Predictive analytics has been the wave of the present and the future in real estate investing. Before the advent of such tremendous technology, real estate investing was mainly accessible to an experienced real estate investor. Buying an investment property was extremely difficult for the common man. Of course, much has changed since then as predictive analytics now allows any real estate investor to find a rental property in a matter of minutes.
How exactly has predictive analytics been transformative to investor decisions, and how can a real estate investor use predictive analytics? Let’s find out!
Predictive Analytics – A Revolutionizing Force in Real Estate Investing
For the longest time, traditional analytics were used as the primary method of analyzing big data. Traditional analytics is a form of data that helps analyze how a result came to be. If an investment property had a high return on investment and rental income, traditional analytics would point to why the property was lucrative.
Traditional analytics ishelpful, but it is limited in application. Aside from mainly being computed through manual spreadsheet calculations, it is only useful for explaining how a property’s potential came to be. In other words, traditional analytics is retrospective.
Enter predictive analytics, and the entire playing field has changed. Unlike its archaic ancestor, predictive analytics, as the name suggests, accurately predicts the profitability of investments. Many vital forms of data are formed with predictive analytics, such as trends, forecasts, and changes in real estate markets. Whereas traditional analytics is retrospective, predictive analytics is prospective.
The purpose of predictive analytics is accurately analyzing big data and using past data to predict future trends. The main investment tools, such as an investment property calculator, use predictive analytics. The uses of analytics translate into many benefits to a real estate investor, many of which we will discuss now.
Analyzing Real Estate Markets and Locating a Neighborhood
The first and foremost part of buying an investment property is to find the right market and neighborhood. Even at this very first step can predictive analytics guide your real estate investing decisions.
The best way for a real estate investor to find a suitable location is through a heatmap analysis (one of the functions of a rental property calculator). As you might’ve guessed, the heatmap analysis is based on predictive analytics. Mashvisor’s heatmap analysis, for instance, finds the best performing and predicted real estate markets for any selected metrics, such as return on investment and rental income. Locating a neighborhood with Mashvisor’s heatmap analysis would not be possible without such predictive data. If you’re interested in learning more about Mashvisor’s heatmap analysis, read this blog: “Finding Income Properties Using a Heatmap”!
Choosing the Perfect Rental Property
Once you’ve selected a location based on trends, forecasts, and actual data, you can narrow down a rental property using more predictive data. With Mashvisor’s rental property calculator, you can select criteria ranging from profitability (rental income, cash on cash return, cap rate, etc.) to property financing (cash, mortgage, interest rates, etc.). This further detailed precision allows you to buy the best investment properties, both traditional investment properties and Airbnb investment properties!
Want to put what you’ve just read into practice? Then click here to start searching for and analyzing the best investment properties in your neighborhood of choice!
Computing the Profitability of Rental Property
The main goal of buying an investment property is to earn high returns in terms of cap rate, cash on cash return, and rental income. Income property profitability is impacted by these returns and the maintenance and financing costs. Of course, predictive analytics will help an investor obtain all three of these data.
Backed with predictive and traditional data, Mashvisor’s rental property calculator and heatmap analysis help an investor search for the Airbnb investment properties and traditional investment properties with the highest potential of returns. All it takes is the click of a mouse, and you can find out which properties will have the highest return on investment, cash on cash return, and cap rate! Want to learn more about the similarities and differences between cash on cash return and cap rate? Read this: “Understanding Cap Rate vs. Cash on Cash Return”!
Predictive data also allow you to search for traditional investment properties or Airbnb investment properties based on your financial capabilities. If you are on a budget, you can use Mashvisor’s heatmap analysis to find properties that fall within your budget. You can also adjust for other financial aspects such as buying with cash or a mortgage.
Estimating property expenses is another highlight of predictive analytics. It is of utmost importance to understand the potential rental expenses associated with a property in order for it to reach its profitability peak. By analyzing big data, analytics uses trends and forecasts to project accurate estimations of a property’s rental expenses.
Understanding the Real Value of Properties
The real value of properties is another form of profit beneficial to investors. Once again, predictive data allows investors to estimate this form of data. Predictive data, as used in Mashvisor’s rental property calculator, estimate how much appreciation an investment property will have over time. If you want to learn more about how the calculator analyzes the real value of properties and other aspects of real estate investing, read this: “Investment Property Calculator for Analyzing Real Estate Investments”!
Determining the Optimal Rental Strategy
The last, but definitely not least, benefit of predictive data is knowing the optimal rental strategy of an investment property. Determining an investment strategy based on profitability requires tedious calculations and analysis. If you want a more accurate analysis that only takes a few minutes, use Mashvisor’s rental property calculator. The calculator and its predictive data will determine the optimal rental strategy based on property type, neighborhood, and more to give you a well-rounded answer.
It would be an understatement to say that predictive analytics has revolutionized the business of real estate investing. With its quick and accurate analysis and multitude of functions, it’s easy to see why such data is a requirement in modern real estate searching.
For more on learning about predictive data and all other aspects of real estate investing, continue reading our blog!