4 Methods for Real Estate Investors to Utilize Big Data

Posted by Chris Clothier on Fri, Apr 15, 2016

bigdata-realestateinvestors.jpgIf you invest in real estate, there is a trend that you need to know about.  For real estate investors, and real estate professionals in general, big data is slowly transforming how we do real estate, especially when it comes to the buying and selling process. But it goes deeper than that, too.

Big data, more than anything, is making things more accessible, more transparent, and less risky for real estate investors. But how, exactly? What does it mean for investors?

Defining Big Data

Forbes has one of the best definitions of big data we’ve seen:

"Big data is a collection of data from traditional and digital sources inside and outside your company that represents a source for ongoing discovery and analysis."

This data can be high-volume or high-velocity to be “big,” and it’s only worth anything to you if it’s accurate. After all, making decisions based on bad data will wind you up in a world of trouble.

Where to Find It

Big data can be found in lots of different places, as there are many different kinds of big data. There’s unstructured data, which often comes in text through blogs, articles, and social media posts. This data can be difficult to interpret without the help of special programs, but it’s the kind that we come in contact with every day without really realizing it.

Structured data comes in the forms of statistics, tabular data, spreadsheets, forms, surveys, and more. Raw data has to be mined, interpreted, and analyzed. It’s what you think of what you picture data. Businesses like Zillow, Redfin, and Trulia have mined census data, home listings, consumer surveys, and more, and combined this information in a proprietary way—and the prime and most obvious example of big data in the mainstream real estate industry.

For investors as well as the average buyer or seller, these have become valuable resources that have created insights into real estate markets and home value trends.

There are also other companies that specifically focus in data mining and analysis, including predictive analysis that looks to future trends.  For our part, Memphis Invest tracks and publishes some big data as it relates to renovations, management and on-going performance.  

With 3,500+ properties under management producing $36 million plus in gross rents and over $24 million spent annually on renovations, we are able to produce big data that is excellent for mining trends within our own portfolio.  In many cases, this can be very helpful in analyzing opportunity and markets.  Expecially when our data is over-layed with other big data.

4 Ways Investors Can Utilize Big Data

1. Research Out-of-State Markets

While nothing beats on-the-ground experience of someone who is in the market, big data can offer a lot of helpful insight when it comes to getting to know an unfamiliar market. If you’re just getting started or even looking into a particular area or neighborhood, big data can be the quickest route to getting a feel for an area, including values, prices, and demographics.

2. Gain Insight Into Market Trends

More than just the cut-and-dried question of what homes cost and and how much your competition is charging in rent, big data can give you a look into market trends and what tenants want. It’s not just about real estate—things like energy efficiency, traffic patterns, air quality, health, and sociology all can play a factor and give you an advantage, if you learn how to utilize that information.

3. Take Advantage of Transparency

Thanks to big data, we have more transparency than ever. It makes appraisals more accurate, for one, because you now also have insight into the value of the surrounding homes in the neighborhood. It makes it more difficult for sellers to hide issues and bad history, on top of your simply being able to find and have access to more information that helps you, as an investor, make more informed choices.

4. Project Future Trends

While we all must be wary of the stock we put in predictions, there is still something to be said for predictive analysis made on accurate data. While we wouldn’t suggest putting all of your eggs in one basket, predictive analysis can be a helpful tool in looking towards the future not only of your individual property values, but of a neighborhood, zipcode, or city.

Beyond your values, and perhaps more helpfully, predictive analysis can help you determine your best prospective tenants and thus, inform marketing strategies and things like real estate listings and advertisements. You can gain useful insights in what amenities and the psychological makeup of your target tenants over the course of the next few years, based purely on data and projections.

That’s pretty neat! The opportunities presented through predictive analysis of big data are really astonishing (and too many to name here), but certainly worth looking into if you’re the kind of person who enjoy data analysis.

Big data as a whole has had a positive impact on the real estate industry—we have more access to more information than we used to, and as a result, we can make better choices about our investments.

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Topics: real estate investing, big data