Successful real estate investments often require investors to make well-informed decisions quickly. The property market can change rapidly, and savvy investors need to be able to adapt and move with those changes quickly.
In today’s fast-paced, highly digitized world, there are many useful tools and resources available for real estate entrepreneurs, to assist them in making calculated decisions backed by data. This is where the use of Big Data for the purpose of Predictive Analysis comes in.
Predictive analysis for real estate investors
Predictive analysis is the term used to describe the analysis of data to predict future patterns and trends. Technology can select patterns from data to predict occurring trends, and while it’s not an exact science, it can provide investors with a reliable forecast of future data when it comes to property market trends.
Choosing the best location
One of the most crucial aspects of successful property investing is choosing the right location. Many websites use big data to provide investors with invaluable location insights, and some even publish up-to-the-minute maps that summarize the current data for a particular area. These maps make it easy to compare areas based on their median house prices or their return on investment (ROI), for example. These ‘heat maps’ enable real estate investors to focus on the most profitable neighborhoods by analyzing data such as property prices, rental incomes, ROI rates, occupancy rates, and more.
The value of analyzing non-traditional data
Along with the more conventional data, there is now an increased amount of analysis that utilizes unconventional data sources. Some of these non-traditional data variables can be used by investors to glean a clearer picture regarding an area’s potential and opportunities, as well as any calculable risks. Such variables could include:
- The area’s crime statistics
- The number of grocery stores in proximity
- The number of accessible gas stations
- The average rating of local eateries and other services
- Demographic information – such as the average age, marital status, and educational level of the area’s inhabitants
Finding the best rental property
Savvy real estate investors are using statistical data to determine not only the best location to invest in, but what type of property will be the most lucrative investment in a particular area.
Predictive analysis of both residential and commercial property data gives investors insight into what properties are the most popular in a given area, and which will return the greatest profits. Depending on the demographics of an area, the best ROIs can be found in vastly differing property types. For example, some areas are favored by young professionals who want convenience and prefer condo living, while other areas are particularly popular with families, in which case two or three-bedroom family homes could achieve the best returns.
Using predictive data analysis also allows investors to consider the long-term possibilities for the property and strategize accordingly. What are the projected numbers for population increase for the area? Will the majority of the area’s residents change in average age or other demographic stats? Are there any significant regeneration works in the pipeline and will they change the rental landscape in the coming years? These are just some of the questions that real estate entrepreneurs need to ask when assessing an area for investment, and data analysis can assist with this. Property investment is typically a long game, so considering any longer-term predictive data analysis is key for a solid investment.
Final thoughts
Analyzing real-time data and predictive analysis is allowing real estate investors to make more informed decisions than ever before. While no one has a crystal ball and unexpected market fluctuations can occur, big data is making it possible for considerably reliable information to be used to make calculated investments.
Big data is transforming the way real estate investments are considered. With access to information that differentiates areas and properties based on small but crucial data, investors are better armed than ever to take far more calculated risks and predict the future cash flow opportunities of investments. The extent of data available today is allowing for opportunity analysis and ROI predictions to be broken down by the street, never mind the suburb. While this analysis relies on accurate data, the availability of both residential and commercial property data has never been greater, and analytical technology is constantly evolving and improving.
The future of savvy real estate investment is certainly in the hands of predictive data analysis.
Guest post courtesy of Denise Langenegger
|