The Real Estate Investor's Guide to Reading Real Estate Data

Posted by Chris Clothier on Thu, Jun 9, 2016

readingrealestatedata-realestateinvestors.jpgReal estate investors deal with a lot of numbers and data. They just do! There are a million considerations when looking to purchase a new investment property, or even when assessing the financial condition of a current property. In our information age, where we have so much data at our fingertips, it’s a little too tempting to take data at face value.

5 Tips on Reading Real Estate Data the Right Way

Pay Attention to the Source

With so much data floating around, the source really matters. If you’re online and you can’t find the source, as a rule...you may not want to trust those numbers. There are exceptions, of course, but when the numbers really count? You want to know where they’re coming from and that they’re coming from a place that’s reliable.

Statistics are so easy to fake and so easy to make look good to support a point. People will try to sell your on their plan or their property with fake stats. Don’t fall for it. Same thing goes for online reviews! Does a company have all glowing, five-star reviews? That should raise as much of a red flag as all one-stars. Look at who left reviews. They could be fake accounts, or paid to leave positive reviews.

Investigate and only trust good sources and remember to take everything with a grain of salt.


What’s the Data Pool?

When people throw out statistics, even if they’re “true,” we have to consider where those statistics are coming from. For example. “I’ve only heard of the basement flooding once.” Okay, but when was it? Were there times you didn’t hear about? Is there a general moisture problem? Just think about national polls. They use percentages that are supposed to represent an entire national from a pool of a few hundred people.

“They didn’t ask me!” we all say.

Those are the kinds of things to consider when we look at data. Where’s it coming from, how they actually came to their conclusion, and how they present that data matters.


Think Through It Logically

The best thing you can do when it comes to real estate data is to think through it logically. First, that means paring the numbers down so the data that actually matters to you. With so much information, it can be easy to get caught up in things that ultimately don’t make an impact.

So ask yourself first: what information really matters here?

For an investment property, calculating your cash flow means looking at:

  • Ongoing expenses
  • Incoming cash flow

Simple, right?

Well, considering how many things contribute to ongoing expenses, and how much that can vary month-to-month...not so much, but still.

When you can focus on cash flow as the most important thing, it’ll help you identify what markets you can afford, which properties to target, and what numbers you should zoom in on.

Specifically for Your New Real Estate Deals...

Gather Your Own Numbers From Your Own Sources

When looking for an investment property, don’t rely on reports from the seller. Always A) verify the data and B) gather your own when you can. That means getting a property inspector in to have your own report done.

You’re going to want numbers that you can trust beyond a shadow of a doubt, not ones that may be fudged to look better.

You’ll want the home appraised so you know exactly what it’s worth in the neighborhood, on top of what the neighborhood is like and if their asking price is fair.


Stop Fitting a Square Peg Into a Round Hole

All of the right data in the world, vetted and verified, accurate and organized, won’t help you if you try to fit a square peg into a round hole. One of the biggest mistakes investors make is trying to make numbers work for them instead of letting the data speak for itself.

When investors make data say something it doesn’t say so that they can hear what they want to hear, it will lead to problems later on. It’s just ignoring problems that won’t go away with creative number crunching, trust us.

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If you want to know how to navigate real estate data in a way that will accelerate your investments instead of holding them back, you’ve come to the right place!

Topics: real estate data