Fact or Opinion? Capital Gain or Capital Pain?

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What’s the difference between fact and opinion?

Easy, right?  Everyone knows the answer.

Or not so easy?

And, what does this have to do with property investment?  A lot.  Let me explain …

Robert Kiyosaki really harps on this topic.  He says, you’ve got to know the difference or you could find yourself in serious financial trouble.  Capital gain or capital pain, which one do you prefer?

For instance, let’s take the following statement:

Historically, in Australia, house prices double every 10 years?

Fact or opinion?

Well, let’s see.  I’m going to boldly claim this to be a fact.

Why?  Because, I believe there’s enough data to substantiate this statement.  I believe you can find sufficient evidence to show that “historically” house prices in Australia – on average – have doubled approximately every 10 years.  So, I would go along with saying this statement is a fact.

There may be those who disagree.  There may be those who say, “My house hasn’t doubled in price in the last 10 years, so it ain’t no fact!”  But, that’s ok.  For the purpose of this discussion, I’ll go along with this statement and accept it as a fact.

In other words if a salesperson said, “Historically, house prices double every 10 years.”  I would accept this as fact because I’ve done my own independent research to verify this claim.  In general, I’d agree with this statement and be comfortable calling it a fact; not the salesperson’s opinion.

Now, what about this statement:

House prices will double in the next 10 years?

Fact or opinion?

Be careful here!

Have you ever heard this one before?  Ever heard this from a real estate agent?

Next time you hear someone make this bold statement, why not just ask a simple question as follows:

“Is that a fact or just your opinion?”

Then wait patiently for an answer.  Should prove very entertaining.

From the above dialog, you’ve probably worked out my answer … and you’re right.

This statement is an opinion.  It’s not a fact.  How can it be a fact?  Where’s the data to prove it?  We won’t have the data for 10 years!

The statement, “House prices will double in the next 10 years.” is an opinion based on the fact that house prices have historically doubled every 10 years.

Bottom line.  It’s still an opinion.  And, as a property investor, I need to be aware of that.

Is the sales agent going to give me a written guarantee saying the price of the home will double in 10 years?  Will the agent agree to pay me the difference if it doesn’t; and write this clause into the sales contract?

I haven’t been able to find an agent yet that would write in such a clause.  Have you?

Back in 2005, I wonder how many people in the USA mistook the following statements as fact:

  • Your house will double in value over the next 5 to 10 years.
  • No need to worry if the payments are high, your house will double in value over the next 5 to 10 years and you’ll make it all back and then some!

Everyone seems to love capital gain!  (That’s my opinion by the way.  There may be folks out there who don’t like capital gain!)  I do.  But, my investment plans must include a safety margin to ward off unexpected pitfalls; like a market downturn.  I love capital gain, but I must be prepared for capital pain.  I must set myself up to weather unexpected financial storms.

So, therefore, I need to understand the difference between fact and opinion, and not get them confused.  It could mean the difference between financial gain and financial pain.

If your property investment strategy is dependent on house prices doubling every 10 years, you may want to have a rethink.

It seems to me, a lot of people in the USA mistook this opinion as fact.  And, look how much capital gain they’re not getting these days.  Look how much capital pain they’re experiencing.  Not exciting.

Fact or opinion?

Knowing which is which could spell the difference between survival and death; success or failure; triumph or tragedy; capital gain or capital pain!

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