Using and Developing Your Intuition in Real Estate

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Last week I wrote a blog discussing three less talked about characteristics of successful real estate investors. The three characteristics that I outlined were intuition, adaptability and patience. I thought the discussion on intuition was intriguing and wanted to expound on the idea of using and developing intuition as part of your investing skill set.

Gary Klein, a research psychologist known for his work in the field of naturalistic decision making, found that under high stakes and changing parameters, people use their foundational experiences to make decisions and choose solutions. In this context, he defines intuition as the pattern-matching process that quickly suggests viable courses of action.

Whereas some would attribute intuition as a something more supernatural or a “gut instinct” (based almost solely on feeling), I think intuition is also learned and honed over time. This is especially true when applying the notion of intuition to a specific context – i.e. real estate.

Intuition & Real Estate Investing

I would assert that a real estate investor gains a more developed sense of intuition with regard to their investing business the more experience he or she has. Almost every real estate transaction is an opportunity to build a base of knowledge that continues to grow as your experience level grows.  Over time, your decision making ability improves based upon your experiences and subconscious knowledge of typical behaviors and outcomes.

For example – I had to make a decision today about a particular tenant applicant for one of our properties.  While an initial glance at credit and income appeared to be acceptable, there were certain questions about her story that raised red flags.  Some of the information she provided to our leasing agent was inconsistent.

When asked about the inconsistencies, she seemed to have answers, but our overall impression of the application was still cloudy.  In addition to this, the general behavior and tone toward our agent was a little unsettling. In the end, we decided to deny her application.

Do I know for certain that things would have turned south had we decided to let her lease our property? No. But I’ve worked with enough different personalities and circumstances over the years to develop a fairly strong sense of when to say “no.”  While much of this decision was based on what some would consider a “gut feeling,” the decision was still made from a standpoint of experience with other applicants/tenants over the years.

Everyone at some point in time has experienced that feeling of knowing the right answer, without the benefit of cold hard facts. Whether it was the decision to walk away from a particular investment or wait for another offer … some level of intuition is present in almost every decision we make.

In an effort to constantly improve my organization, I consistently discuss with my team the lessons that we learn from mistakes as well as accomplishments. In doing so, I believe we are creating a foundation of knowledge that will allow all of us to hone our intuition and decision making ability.

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About Author

Ken Corsini G+ is the founder of Georgia Residential Partners, LLC - a real estate investing firm based in Atlanta, Ga focused on creating turn-key investments for investors all over the country. He's been investing in real estate since 2005 with hundreds of real estate transactions.

2 Comments

  1. Great post. I like when you point out- do you know for sure things would have gone south? No. A lot of people can’t grasp something without concrete evidence. My take on it is, go with your gut even if no one else sees that something bad may come of whatever it is. Always do what feels right to you, while using experience and education to help you. Then, if things do go south, you don’t have to feel horrible about it because you know you did the best you could. If you bail out of something that turns out it would have worked out great, you don’t have to feel horrible about it because you know you did the best you could.

    In real estate investing, always make sure the numbers work, then check in with your feelings. If your feelings are good, re-run the numbers one more time and if they still check out, go for it. If your feelings are ever bad, bail. Who cares why.

    Although be careful about confusing feelings with over-analytical anxiety too. But you get my drift.

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