In an industry that moves as quickly as real estate, gut instinct and intuition will only get you so far. Yes, there’s something to be said about the product of an investor’s experiences informing the choices they make in the future. But at the same time, local markets are malleable. Trends come and go. What is a “hard and firm rule” today may be woefully inadequate a few weeks from now.
That, in essence, is why data is so important in real estate. It removes much of the guesswork from the equation so that investors can make moves not with a hunch but with the cold, hard facts staring back at them from their computer screens.
This is a large part of why integrating data-driven insights has revolutionized the real estate investment landscape in recent years. By leveraging advanced data analytics and technology like AI in real estate, investors can spend less time trying to make sense of a market and more time capitalizing on it exactly how it should be.
Uncovering Emerging Trends
It may seem like hot real estate trends tend to come out of nowhere, but the truth is things likely followed a long, steady path to get to this point. The seeds were planted some time ago, and because of the sheer volume of activity happening across both residential and commercial real estate, it took people a long time to notice.
This is one of the most crucial ways data boosts modern real estate investing – by helping professionals identify those trends as early in their lifespan as possible. Consider things within the context of commercial real estate. Imagine a situation where you could see exactly what types of businesses are starting to become popular in a market based on evolving consumer preferences. You’d know what types of properties to look for, what kinds of clients to target, and where to invest.
The same is true of residential real estate. The more data you have access to, the better you understand not just where things currently are but where they’re likely headed.
Accurately Assessing Property Values
So much success in terms of someone’s real estate portfolio depends upon property values being set accurately.
Nobody wants to pay more for a piece of property than it is worth, just like nobody wants to accidentally give lucrative real estate away for a song. Unfortunately, assessing property values takes a great deal of time— at least when you do it manually.
To set property values, someone has to examine the property in question, look at comparable properties, consider the market as a whole, etc. The amount of mandatory research is enormous, and there is still room for human error and/or artificially inflated property values if someone isn’t exceedingly careful.
Thankfully, data analytics can be used to price more accurately than ever before. These tools can have instant access to the pricing of building materials, property taxes, comparable properties, and more – leading to in-depth analysis and an accurate valuation in a fraction of the time it used to take.
Investors can spend less time worrying about accuracy so that they can focus more on how a specific opportunity fits into their own larger strategy.
Optimizing Market Strategies Like Never Before
Real estate investors don’t enter the space purely for the sake of it. They do so with an over-arching, career-spanning goal in mind. They know from a financial perspective what they hope to accomplish and how long they want it to take. They then use strategic real estate investment to help make that happen.
Now, this is more effective than ever, thanks to a seemingly endless volume of historical market data that investors can draw from when developing those strategies in the first place. Tools now help understand not only one’s performance on a property-by-property level but also the strategy. For example, you can see if specific markets are closing faster or if you’ve had success (or failure) with particular brokers. You can see how deals still in the pipeline are projected to perform against past deals, all of which can be used to help understand where your strategy stands today.
Mitigating Risk as Much as Possible
The common theme running through all of this has to do with the idea that data helps mitigate risk in real estate investing as much as possible. If a deal feels risky, you have historical market performance and property-specific data to contextualize it.
In an environment as fluid and often unpredictable as real estate, you’ll never be able to eliminate risk. But what you can do is mitigate it. The more you understand your situation, the more informed you can be when making decisions. You can also see how an opportunity fits in with your personal risk tolerance, which, without big data analytics, is a lot easier said than done.
In the end, an old saying reminds us that “knowledge is power.” Whoever coined that was talking about real estate, whether they knew it or not.
All trends must start somewhere, and if you can discover one while it’s still in its nascent stages, you can begin reaping the benefits before anyone else even realizes it exists. The more accurately you can assess property values, the more you’ll know where to focus your efforts. The list goes on and on.
In the short term, harnessing data is about increasing the efficiency and productivity of a person’s real estate efforts. But in the long run, it’s about allowing savvy investors to gain a legitimate competitive advantage. One that maximizes profitability while minimizing uncertainty as much as possible.
But the best part is that when you’re talking about something like AI in real estate, it’s a process that gets better all the time by design. The more data an AI-driven analytics tool can ingest, the better it gets at its job. The implications alone are exciting for seasoned industry veterans and newcomers alike.