Thomas Sowell's 3 Questions

Thomas Sowell’s 3 Questions

When engaging in debates or analyzing policy decisions, economist Thomas Sowell recommends asking 3 important questions.  What are these important questions and how do they relate to the world of Real Estate and Real Estate investment?

First Question:  ...Compared to what?  

In economics and in investing appropriate comparables are key to being able to evaluate the strategy as a whole.  You may ask yourself, “is this a good Real Estate investment?”  Well, compared to what?  Are there other strategies that will net you a bigger return?  What are the values of other homes in the area?  Reducing tunnel vision, and taking a look around at the market can go a long way to ensuring success.

Second Question: At what cost?  

Investors will often have a good idea of the costs involved with the initial capital, ongoing maintenance etc., but are there costs that you’re overlooking?  Costs on your time and lifestyle might not be at the front of your mind when planning an investment, but we all know that these costs can be heavy.   Plan and budget appropriately.  The point in Real Estate investing is to add dollars to your bank account, not to add stress to your life. 

Third Question: What hard evidence do you have?  

In our experience, successful investments are the result of proper planning and data analysis.  How accurate is your estimate of the after-renovation value of the home?  Which key factors of market data are measurable, and which are speculation?  We work our team (brokers / contractors / legal) to get the hard numbers, and the most accurate data.  Having all the information always puts you in a position to succeed.

These questions all have the same underlying theme:  by digging a little deeper, and by looking at supplementary costs and considerations, you’ll be more prepared and you’ll get more out of your investment.   These questions allow you to have more realistic expectations, so you can remove some of the emotional ups and downs, and let the strategy work as it’s supposed to.

We’ve learned through our investments that by asking deeper questions like these, we’re able to eliminate speculation and use real data to get the most bang for our buck.  Some other types of investments can make you feel like you’re riding a wave.  Our team asks the important questions and does the work ahead of time to ensure that our investors rest easy.  Are you looking at your investments from all possible angles?  Maybe we can help you get a better perspective.