Real Estate Deal Analysis & Advice

How Data Analysis Can Make You Rich in Real Estate Investments

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Personal Finance, Real Estate News & Commentary, Business Management, Real Estate Deal Analysis & Advice, Real Estate Marketing, Mortgages & Creative Financing
104 Articles Written
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Many companies use data to improve various facets of their operations. It can also be incredibly useful for investment functions, particularly for real estate investors who seek to maximize their portfolios.

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When complex data is presented simply, it can have a strong impact on your investments. For example, it can show which markets are ripe for investing and which to avoid. You can analyze current and past trends to assess the income potential.

You can also learn things about other investors in the market, such as how many there are or how much they’re making. You don’t want to enter an over-saturated market, nor do you want to enter a market that’s not profitable for other investors.

Before diving into real estate investing, make sure you understand how to compare markets and properties. Whether you’re trying to decide between investing in Boise or Sacramento—or you’re just comparing two similar homes—this guide will walk you through all the numbers you need to know. From calculating cash-on-cash return to running a comparative market analysis, the experts at BiggerPockets demonstrate the steps you need to follow and the statistics you must know with The Beginner’s Guide to Real Estate Market Analysis.

So data analysis can point investors in the right direction. Each investor has a unique situation, so data that applies to your current needs will be crucial to achieving success.

If building wealth and saving time appeal to you, here are some ways you can use data analysis to profit from real estate investments.

Portrait of a concentrated Asian accountant at her workplace using her calculator. Concept of accounting in business.

Related: 6 Essential Considerations When Looking at Real Estate Statistics & Data

Automated Valuation

Being able to estimate current home values would be extremely difficult if it weren’t for the Automated Valuation Model, which major real estate organizations use. Think about the role the big players in real estate serve in data analysis.

Organizations like Trulia, Realtor, and Zillow set the data standards. They offer a variety of tools like graphs that showcase neighborhood trends, the average cost of ownership in an area, mortgage payment calculators, the history of a property, and so on.

Each tool is invaluable to both buyers and sellers for determining the value of a property, and investors can take advantage of this information better than anyone.

Home-Flipping Reports

If home flipping is your investment preference, monthly and annual reports can identify various success factors. You'll learn such things as how many homes are being flipped in an area, how many are profitable, and the saturation of home flippers in your area.

One of the most useful components of these reports is the ability to calculate how much an investor takes in before deducting expenses and taxes, which is also called the gross yield. This provides a clear idea of how profitable you could be if you can penetrate a particular home-flipping market.

Foreclosure Reports

Foreclosure reports can also be very useful. These can be used to assess an individual house, as well as the market.

For example, if you see a sudden increase in the number of foreclosure report filings, you may intuit that this market is experiencing economic difficulties and may not be the best place to invest.

Since profitable investing often depends on entering a good market early in the trend, such data can be invaluable for determining whether to invest. It can help you find hidden gems in real estate markets and avoid others that are unlikely to yield.

On the other hand, foreclosure reports don’t always present an accurate depiction of the current market. Often, it’s a slow-evolving process, and many months may pass before a foreclosure report is published. So the information can be valuable, but you should be aware that it doesn’t always apply to the current market.



Related: The 5 Areas Investors Overlook When Analyzing Real Estate Deals

Choosing Your Property and Strategy

Without data, it’s too easy to spend months mulling your options and trying to devise a strategy. After all that time and effort, you could still end up with a money pit.

Data analysis can both speed the process and help you avoid making a bad purchase. Using information from reports, online real estate websites, MLS, and more, you can find the key data that will determine your optimal course.

For example, a property that has been on the market for 300 days might be overpriced. A property that has undergone multiple inspections but no final offer will likely have issues you probably don’t need.

As you select your property through the tactical collection and study of data, choose your strategy for making money. You might have begun your initial search looking for a vacation rental, but decide on a switch to a fix and flip because of the data you collected.

This is a small array of the data tools and benefits that are available to help investors make their fortune. As you consider your next property, investigate further data analysis tools, and make a more intelligent choice for your investment purchases.

What kind of data analysis tools do you use for your investing?

Weigh in below!

Larry is an independent, full-time writer and consultant. His writing covers a broad range of topics including business, investment and technology. His contributions include
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    Kim Wendland Rental Property Investor from Pflugerville, TX
    Replied over 2 years ago
    Great point! While I’m new to real estate investing, I’m not to analytics. I’ve found surprising and actionable information in our own data just comparing the basics of our own portfolio for key performance factors such as rent per sq ft, opex and capex per property, as well as assessment evaluations for deferred maintenance. So many counter intuitive gems in our little portfilio’s data. Really tunes up decision making.
    Eric Boyer Rental Property Investor from Amherst, NH
    Replied 8 months ago
    Wow! That is impressive, Kim. I am also new to real estate investing and, if you are willing to share, I would love to learn about some of the tools you are using to gather such useful data.
    Hank Rhule
    Replied 8 months ago
    Where do i start there are so many. The task isnt an easy one. Where do it find the strength, I guess when reaching that goal its an unbelievable one i suppose.
    Carlos Garcia Investor from Florida
    Replied 7 months ago
    Good reminder on the importance of data in real estate investing.
    Michael Bowie Investor from Knoxville, Tennessee
    Replied 7 months ago
    As a Data Scientist myself, all of that sounds nice, but the problem is getting access to the data. Unfortunately, data in real estate is so fragmented and messy. Keeping up with web crawlers isn’t a walk in the park either.
    Solomon Stavis New to Real Estate from Tampa and Washington, DC
    Replied 6 months ago
    Does anyone have good data website they can share?
    Bryant Clark
    Replied about 1 month ago
    I've found https://datausa.io to be helpful, although the data is a couple of years old.
    Steve Bennett
    Replied 4 months ago
    I am interested in developing a real-estate portfolio and using data to do it. I am a data person, not a real estate person per se. If any real estate experts out there have access to some good data (I can only imagine how fragmented it must be!) and want to partner with a data person to explore models I would like to talk to you.
    Bryant Clark
    Replied about 1 month ago
    I'm interested in this exact topic as I try to narrow down from a few market options for a first investment. I'm breaking the analysis into macro and micro analyses. The macro (think city) gives you data on the area at large to help determine how well the local economy can support your investment goals in the area. The micro (think neighborhood) gives you data on individual home sales, rents, etc. In other words assuming the local economy can support my goals what does my cash flow and appreciation look like in one area vs another. I've found https://datausa.io to be helpful with the macro so far, although the data is a couple of years old. I go to Redfin, Zillow, etc for the micro. I'm very interested to get feedback on this and hear more specifics on others' approach to comparing markets.