Governance Mistakes That Cost Saudi Investors More Than the Market

The losses investors blame on conditions and should blame on their own process: decisions nobody owned, reviews that never happened, and advice bought and then ignored.

When an asset disappoints, the explanation is usually external: the market, the tenant, the manager. Examine the file and the larger losses are almost always procedural. Nobody owned the decision, nobody reviewed it, the information was never verified, and the advice that would have prevented it was bought and shelved. Seven process failures that outweigh the cycle.

Why these keep happening

Property gives very slow feedback. A bad decision takes years to show up, by which time the market has moved and offers a ready explanation. That delay removes the link between process and outcome, so nothing is learned and the same process produces the next disappointment. The only reliable defence is to write decisions down at the time, with their reasoning, so they can be judged later on what was actually known.

1. No single person owning the decision

Where several investors or family members are involved, decisions emerge from conversations rather than being taken. Nobody is answerable, so nobody prepares properly and nobody reviews the outcome.

• Avoid it by: Name an owner for every decision, with authority and a written mandate, even where approval is shared.
• Proof it is closed: Each significant decision in the file names the person who took it and the date.

What it costs you: Slow decisions, assets bought on consensus rather than conviction, and no learning because there is no author to compare the result against.

2. No written record of the reasoning

Investors remember their conclusions and forget their assumptions. Without a contemporaneous note, a disappointing outcome cannot be diagnosed, because nobody can tell whether the assumptions were wrong or the execution was.

• Avoid it by: Write a short note for each commitment: what you expect, what you assumed, what would make this wrong, and when you will check.
• Proof it is closed: A one-page note exists for every asset, dated before completion.

What it costs you: Repeated mistakes, and arguments between partners about what was expected and by whom.

3. No scheduled review of an asset already owned

Attention goes to acquisitions, which feel like decisions, while holding feels like a default. An asset that no longer fits the objective can be held for years simply because nobody put a date on asking the question.

• Avoid it by: Diarise an annual review per asset that tests return on current value against the objective and asks the hold or sell question explicitly.
• Proof it is closed: A dated annual review exists for each asset, with a recorded conclusion.

What it costs you: Capital sitting in an underperforming asset through years when it could have been redeployed, which is the largest unrecorded loss in most portfolios.

4. Taking the numbers from the party selling you something

Rent assumptions from a broker, cost assumptions from a contractor, income projections from a promoter: each is prepared by someone whose interest is the transaction completing. Adopted without verification, they become the basis of your own model.

• Avoid it by: Verify every material assumption with independent evidence and keep the source and date against each line.
• Proof it is closed: Every material line in your model cites an independent source.

What it costs you: A case built on optimism, which fails in the first difficult year and cannot be defended to co-investors.

5. Buying advice and then not acting on it

The report arrives, confirms a risk, and the commercial momentum carries the decision anyway. The money spent on advice buys a record that you were told, which is the least valuable thing advice can do.

• Avoid it by: For each recommendation, record accepted or rejected with a reason, and have the decision maker sign it.
• Proof it is closed: Every report in the file has a disposition note against its recommendations.

What it costs you: The full fee for the advice plus the full cost of the risk it identified.

6. No threshold at which you stop

Without a predefined walk-away point, every new negative finding is absorbed as an adjustment. The price creeps up, the condition findings accumulate, the lease turns out weaker, and the deal survives because no single item was decisive.

• Avoid it by: Write the walk-away conditions before diligence starts and treat crossing one as a decision point rather than a negotiation.
• Proof it is closed: The walk-away conditions are dated before the first diligence report.

What it costs you: Transactions completed on terms you would have refused at the outset, which is how most regretted purchases actually happen.

7. Treating external advice as a one-off purchase

Legal, tax and regulatory positions are taken once and then relied on for years, through changes in residence, structure, the asset's use and the rules themselves. Advice has a shelf life that nobody attaches to it.

• Avoid it by: Date every piece of advice, list the facts it assumed, and refresh it with a licensed adviser whenever those facts or the applicable rules change.
• Proof it is closed: Each advice note in the file records its date, its assumed facts and when it was last confirmed.

What it costs you: Decisions and filings based on a position that has changed, discovered at the point of a sale, a transfer or a review.

A short check before you sign

• Every significant decision names an owner and a date.
• A dated reasoning note exists for each asset, written before commitment.
• An annual review has happened for every asset you hold, with a recorded conclusion.
• Material assumptions in your models cite independent sources.
• Every adviser recommendation has an accepted or rejected disposition with a reason.
• Walk-away conditions were written before diligence began on your last purchase.

If it has already happened

If the process has been absent, start with the assets you already hold rather than with the next purchase. Write the reasoning note retrospectively for each one, honestly, including what you now know, then run the hold or sell question on each. The exercise usually identifies one asset that should have been sold and one decision that should have been someone's responsibility. Then put the calendar in place. Where the reasoning touches legal, tax or Sharia matters, take the specific position from a licensed adviser or qualified scholars, and refresh it near the date you act, because the rules in this area continue to be developed.

Domira builds the numbers on a Saudi property with you before you commit: rent and cost evidence, condition and capital expenditure, the appraisal and the sensitivities that decide whether the deal survives a bad year. The investment decision stays yours, and so does the advice of your licensed tax and legal advisers.