Long gone are the days when people made decisions without knowing the future outcome. Whether you’re running Facebook ads and getting an estimated number of new likes, or making an investment and getting a projection on returns, today’s tools and data help you make better decisions.
What is the data?
Such data is predictive analytics. This is data that uses past trends and algorithms to predict future outcomes or trends. This helps a person or a business to make a decision based on intelligent data and gives them comfort by having an idea of what to expect as a result of their decision.
A real estate investor is familiar with studying past trends before purchasing an income property. They will look at the fluctuation of housing prices, appreciation rates, rental rates, and the habits of people in the area. Since more people in the U.S. are tapping into real estate investing, it only makes sense that there should be a way to automate the research process.
Mashvisor aims to help real estate investors 1) understand a market without having to live in the area 2) get the projections needed to make a decision 3) find an income property quickly without having to perform complex research or analysis. Use this mini guide to understand what you can gain from this tool and how to use the information.
What does predictive data tell a real estate investor?
How good a market is for investing
Not all investors stay in their area when buying a property. Some investors choose to invest outside of their local area to seek more affordable homes or better returns. The challenge with this strategy is understanding the investment performance and potential of a market and without having to spend months worth of research to do so.
If someone searches for a city on Mashvisor, they can click on a neighborhood and get a summary of the neighborhood’s performance: the average rental income, cash on cash return, overall investment score, and the optimal strategy for that area. In certain areas, vacation rentals are more lucrative than traditional rental properties. Should an investor choose to turn the property into a vacation or short-term rental, the Airbnb occupancy rate is also shown in the area’s summary.
How much money other investors are making
Rental comps, or similar properties, is a major part of the research done prior to buying an income property. It’s also one of the more challenging pieces of information to find.
When looking at the overview of an area, investors can also look at other existing properties. The “traditional” tab has properties that are rented out on a long-term basis. Each property has the monthly rent and number of bedrooms and bathrooms. The “Airbnb” tab has a property’s nightly rate, estimated monthly income, and estimated Airbnb occupancy rate.
How much money they could be making
Finally, the data tells real estate investors how much money they would make from a property. But with each investor having a unique situation, that’s where the rental property calculator comes in handy.
Whether the investor is financing the property using cash or a mortgage, they can set the calculator based on their financing preferences, and from there, get the estimated rental income, cash on cash return, and cap rate that they would receive from a particular property. The calculator is interactive, which means they can put in their own numbers and other expenses they might have, such as a gardener.
How does this data help them get rich?
Points them to the money-making areas
Ok, so the data doesn’t give the winning lottery ticket numbers. But, it certainly puts an investor in the driver’s seat. By knowing how areas performed in the past, they know how the potential property would most likely perform, which gives them the ability to select top areas and properties.
Let’s take an example. Austin, Texas is well-known hot-spot for real estate investing. But you’re not from Austin nor have you ever lived in Austin, so where do you go? That’s why you count on the numbers. The neighborhood that has your budget and the highest returns will likely put you in a profitable area.
The data also has the calculations needed, whether or not the investor was aware of such numbers before. The average rent might be easy to find, but that doesn’t tell the cap rate or cash on cash return, which are important metrics to know.
Tells them the competition
Rental comps should be used for insight but also for knowing the local competition. While there might be plenty of renters, know what other properties are making and what kind of properties they are.
This is especially important for those with short-term rentals. If a property is listed on Airbnb, it’s up against a lot of competition. But the data can help compete. How? 1) View the listing on Mashvisor to get their estimated income and Airbnb occupancy rate. 2) See the listing on Airbnb. 3) Read the reviews and look at the pictures. Doing these three steps helps gain a perception of what a property has to do and look like to get that much income and bookings.
Shows what property to pick and what strategy to use
An investor can spend months just trying to pick a property, even if they know the area like the back of their hand. But all investors have the same goal, make money. So by viewing the potential investment properties and their projections, it should make narrowing down properties a lot easier. Go with the better returns.
Finally, the data opens up an investor’s eyes to other strategies. Not all investors would consider turning the property into a vacation rental, and knowing what strategy is best can be difficult. Sometimes Airbnb properties make much more than traditional. Hence, knowing the optimal strategy in the area could exponentially increase returns.
The point of using data in real estate investing is to do research, get the calculations needed, and pick a property in a short amount of time. The use of data has helped investor not only save time, but has helped them increase their income by picking the right apples.