Real Estate Tips: Why You Should Care About Real Estate Data Science
Published by Jordan Girard on October 5th, 2020
Many investors and practitioners in real estate have long made decisions based on traditional data, a lucky hunch, and data from the past. Some of them may have even made decisions just because they got the “advice” from a fellow investor, friend, or “industry insider”.
When you are making important decisions based on limited data, you will discover the disconnect between the numbers you are looking at and the number you’re expecting down the road. That’s hardly surprising. The world we’re living in is different from the world several decades ago. Today more than ever, everything is driven by data, both traditional and non-traditional, or alternative data. Whoever has the data and can piece them together to form relevant trends and insights, will have an advantage over their competitors.
Picture this scenario: You’re an investor looking to purchase either of two identical properties. Both have the same features, including a single-family, located in a suburb, 2 bedrooms with 2 bathrooms, built in the same period. Normally, you’d also look at the rental rates for the same property within the neighborhood, and you would find out that they’re not so far with each other.
Based on that case, there’s hardly enough compelling evidence to allow one to win against another. But, what if you can get hold of additional information such as the average increase of jobs within that zip code, the number of Uber rides, or even restaurant ratings? Throw in some additional and more comprehensive data such as property increases over some time, what contributed to the increase (if there are any), etc.
This is why predictive analysis and alternative data is far more important now than ever.
In a fast-paced world, an investor with the ability to harness data to formulate actionable insights is a game-changer. It allows you to be more sensitive to the subtle trends and, if you are bold enough, you can be a trailblazer and gain first-mover advantage.
This is the new normal when it comes to real estate investing. Gone are the days when decisions are done based on pure intuition and gut-feeling. With data science, you can be a few steps ahead of your competitors, allowing you to maximize return, and give you a window of opportunity to scale up your portfolio.