As the real estate industry becomes more institutionalized, there is greater demand for quality data. Data is the key to making informed decisions. Having a solid grasp of the current cap rates, financing markets, vacancy rates, rent growth projections, construction costs, population, employment, and income growth, are all critical to accurate deal underwriting and execution. However, most real estate professionals (myself included) only have access to select data-sources, providing limited data which may or may not be out-of-date. The data we maintain internally is unstructured and stored across disparate emails, spreadsheets, and Dropbox folders. Fairly useless when you really need it. However, in order to be successful, we need access to accurate data which can seamlessly be integrated into each aspect of the real estate lifecycle (acquisition, asset management, disposition).
Acquisition: When acquiring a deal, we typically rely on relationships to source off-market opportunities. During our initial underwriting, we look at comparable deals we own as expense comps, pull some rent comps from Costar, analyze the rent roll using redIQ, and look at some high-level market reports. From here, we put together a BOE and determine whether we’ll be submitting an LOI. Data is used to confirm the quality of the opportunity, not identify one.
Asset Management: Once we close the deal, we execute our value-add strategy, which has been honed on similar deals we’ve executed in the past. Very little (if any) data is integrated into this aspect of the deal lifecycle. We do more or less the same unit interior renovation in FL as we do in VA. The amenity set is also nearly identical. Once stabilized, our onsite staff set rents based on information provided by the comps. We use rent optimization software across some deals, but the result is only as good as the data we input (garbage in, garbage out). It’d be helpful to have accurate data on-hand to help make these decisions.
Disposition: When selling a deal, we rely heavily on trusted local brokers. We know asset values are high and demand from the investment community is strong, but there is little actual data used in the decision-making process.
It’s crazy to think about how little data is utilized when making decisions on multi-million-dollar investments. But that’s common across the real estate business. Wouldn’t it be nice to have accurate, real-time data which could seamlessly be integrated into every aspect of the real estate life-cycle? That’s where the business is headed.
Real estate firms need to leverage the power of structured data to make better decisions. It’s important to first recognize the type of data that is most important to you. For our multifamily platform, sale and rent comps are important, so we utilize data from CompStak. Submarket vacancy and rent growth are also critical, so REIS and Axiometrics are useful. When layering in economic data, we use sources such as ESRI. We also take advantage of in-house data we have from other similar deals.
Once you have the necessary data, you need to bring it together in a format which can be easily manipulated and layered into your analyses. While we do a lousy job of this today, it’s something we’re thinking about and improving.
Tools such as DealPath, redIQ, Rentlytics, and Juniper Square are enabling firms to centralize and structure data in a cloud-based system in real-time. Each of these systems has open API’s, allowing data to flow easily from one platform to another while automatically providing end-users with complete data sets. This is where the business is headed, and firms must adapt.
As a real estate professional, ask yourself, ‘can I quickly integrate data across every step of the real estate lifecycle’? If not, you should be focused on putting systems in place that enable you to access the right data, quickly, and seamlessly integrate it into your decision-making process.
If you can’t, you’re going to be left behind.