Investing in single-family rental homes is a burgeoning business. Investors increasingly turn to data to drive these purchases. Access to local multiple listing services (MLS) and pairing this access with algorithms helps select properties based on assets and location. Let’s examine how these real estate analytics will help investors in 2022.
Harnessing Real Estate Analytics for Informed Investment Decisions
Investors in real estate have always understood that real estate analytics is a critical component in determining the potential income of a property. These analytics are also used to evaluate the risks of a particular investment. A long time ago, standardized data fields for trading commercial mortgages were established. Today, those tools are increasingly applied to single-family rental properties. These data sets include rental income, occupancy rates, construction, and more. Technology allows an investor to get up-to-date information to inform their marketplace decisions.
Real estate analytics focused on the Real Estate Data Summit in New York City. Hosted by Cherre, a platform for real estate data, this summit presented tools and strategies for investors who want to shift from a focus on process to a focus on data. Using data helps with risk reduction and maximizing profits.
Essential Tools for Real Estate Investors
Dealing with data is a struggle for an independent real estate agent or a small firm. The real estate industry has been a slow adopter of technology, including real estate analytics. However, these user-friendly technologies make it easier for a person without a statistical background to get the data they need for making insightful and informed decisions about the future income and performance of a single-family rental property.
A real estate investment manager must consider the data most relevant to their situation. Data warehouses collect an incredible amount of data, and the available analytical tools make it easier to hone into what matters. Some trending data compiled and analyzed by these tools include energy and property systems, credit of tenants, neighborhood demographic changes, occupancy, risk of natural disasters, crime rates, zoning changes, insurance costs, and utility rate changes.
Real estate analytics allow investors to compare income to expense ratios over time and into the future. Using these tools can also help investors choose properties based on a risk-adjusted return or maximize occupancy at the current market rental rates. These tools also make understanding the demand for local single-family rental homes easier. Trying to handle all this information with a spreadsheet would be impossible, which is why all real estate investors should consider a powerful analytical tool.
As technology advances and everyday users start to feel more comfortable using analytical tools for real estate investments, the usefulness of the information will also grow. Each investor may need different data points to make decisions, and the ability to customize algorithms is vital. Algorithms that use AI through tracking activities and choices essentially learn the investor’s behavior and make predictions about what the investor will need in the future. Increased data collection and a wider variety of data points will also help investors take advantage of these powerful tools. Investing in single-family homes may not be as lucrative as commercial real estate investments. Still, the availability of enhanced data and analytical tools will help investors make the most of the performance of their assets.