The big American dream: Owning your home, financial success and wealth building – all in that order. For many Americans, their biggest investment will be the home they buy. This means that a successful investment in real estate for a home, rental property or land can be a future pot of gold. With Big Data and Predictive Analysis, the risk that was part of real estate investment has been greatly reduced. Real estate agents and brokers can derive the greatest value from these calculations since they offer a competitive edge to their clients, helping them to make a more informed decision.
So what is predictive analysis and how does it relate to real estate?
Predictive analytics uses new data, historical data and real-time data to predict what the future will be. While all this might sound like a lot of jargon, predictive analysis is already a big part of our everyday life. For instance, you have a lunch meeting in Upper Manhattan and your smartphone tells you that your Uber is 10 minutes away. It also tells you it will take 25 minutes to reach the destination. That is predictive analytics at work.
Predictive analysis in real estate can tell you the best time to buy or sell a property.
To maximize returns, it can even tell you which location would be the best investment. Real estate professionals who leverage predictive analytics will score over their competitors time and time again.
Here are 4 ways predictive analysis can best help when investing in real estate:
1. Geographic Analysis of Up-And-Coming Areas
Location is everything and often dictates property prices. Predictive information that reveals which locations will soon be popular can make for investment sweepstakes. There are a few factors that indicate whether a locale has the potential to become the next hot spot:
- Increases in job opportunities will spur people to search for housing in nearby locations, often with great school districts.
- Big retailers (Walmart, Starbucks, etc.) coming to town can indicate long-term growth.
- As certain locations become over-priced, spill over markets open up in adjacent locations.
- Access to public transportation is another vital sign. If any new routes are being introduced, that is a great indicator of a possible swing in property rates.
2. Reduces Time Spent Searching for Investment Opportunities
The best real estate agents are moving the needle by using predictive analysis to cut down time in identifying the most suitable property for their clients. Individuals can do the same. What used to take 3 months of driving around and visiting properties can now be cut down to just 15 minutes of online activity. Property results can be pruned down based on multiple criteria and voila! You have a list of most eligible properties for final viewing.
3. Investment-Specific Strategic Analysis
Depending on the economy, real estate investments could be exactly what you need to grow your wealth. Predictive analysis can help you decide on the type of investment for a positive cash flow. Buy and Hold investors as well as REITs (Real Estate Investment Trusts) can use big data to help them decide on properties to acquire to leverage profitability. The datasets available are from a macro business perspective (e.g. Renters’ demographics) to microbusiness levels (e.g. building space, parking available, other retail businesses close by etc.).
This data is also relevant for short-term investments (like house flips), long-term and vacation rentals. In fact, predictive analysis on rentals published by the Urban Institute says there will be 13 million new rental households by 2030, with single-family units being the top preference.
Types of Real Estate Investment
4. ROI forecasting based on specific factors
There is always a risk when investing, even though real estate may be considered to be a safer option than the stock market. Calculating return of investment metrics can be done based on many factors and there are many interactive property tools available online that you can sign up for.
Investors can calculate ROI for any specific property based on the location and neighborhood. Predictive analysis can go as far as to tell you the numbers on occupancy rates in a neighborhood as well as the vacancy risk. It can also recommend the optimal combination of attributes to increase the value of your property. Just adding a bathroom or remodeling the kitchen could instantly improve property rates.
The 4 benefits here are just the beginning to how data can streamline investments and help improve transactions in ways most of us have not seen as yet. It will only get better.