How Predictive Analytics Maximizes a Real Estate Investor’s Return

What is predictive analytics and how will it benefit me as a real estate investor?

The real estate industry is so complicated and ever-changing that today’s real estate investor can’t expect to succeed following traditional ways that were used a decade ago. The investing business has become technology-driven, which is not necessarily a bad thing. Property investors now can use a number of investment tools and resources to make smart, informative investment decisions. One of these resources is predictive analytics. Even though the term might sound complex, it’s actually not difficult to understand and it’ll help you immensely once you do! So, stick around and learn how predictive analytics will help you maximize your return on investment.

Traditional vs Predictive Analytics

Traditional analytics is analyzing big data to see how we arrived at where we are now. A real estate investor would use traditional analytics to explain the reasons behind the success or failure of his/her investment property. Predictive analytics, on the other hand, is basically analyzing big data by using historical data to predict future trends. It uses science with patterns that even human experts can’t easily detect. Thus, it creates a forecast of what might happen to your property investment in the future.

There are a number of sites that have been created to help property investors make informed investment decisions through predictive analytics. Take Mashvisor, for example, where big data is mashed to help any real estate investor assess housing market conditions, price forecasts, risk metrics, demographic shifts, and market fundamentals in any given city and neighborhood throughout the US.

As you can see, using predictive analytics allows property investors to see the big picture and make the best decisions when it comes to buying an investment property. It also gives them a competitive edge and the ability to increase their bottom line. How? Here are 4 ways real estate analytics helps you make wise investment decisions that will maximize your return on investment.

Assess Real Estate Markets

Investing in a top location is key to a successful real estate investing career. Real estate analytics can provide experienced and beginner property investors with a number of benefits when it comes to housing market trends. As we said, predictive analytics uses past data to predict future ones. Home values, market cycles, vacancy rates, rental rates, and others are trends property investors need to consider to determine how profitable investing in the housing market is – all of which can be easily assessed using predictive analytics.

Furthermore, such analytics provide you with data for a real estate market analysis. Predictive analytics tools, like a heat map (pictured below), provides property investors with a visual analysis of cities and neighborhoods in the US housing market based on data, trends, and forecasts. Using this investment tool, you can see many variables including property prices, rental income, and cash on cash return to easily estimate your potential outcome and return on investment.

How Predictive Analytics Maximizes Real Estate Investor's Return

Hence, a real estate investor can analyze and pinpoint the best places to buy a rental property with this predictive analytics tool. To learn more, read “Heat Map Analysis: Real Estate Investing.”

Find the Best Investment Properties

After locating the best places to buy a rental property, a real estate investor has to find the best rental property that serves his/her investment goals. Another tool that relies on predictive analytics which will help you find profitable properties is the Rental Property Calculator. Also known as the Investment Property Calculator, this tool shows you features of the most profitable investment properties in your housing market like the property type and the number of bedrooms and bathrooms.

Predictive analytics also provides property investors with reliable projections of the ROI to expect from a particular rental property – both cash on cash return and cap rate. The benefits of the investment property calculator don’t stop here! A real estate investor will also see the expected rental income, rental expenses, and occupancy rate and, thus, is able to identify which investment properties will generate positive cash flow. All of this allows you to make wise investment decisions and select the best property to invest in and get the most from your money.

Related: Buying Rental Property Calculator: The First Thing to Do in Real Estate Investing

Want to give our rental property calculator a try? Click here to start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after.

Determine the Optimal Rental Strategy

So you’ve found the perfect property in your neighborhood, great! Now it’s time to rent it out and actually make money in real estate. You might wonder which the best rental strategy is: traditional or short-term? A short-term rental in a location that doesn’t favor this rental strategy is a bad investment decision, and vice versa. Manually running the numbers and following traditional analytics can be a difficult task. With real estate predictive analytics, on the other hand, beginner property investors can easily find out the answer.

Real estate investment analytics tools use data and trends to determine the optimal rental strategy of any rental property. The rental property calculator, for example, shows you the traditional and Airbnb cash on cash return and the cap rate of the same investment property. Thus, you can see which strategy will yield a better return on investment. Moreover, if you already have a preferred rental strategy, the heat map shows you which neighborhoods align with it for a higher rental income and positive cash flow.

Related: Real Estate Investing: Traditional vs. Airbnb Investments

Identify Target Tenants

Without the right tenants, property investors face vacancy risks which lead to negative cash flow and hinder potential profits and overall success in the real estate investing business. Here comes another use for predictive analytics: identify target tenants. Such analytics enables a real estate investor to see trends regarding tenancy and vacancies and predict how it will change in the future. So, you’ll be able to see how the rental demand in the neighborhood is and predict if it’ll change in the coming years.

In addition, predictive analytics tells you the type of people looking for rental properties (university students, families, professionals, retires, etc.). Knowing this will assist you in marketing your investment property to future tenants. Real estate analytics will also provide you with data regarding the average household income and size. Knowing this helps owners of investment properties decide if tenants can afford to rent to maintain positive cash flow.

Final Thoughts

To sum up, big data and predictive analytics provide property investors with a detailed picture of the housing market and what to expect over the long-term. This gives them a completive advantage and the ability to make smart and wise investment decisions which result in a higher return on investment.

Click here to start looking for and analyzing the best investment properties in your city and neighborhood of choice using predictive analytics!

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