I’ve noticed something in the website analytics recently.
Some of the articles I’ve written about property investment are being read carefully by people working inside property investment sales businesses. Not just clicked and skimmed. People are spending real time on them, and it appears some of the material circulates as informal reading.
I like that. If something I’ve written helps somebody understand part of the market better, I’d rather they read it than not.
But there is a consequence.
Independent criticism is not necessarily a threat to a sales business. Sometimes it is useful precisely because the company doesn’t sell the thing being criticised.
If you sell off-plan apartments but don’t sell social housing investments, a detailed article explaining the weaknesses of certain social housing products can become useful ammunition.
And that gets to something investors often misunderstand about property sales.
The most effective sales arguments are not necessarily built from false information. They are built almost entirely from facts.
You don’t need to lie to create a distorted picture
There is a comforting way of thinking about bad property advice: somebody tells you something that is wrong, you check it, discover it is wrong and stop trusting them.
In reality, the better sales environments are rarely that simple.
A consultant might tell you that a particular social housing model has weak resale demand. That can be true. They might explain that a certain lease structure creates mortgageability problems, or that a particular investment depends heavily on one operator remaining in place. That can be true too.
Then the conversation moves onto the property they actually want you to buy.
Now you hear about rental growth, regeneration, undersupply, tenant demand, infrastructure spending and how quickly the previous phase sold. Those things may be true as well.
Nothing obvious has been fabricated. The problem is that two different standards of scrutiny have been applied.
The products outside the stock list have been examined for weaknesses. The product on the stock list has been examined for reasons to buy it.
That difference can be enough.
You can create a persuasive sales pitch without inventing a single fact. You need to be selective about which facts receive attention.
I know because I’ve done versions of it myself
I spent years working in property investment sales, and when you work in that environment you become very good at collecting information.
You read news stories. You follow interest rates. You learn what is happening in different cities. You know which developers are having problems, which schemes look expensive, what other companies are pushing and where the obvious weaknesses in competing investments sit.
A buyer tells you they are considering something elsewhere and you start pulling the argument apart. Sometimes you are doing them a favour. There are plenty of things I would have warned a buyer away from then and would still warn them away from now.
But you naturally become more forensic when analysing the thing somebody might buy instead of yours.
If rates rise and that makes another strategy less attractive, you talk about rates. If a news article undermines confidence in another market, it becomes a useful news article. If another company is selling something with weak mortgageability or thin exit liquidity, you make sure the buyer understands exactly why that matters.
And you may be completely right.
That is not always conscious dishonesty. Often it is what happens when somebody’s job is to sell a particular set of investments.
Incentives influence where you look, and where you look influences what you find.
True criticism is a very good trust-builder
This is why genuine criticism of the wider market can make a salesperson more effective.
Imagine a consultant spends twenty minutes explaining, intelligently and accurately, why three other types of property investment have serious weaknesses. They acknowledge risk, tell you things you didn’t know and perhaps even tell you not to buy something you were close to reserving.
Naturally, your trust in them goes up. They seem selective, knowledgeable and willing to criticise parts of the market rather than pretending every investment is wonderful.
Then they show you what they do recommend.
Some of the credibility created by the earlier criticism transfers to that recommendation. They were honest about all those other things, so why wouldn’t they be honest about this?
And they may well be honest about it.
That is the point.
The distortion does not necessarily come from dishonesty. It can come from asymmetric scrutiny.
One investment has been subjected to an attempt to disprove it. The other has been subjected to an attempt to explain why it works.
Those are not the same exercise.
Good information does not automatically produce good advice
This distinction matters because investors are increasingly good at checking individual claims.
They search the developer, look at rental listings, check service charges, read about the area and compare mortgage rates. All of that is useful.
But checking individual statements does not solve the problem if the statements were already true.
Suppose somebody tells you that Manchester has strong rental demand, there is significant investment going into the city, the development is close to employment and the UK has a housing shortage.
Every one of those things could be accurate.
You can verify all of them and still know surprisingly little about whether this particular property, at this particular price, for this particular investor, is a good investment.
You still need to know what comparable properties have actually sold for, how mortgageable the property is likely to be and who the natural resale buyer is.
You also need to understand what the service charge does to the real return, how much of the price is being supported by investor demand rather than the wider owner-occupier market, and what happens if rental growth is weaker than projected or you need to sell earlier than planned.
None of those questions necessarily contradicts the positive facts. They sit alongside them.
That is why a sales pitch can contain a lot of good information and still lead to a poor decision.
Information is not the same thing as analysis.
The test is symmetry
There is a simple test investors should use.
When somebody gives you a convincing criticism of an investment they do not sell, listen to it. They may be right.
Then ask them to apply the same standard of scrutiny to the investment they are recommending.
If they have spent ten minutes explaining why another product has a narrow exit market, ask who the natural resale buyer is for theirs. If they have criticised another property because it is difficult to finance, ask what the mortgageability looks like on theirs. If they have challenged another scheme’s rental assumptions, ask for the evidence behind their own.
And if they have explained why another investment creates operator dependency, ask what happens to theirs if the preferred operator disappears. It is the same distinction I wrote about in A Great Return Is Not an Investment Strategy: how much of the investment case belongs to the asset, and how much belongs to the operation around it?
The most revealing question is:
What would you say about this exact property if a competitor were selling it?
It is a variation of another question investors should ask more often: what would you recommend if your own inventory didn’t exist?
Both force the same thing. For a moment, the consultant has to step outside the stock list and analyse the investment without starting from the assumption that it needs to be sold.
Not everyone will give you a perfect answer, but the way they respond tells you a lot.
Real analysis has to be able to criticise its own shelf
This is the standard I think matters most.
Independent analysis should sometimes produce conclusions that are commercially inconvenient for the person giving it. If every conclusion points towards the same stock list, developer, strategy or service, eventually you have to ask how independent the analysis is.
That does not mean a company cannot believe in the investments it sells. Of course it can.
Some businesses specialise in particular markets because they understand them well. Some developers build very good property. Some operators create real value. Some sales consultants know far more about their niche than the people criticising them from outside it.
The issue is not specialisation.
If I criticise somebody else’s off-plan pricing, you should ask how I established fair value on mine. If I tell you not to rely on a guaranteed return elsewhere, you should ask what assumptions I am relying on here. If I tell you another investment has weak mortgageability or exit liquidity, you should expect me to apply the same questions to anything I recommend.
If my analysis cannot survive being turned back on my own recommendation, then it was not much of an analytical framework in the first place.
It was an objection-handling framework.
This is why incentives matter
People often think incentives only matter when somebody is deliberately dishonest.
That gives incentives far too little credit.
Incentives affect what gets researched, which risks receive attention and where somebody stops looking.
You do not need a meeting where everybody agrees to hide the bad bits. You need a business where revenue is generated when a particular product gets sold.
Over time, people naturally become good at explaining why the things they sell make sense and why competing options do not.
That isn’t inherently sinister. It is what commercial incentives do.
The important thing for an investor is understanding that the analysis did not emerge in a vacuum.
Independent analysis can be absorbed by the sales process
There is an irony here that I find funny.
The better independent analysis becomes, the more useful parts of it become to sales organisations.
If I write a strong article explaining why a certain type of investment has weaknesses, a company that does not sell that type of investment is perfectly entitled to agree with me. They may circulate it, use the argument or quote the same risks on calls.
And I would rather the investor hears a true criticism than doesn’t.
The problem appears when the analysis gets cut into pieces.
The criticism of everything outside the stock list is retained. The parts that would challenge the stock list are left behind.
At that point, independent analysis has not really changed the sales process.
It has been absorbed by it.
Which is why the answer cannot simply be “find better information.” There is already plenty of good information available.
The more useful skill is learning to ask whether the same questions are being applied in both directions.
A question to take onto the next sales call
The next time somebody tells you something persuasive about why another investment is flawed, don’t dismiss it simply because they are selling something.
They may be right. They may have given you useful information.
Keep the same standard when the conversation turns to their recommendation. Apply the same scrutiny to the price, mortgageability, exit, assumptions, incentives and any dependency on an operator.
Then ask the question sitting underneath all of it:
Would you analyse this property the same way if you weren’t selling it?
If the answer is yes, you may be hearing analysis.
If the scrutiny stops at the edge of the stock list, you are hearing something else. It may be intelligent, well researched and entirely factual.
But the conclusion was settled before the analysis began.