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If you have a background in marketing or if you have just started to dig around in the world of property investment, you may have stumbled across the term \u2018halo effect\u2019. This halo effect can be a trap for investors because rather than choosing an investment opportunity based on research and objectivity, people can often make decisions based on bias or familiarity.\u00a0Peter Gionoli<\/strong>\u00a0from Investor Assist explains the financial implications of the wrong halo effect.<\/p>\n <\/p>\n Kevin:\u00a0 <\/b>Peter Gianoli is the General Manager for Investor Assist and is a property marketing and investment expert, and he\u2019s talking to me this time about the halo effect.<\/p>\n Peter, thank you for your time.<\/p>\n Peter:\u00a0 <\/b>It\u2019s a pleasure, Kevin. Nice talking to you.<\/p>\n Kevin:\u00a0 <\/b>Firstly, tell me, what is the halo effect?<\/p>\n Peter:\u00a0 <\/b>Well, I suppose the halo effect has two parts. Number one, it\u2019s probably better known where if you have a look at a property hot spot, where people are constantly looking for property hot spots, the halo effect is the impact of that particular hot spot in and around suburbs around it. So you get a glowing effect of the halo not only from the hotspot but in suburbs around it, and as a property investor, there are opportunities there that are presented.<\/p>\n The other aspect of the halo effect is we all have preconceived ideas. It\u2019s a typical marketing scenario, where each of us have already made up our mind often because of conditioning. So you already have a preconceived idea that the best football team Australia is Collingwood as opposed to, say, the West Coast Eagles, so therefore everything you see regarding Collingwood, you take on a positive message, or it could also be no different to if you\u2019d bought yourself a red car, then you go outside and all of a sudden you notice red cars all the time.<\/p>\n Kevin:\u00a0 <\/b>Yes, it\u2019s awareness.<\/p>\n Peter:\u00a0 <\/b>If you have a preconceived idea to something, that can have an impact on how you make an investment.<\/p>\n Kevin:\u00a0 <\/b>Well, let\u2019s relate this to property, then. What are some of the biases or familiarities or beliefs that we have that sway us in property?<\/p>\n Peter:\u00a0 <\/b>It could be house versus apartment. Certainly in Western Australia, apartments are new. The only people who lived in apartments \u2013 or flats, as they were \u2013 in the 1960s, \u201970s and \u201980s were people living in housing authority blocks of flats, so there is a bit of a stigma around with the empty-nester in Western Australia as an example with houses versus apartments. You\u2019ll hear \u201cDon\u2019t touch an apartment, you have to have a house.\u201d That could be true; it might not be true.<\/p>\n Kevin:\u00a0 <\/b>Might not be true, yes.<\/p>\n Peter:\u00a0 <\/b>New versus established. Do you want new, do you want established? Well, it could be as gruff as \u201cOh bloody hell, you can\u2019t trust builders, so you have to buy established.\u201d<\/p>\n In Perth, it\u2019s north of the river, south of the river. I know it\u2019s eastern suburbs, western suburbs in certain localities.<\/p>\n Kevin:\u00a0 <\/b>North and south, yes.<\/p>\n Peter:\u00a0 <\/b>Positively geared, negatively geared.<\/p>\n Kevin:\u00a0 <\/b>That\u2019s a good one, positively geared or negatively geared.<\/p>\n Peter:\u00a0 <\/b>Yes, some people have heard somewhere along the line that it really doesn\u2019t matter whether they charge you for a guaranteed rental return and put it onto the price, but it\u2019s positively geared or negatively geared, it\u2019s going to cost you a bucketload, but I\u2019ve heard negative gearing is a good thing, who knows.<\/p>\n Or public or private education, furnished or unfurnished housing. Are we next to private schools, are we next to public schools? Should we buy something that\u2019s already furnished or unfurnished? These are some preconceived ideas.<\/p>\n Kevin:\u00a0 <\/b>What about some of the common phrases in real estate, like \u201cLocation, location, location,\u201d or even \u201cBuy the worst house in the best street\u201d? Do these fall into that category?<\/p>\n Peter:\u00a0 <\/b>Yes, most definitely. I think \u201cBuy the worst house in the best street\u201d is probably one of the biggest ones, because if it\u2019s already the best street, the value is probably already at its max and you\u2019re actually paying too much for the worst house in the best street.<\/p>\n Kevin: \u00a0<\/b>Yes, that\u2019s true.<\/p>\n Peter:\u00a0 <\/b>Particularly if you compare it to, say, the best house in a lousy street. You might have paid far too much, so that\u2019s one in particular that goes. And of course, \u201cLocation, location, location\u201d at the wrong time could be a lousy investment.<\/p>\n Kevin:\u00a0 <\/b>I suppose there are many others, too, even locations close to the CBD or even easy access to the CBD.<\/p>\n Peter:\u00a0 <\/b>Yes.<\/p>\n Kevin:\u00a0 <\/b>These are all preconceived notions, aren\u2019t they?<\/p>\n Peter:\u00a0 <\/b>Yes, absolutely. I\u2019ve seen properties that are very close to the CBD could be termed good location in that regard but are actually on a busy freeway or a busy road, next door to a petrol station.<\/p>\n Kevin:\u00a0 <\/b>I imagine this halo effect could be used to great advantage by spruikers.<\/p>\n Peter:\u00a0 <\/b>Yes, and that\u2019s what we see. That\u2019s the sad outcome. If you already know what people have preconceived ideas to \u2013 and it\u2019s not difficult if you have a room full of middle aged empty-nesters, and particularly if you know your market \u2013 then there\u2019s a chance if you\u2019re in Western Australia that if you pushed housing, new, with a very reputable builder, north of the river, that\u2019s going to get you your tax back, and maximum depreciation, they\u2019ll all rush to it and say yes, even though they haven\u2019t done any research on the market, the area, the suburb, and the type of dwelling.<\/p>\n Kevin:\u00a0 <\/b>It\u2019s an interesting subject; it\u2019s one that we should be very aware of. Peter, it\u2019s been great talking to you, thank you. Peter Gianoli is the General Manager of Investor Assist, and you help guide people through this maze quite often. I imagine this is a question that\u2019s asked of you as well on many occasions, Peter.<\/p>\n Peter:\u00a0 <\/b>Obviously, the question on everyone\u2019s lips is \u201cWhat should I buy?\u201d because no one wants to look foolish. It\u2019s good if they ask the question, because then you can take them through what all the fundamentals are with property investment, but if they\u2019ve already fallen in love with something, they generally convince themselves that it\u2019s a good idea, and then they\u2019re looking for just those buying cues that reinforce their decision.<\/p>\n Kevin:\u00a0 <\/b>Peter, great talking to you. Thank you very much for your time.<\/p>\n Peter:\u00a0 <\/b>A pleasure, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":" If you have a background in marketing or if you have just started to dig around in the world of property investment, you may have stumbled across the term \u2018halo effect\u2019. This halo effect can be a trap for investors because rather than choosing…<\/p>\n","protected":false},"author":176692473,"featured_media":8508,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,10,11,13,36,22,25],"tags":[101],"class_list":["post-25291","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-research-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nTranscript:<\/strong><\/h4>\n