How Data is Driving Decisions for Multifamily Investors
With technology continuing to change the way the world will operate; the real estate market is no different. See how data can drive investing decisions.
The use of data has been the foundation of multifamily investments for a while now. However, APIs and real-time data have resulted in the empowerment of another generation of decision-making that is data-driven. The real-time and granular data together with better rental forecasts are helping change the way multifamily investors are using strategies and making property and marketing decisions. The granular and non-traditional data points together with conventional sources such as rent growth figures provide useful insight into using key drivers of rent and demand growth for certain zip codes.
Why use data?
Because real estate is a hyperlocal business this innovative insight into real estate data through an accurate apartment market survey is pretty useful. It gives the required data points for making strategic capital investment allocation decisions. It also identifies the different areas for additional rent growth and asset appreciation in the future. Let’s look into the next generation of data-driven decision-making for the new look multifamily investors, considering elements like advanced analytics, market trends, and the role of strata management in optimizing community living.
Using in-house market scoring models
Every organization keeps the data about the best investment markets available at its fingertips. Many times, what prompts the decision for real estate investment is either beyond control or macro-cyclical. But, selecting the markets that are likely to perform better is necessary for all data-driven investments. You need to subsequently identify the best available zip codes and submarkets for a continuation of relative outperformance. Then this is up to the teams that look after acquisition to execute the best possible deals.
Some of the better data-driven teams working in a real estate environment, design internal models having benchmarks and objective metrics. As it is not possible to incorporate all the data manually, you can use selected inputs that are based on earlier tests to decide the most significant fields. Then these data points help in developing a more complete picture of the market activities. All this research will educate the investors about the expansion opportunities within a new market and the opportunities for growth in the existing ones.
Factors affecting rent growth
Your income, job, and key demographic growth are all related to the rent growth. So, the investors analyze how the rent can grow depending on these trends. In a constantly changing scenario, it is mandatory to have the updated metrics in real-time for receiving a correct picture of the current trends. Many multifamily investors these days leverage nontraditional data such as gross income and employment growth at different levels. This is done for achieving a completer and more accurate picture of the real estate market.
According to some recent surveys, the real estate markets having greater employment growth are experiencing better revenue growth as well. The tertiary markets displayed strong year-over-year revenues. The submarkets having the highest employment growth such as Memphis and Savannah received some of the greatest growth in revenues in the region.
Rent forecasting
Rent growth is a critical factor when underwriting certain models and evaluating some investments. Some metrics such as employment growth and real-time gross income are responsible for accurate rent growth forecasts. They are also responsible for zip code and submarket scoring models. Due to the census delay in 2020, the real estate firms had to take into consideration nontraditional data. They were forced to tap into local calculations from non-conventional data sources to achieve a competitive advantage as a result of unique insight. The use of more recent kinds of metrics has meant that the firms are in a better position to identify the growth opportunities in a new market and various submarkets. These metrics are indicators of how various properties are likely to perform in the market.
Conclusion
With technology continuing to change the way the world will operate; the real estate market is no different. It will also evolve with the change. When you take a close look at the real estate market you will realize that it is all about having an edge. Most multifamily investors have discovered that the nontraditional data sets are also providing the required insight and context for making better capital allocation decisions. You can more readily identify the market that is ripe with opportunities and outperforms the competitors by using the data judiciously.
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