Experts consider the applications of Big Data and analysis in the field of real estate investing on a constant basis. The approach focuses on incorporating machine learning along with evidence-based workflows, to direct decision making that in effect drive specific results.
People interested in real estate investing and those professionals that work day-to-day in property management, have been keeping a close eye on the applications due to their promising deliverables. However, the biggest obstacle is learning how to utilize this data to drive greater results.
While the real estate tactics for data utilization vary from person, business or investment type, there are a few applications of data that should always direct business processes and decisions to drive those sought after results. A real estate investment is a business after all, so leaning on the numbers is essential.
The following are some of the key ways 1836PM uses data as a professional Austin property management company. These elements direct business practices and help earn our investors greater ROE (return on equity) within a long term strategy.
To Determine If the Property Is A Good Investment
The biggest issue for most real estate investors is determining whether a particular property is a good investment opportunity or not. A major reason for this is the flux in the real estate industry in recent years. Factors like the pandemic have caused real estate prices to go up, supply chain issues, labor shortages, etc., which has made purchasing and maintaining new properties a little more difficult for the average investor than before.
Things will eventually normalize though, as people around the world are beginning to resume their lives as per their previous routines. However, there is still a chance that we may face several more obstacles, considering the nature of any investment market is always unpredictable.
Fortunately, using data to determine the investment trends for real estate makes things a little more to-the-point. Simply by plugging in a few numbers you’re able to make a purchasing decision based on evidence and trends, rather than just by a gut feeling. Here are a few of the numbers you’ll need to know:
- Sales price
- Down payment
- PITI (principal, interest, tax, insurance)
- Forecasted annual maintenance expenses
- Forecasted monthly rental rate
While the average investor may not know exactly how to gather these numbers, your trusted and experienced real estate team (agent and property manager) does. They will know the market you’re planning to invest in, the trends for rental rates based on location, etc., and will be able to guide you on forecasting numbers for your expenses such as maintenance and more.
To Develop Pricing Strategies
No two properties are ever identical, so making 100% accurate estimations can be difficult. However, just as the investment market is always in flux, so too are the factors that are used to make good pricing decisions.
It’s important to look at historical trends but more importantly we must be aware of what is currently going on with the real estate market that you’re investing in. You need to have your professional real estate team run a comparative market analysis to let you know what rent should be priced at.
How are home sales and values fluctuating? How are rent prices fluctuating across your neighborhood, city, state, and even the U.S.? What other economical factors like, tax increases, labor and supply changes, etc., could affect your pricing strategy?
But then there are also other factors to consider (that are weighed in a comparative market analysis) like:
- The quality of your property. Is it in good condition to get a great renter?
- Is it peak or slow season for renters looking for new homes?
- Is there plenty of inventory for renters to choose from or not?
- How many days on average is it taking for properties to get rented in that area?
- And how many showings on average is it taking for properties to go under contract in that area?
It’s important to remember that it is always the market that determines rental rates. Investors need a good strategy in place to not only earn a great return but also to keep it fair for tenants. If you set a rent price that’s out of the norm for that area, then you just might lose your chance at getting that perfect tenant in contract. Which means an extended amount of time that your property sits on the market, and inevitably costs you more in the long run.
To Evaluate the Productivity of Pricing Levels
Once the comparative market analysis has been completed, a strategy has been put into place, and the rental rate has been determined, then we must monitor the success in which that property is rented and the kind of return it provides.
If you have two properties similar in housing factors, location, etc., but they differ in rental rate, which property goes under contract more quickly? Does the strategy need to be altered based on the outcome?
Now, let’s consider what kind of return that pricing level might provide for the investor. What might that monthly or annual return look like after expenses? And based on those numbers, should it be adjusted or is it fair compared to current average market returns?
Pricing a rental property considers many variables and is never a set it and forget it item. You have to pay close attention to the market, trust the numbers, and strategize where and when necessary.
To Evaluate Expenses Such As Maintenance
While some homeowners believe that maintenance does not matter much, we can tell you that it most certainly does. Reports show that the costs range between 1% and 4% of your total property expenses in most cases. However, we use data evaluation to determine a more precise estimate for each year.
We take into account the age of your property, the age of the systems at your property, pricing changes by professional maintenance vendors (those who actually perform the labor), and the average historical maintenance costs for our portfolio of properties annually. Plus, we must also consider inflation rates and other economic factors like supply and demand, etc.
This process is highly beneficial for rental property owners who own one or even several properties, and have a hard time managing and estimating their maintenance. Looking at all the data can help you get a better understanding of those expenses so that you’re always prepared to act quickly when the need arises.
Investors should consider maintenance as a necessary and inevitable expense, that actually is an investment into your investment. Maintaining your property will increase its value over time and will help you reach your long-term goals with that property more easily.
To Evaluate and Forecast Showings and Applications
Evaluating and forecasting showings and applications of a rental property is an important part of property management. Doing so allows us to create proper onboarding strategies to get a unit rented quickly and at a great rental rate. Some of the data we evaluate to determine the best course of actions may include:
- Current supply and demand
- The fluctuating labor availability to complete make-ready or renovation projects to get a property ready for market
- Property characteristics
- Rental volume, season, etc.
- Average number of days a property spends on market in the area
- Average number of showings it took a property (within our portfolio of properties) before it went under contract
We use a number of data factors to direct our business processes in order to devise the best possible strategies and approaches for your real estate investment and drive results.
To Evaluate and Forecast Labor Needs and Ensure Proper Service Levels
As a professional property management service provider, it is essential that we have experienced professionals and the right amount of staff on our team to ensure that we always provide excellent services to our clients, residents and partners.
But in order to do so, we must first be aware of what the industry standards are for how many units a single property manager might be held accountable for, then initiate our own set of standards as a company. But we can’t run a property management business with only the professionals who actually manage the units. We also have to consider accounting, maintenance, legal, and so much more.
As with any business we begin with a well strategized plan and execute it, then we evaluate the success of that strategy, and reevaluate if needed. But the only way to evaluate the success of that strategy is by looking at the data.
How many calls, emails, and maintenance requests do we respond to in a given day, week, or even month per person? How long does it take to execute and complete projects? How long does it take for our team to onboard new properties or new renters?
How does our staff feel about the execution of our processes and procedures? How do our clients, residents and partners feel about our communication, processes, procedures, performance, etc.?
All of the questions have to be asked and answered with well organized data retrieval methods – whether that be with questionnaires, surveys, net promoter scores, meeting recordings, numerous spreadsheets and so much more. The goal is to evaluate what our team and company needs are so that we continue to provide excellent service.
Learning and executing better methods through data evaluation for real estate investing and property management is the most logical and effective way to boost your ROE (return on equity) and maximize profits. We use it to determine investment opportunities, develop pricing strategies, calculate maintenance costs, and much more.
Call Us Today!
Reach out to our team of professional Austin property managers today to assist you with your real estate investing ventures. We’ll help you evaluate your numbers, create a plan and help you reach your long-term financial goals. At 1836 Property Management, your success is our success.
By: Kayla Gonzales, 1836PM Marketing Manager