickly' lead to better decisions? Is it a special skill of the gifted few?"

Then considers:

(Quote)

1.The more important the decision, the longer a manager should take in making it. It is better to wait and consider all possibilities rather than make a hasty decision.

...and

2. The more a decision is grounded in reason and logic, the greater the chance of success. At all costs the rational manager should avoid making decisions based on emotion.

Works through the slow decision=slow learning, then talks about Ideal is rarely achievable...

....and finishes up with the bit of a conclusion:

Emotions are essential
The emphasis on reason in making decisions is misplaced according to Antonio Damasio, neuroscientist and author of The feeling of what happens. In fact, he believes that "emotions turn out to be essential to our rational decision-making processes. If we didn't have those gut responses, we'd get caught in an endless cycle of analysis, drawing infinite pros and cons lists in our heads."

The realisation that emotions are vital in good decision making is also reflected in the growing interest in the role of intuition (see research psychologist Gary Klein's 2004 book, The power of intuition). The more experience a manager has, the more they tend to rely on their intuition to make decisions. This is both rapid and can happen without conscious thought. Although it has its shortcomings, some combination of intuition and rational analysis may be the best way for managers to make decisions in uncertain and fast-moving times.


It can certainly be argued that two of the most cherished beliefs about decision making are not only outdated, but perhaps were never appropriate. The ideal of the rational, logical, objective decision-maker is not only unattainable but unworkable.

Managers are human and make decisions for all sorts of reasons; sometimes these are correct and other times, not so. The most important attribute, however, is to keep making them. And as Frank Lowy and Richard Branson suggest, trust your judgement and make decisions fast!

Gotta say it all fascinates me, well worth the read of entire article/context, found myself another couple of books to collect, and my first ever venture into latte land, (ie coffee shop) was absolutely delicious!
Cappuccino's are out, latte in.

 

[plusnq]

Thx for this.

Cheers

Shane

 

[Perp]

Wow, so exciting to see Gary Klein mentioned in mainstream media! I used to consult in industrial design/interface design, and read many of Klein's academic papers about naturalistic decision making. It is a very interesting field of study indeed.

 

[BayView]

It might be a good idea to stop irritating property investors & look for a shares forum!
KY

No, I reckon we need a section here called "The Shares Bit".

Hopefully we'll get someone in there who hasn't been raped this year.

Hands up any share investor who has a pos cashflow share portfolio - only shares and without including any other income to cook the books.

 

[LynnH]

Marc

I'll stick my hand up. Our share portfolio is CF+ - we only ever buy with cash! (Margin loans scare me big time!!!)

Wish I could say the same for the CG part of the equation!

Cheers
LynnH

 

[BayView]

Marc

I'll stick my hand up. Our share portfolio is CF+ - we only ever buy with cash! (Margin loans scare me big time!!!)

Wish I could say the same for the CG part of the equation!

Cheers
LynnH

Good work.

Yeah; you can keep your margin loans.

Have you ever considered using a LOC to buy shares?

This is where my mind is at; we have a LOC, but I would only ever use a small % of the available funds for shares - say; 10%.

 

[LynnH]

Marc

Yes, we have considered using an LOC to buy shares. We have a couple of LOCs secured against our PPOR that we use for 'opportunities' as they arise. Will probably use one for some share purchases when the equities market looks to have bottomed (whenever - if ever - that may be! )

I agree with you about using only a small percentage of your available funds to purchase shares - 10% sounds about my comfort level there, too.

Funny, it must be a 'mental thing' - I don't have a problem borrowing large amounts of $$$ for property purchases, but am totally, boringly, ultra-conservative when it comes to shares. Hubby would probably vote for a bigger portion, but I keep telling him I'm too bl@@dy old to have sleepless nights!

Cheers
Lynn

 

[kum yin lau]

Hi people specially Marc & Lynn,
I'm seriously seriously thinking of buying shares with a loan secured by my commercial property. Around $200000. And before anyone scare the #@$% out of me, that's only a small portion of what the property's worth.

Anyone has any -ve vibes about QBE? I'm targetting around $20 if I'm lucky. I missed BHP @ $23 ten days ago. But if it comes back to that price, I might buy it too.

I'll buy in $50K lots. Probably 3-4 companies. QBE, BHP, MACQ GP then mid caps & small caps. Boom Log caught my eye today. Probably Argo if I can get it around mid $4. IPL & a couple of other cheapies.

My time frame is 5 years.

I'll pay attention to comments even if I choose to follow my little voice.

Thanks,
KY

 

[BayView]

Hi people specially Marc & Lynn,
I'm seriously seriously thinking of buying shares with a loan secured by my commercial property. Around $200000. And before anyone scare the #@$% out of me, that's only a small portion of what the property's worth.

Anyone has any -ve vibes about QBE? I'm targetting around $20 if I'm lucky. I missed BHP @ $23 ten days ago. But if it comes back to that price, I might buy it too.

I'll buy in $50K lots. Probably 3-4 companies. QBE, BHP, MACQ GP then mid caps & small caps. Boom Log caught my eye today. Probably Argo if I can get it around mid $4. IPL & a couple of other cheapies.

My time frame is 5 years.

I'll pay attention to comments even if I choose to follow my little voice.

Thanks,
KY

Hi K,

I don't think the zeros on the end are the issue; it's all about the percentages.

For example; $200k for me is way too much stress for shares at this stage in life, but for a property it is small fry now.

So, it comes down to how much you can afford to lose - as a percentage of your wealth. Of course, you are not expecting to lose anything, but the worst-case scenario always needs to be addressed.

I don't have any shares knowledge, but my mindset is a bit like Chilliaa's. He seems to be focused on the value and performance of the core business, irrespective of the share price (in this current climate).

To me, if you can find a good solid core business, with a really low share price and healthy p/e ratio, then despite the climate, it should be good buying for the longer term.