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In today’s competitive real estate environment, finding a good investment opportunity can be tough. Due to high interest rates and low inventory, investors must be resourceful in order to find profitable investment opportunities that will produce consistently good returns. This is where data analytics comes into play. By incorporating useful insights about a market, including property data, demographics, and greater market data, investors can make informed decisions that help them make the most of their real estate ventures. Data analytics can also be beneficial for managing rental properties, helping predict conditions before they occur so investors can be better prepared. Interested in learning more? Here’s 5 ways real estate data can help maximize rental property ROI.
Understanding Real Estate Data
Real estate data comes in a variety of forms. For instance, market data typically includes numbers on property values and demographics, but property specific data may be able to give you insights on appreciation, market rent, and typical vacancy rates. It can also be helpful to have a visual component to your data; think graphs, charts, and maps, as they can help you easily understand the bigger picture.
Most importantly you will need to carefully consider the source your information is coming from, since not every provider will be a reliable source. We recommend working with a trusted data aggregator, such as ATTOM Data or REiDEAL MASTER, to ensure you are getting the most accurate and up-to-date information.
#1: Analyzing Market Trends
One of the most common strategies for implementing data analytics in real estate is making use of market trends. Taking a look at historical data on property values, or the population of a market for example, can give you a good idea on the direction things are heading. You can then compare the numbers for different markets to help you find the one that is likely to be the most profitable. When people talk about doing your due diligence with a real estate investment, it often involves this step of comparative market analysis. Another good technique involves identifying new trends in data, such as sudden spikes in property values, and getting in early to make the most of the opportunity.
#2: Evaluation of Property Performance Metrics
After you have found a reliable source of data on markets, your next step will be to compare key statistics in order to find the most profitable opportunities. There are some key performance indicators (KPIs) you should look at for any property which let you know exactly how good of an investment it will be. The main things you will want to focus on are cash flow (total monthly income – total monthly expenses), occupancy rates, and turnover rates. These data points can also be incredibly beneficial if you already manage rental properties, allowing you to identify underperforming properties and potential areas of improvement.
#3: Leveraging Demographic Data
Understanding the demographic data of a location can help you make better decisions to maximize your returns. For instance, if you know that a town’s population has many children, you can expect that homes in good neighborhoods which are safe and have access to great schools will be in high demand. Understanding the concentration of the population can also be beneficial, as it allows you to identify homes with good potential for appreciation from increasing demand. Be sure to consider the data of the population as a whole in order to make the most of your rental property investment.
#4: Implementing Predictive Analysis
Another incredibly useful application of real estate data is predictive analysis. We already mentioned how understanding trends may allow you to identify good opportunities, such as price appreciation for rental properties. There are also powerful tools that use predictive models to forecast these statistics, along with key data points like rental demand and vacancy rates for a property or area. Making use of these tools will give you a leg up on the competition and lets you make profitable investment decisions before others are able to identify these opportunities.
#5: Harnessing Technology and Data Visualization Tools
There are also various technologies that can help you with the day-to-day management of rental properties, along with data visualization tools that give you a better understanding of the numbers. Consider utilizing tenant management software that makes it easier for you to track rent, as well as bill and collect it. These same tools will also make it easier for you come tax season. Along with this, you will want to look into data visualization tools. They can help you get a good understanding of data at a glance, allowing you to make the best decisions without much technical knowledge.
RCN Capital
The easiest way to save on rental property financing is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance an investment property?