New member here! I started listening to the podcasts last week! I am a full time engineer by day, and Realtor/investor by night.
I wanted to get some input from the community on a real estate software/algorithm project I am currently working. When I started looking for my first SFH (buy & hold) property, I noticed that doing rental analysis & comps for each property was taking up a good amount of my time. Being an engineer, I decided to automate it!
I have developed a tool that analyzes every single SFH in my area on the market, and determines all my rental benchmarks like cash on cash return, cap rate, cash flow etc. I do this by pulling in rental data on MLS using near by properties with similar characteristics. My analysis also automatically factors in closing costs, mortgage payments, interest rates, etc in my analysis. It even pulls in HOA fee information and Tax information and factors those in as well! It also allows for me to enter % vacancy, cap ex, repair costs, insurance, etc to my liking!
A quick caveat. Being that its an automated piece of software, it can only evaluate the home from a purely statistical average. Therefore, it takes some sort of human oversight to vet properties that have things like: new AC, new roof, recently remodeled, etc. However, since I can analyze every property in the market, and rank them by their returns, it puts properties on my radar that I would have normally overlooked.
This tool has been a real game changer for me. From what I understand, large investment groups have tools like this. From what I am told, they have it automated all the way to the point where they can even fire off automated offers! However, I have found no one who currently has a tool like this, accessible to probably %99 of the investors on hear.
My question for the community... Have you heard of a tool like this before? Has it been accessible to you?
@Mike Mazzucco I don't dabble in SFR market very often...just really doesn't make a lot of sense to me anymore. It sounds like you're doing a great job with your tool. I've been working on a similar project for a few years...the SFR fix and flip stuff was pretty easy...just plug in desired profit and work backwards...as long as you are good onrepair costs and ARV it works. But as you discussed, you cannot escape the need for human eyes. After I analyze our possibilities, I still have to go back and estimate renovation costs and assign a property class to factor accurate potential rents.
I do the same thing you do with my MLS data in the multifamily market...it's proven to be quite a complex endeavor to get it right with consistent accuracy. I initially stared building these tools for each client based on preference, acquisition strategy, and exit...there is a funnel each deal must go through and then pop out with the best possible option...this is crazy complex, but I think it's doable. We've explored lots of tools to use over the last months and are likely going with Caspio...maybe Quickbase.
Your exercise is a good one and I think it has a lot of potential value. I am in agreement that the only accurate way to analyze real estate is in aggregate...we have finite dollars and many options on how to put those dollars to work...it's like a kid in a candy store.
I don't do BP too much lately, so if you want to chat further on this email or call me...information in my signature line. Cheers
Suggest you write a complete blog showing your analysis to share with a larger crowd. The harder part is find actual rent rates not asked rates. Even finding the historical rental rates over 5 years to project future is difficult.
@Sam Shueh , From what I understand, rental properties listed in MLS should have the "actual" lease amount updated in the system when the listing closes. Therefore, my algorithm is using actual rent price.
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