How to Use Big Data and AI to Perfect Your REI Strategy and Increase Your Profits

“Predicting the future isn’t magic, it’s artificial intelligence.” 
Dave Waters, director and geoscience consultant of Paetoro Consulting UK Ltd

Big data and artificial intelligence (AI) have become increasingly prominent in our society. As technology continues to become more sophisticated and complex, the successful use of big data and AI is becoming even more imperative for businesses that want to succeed and thrive in future years. 

But what do these things mean to a real estate investor? And how can they impact our business? To get more information, I decided to go straight to the expert, Todd Teta. 

Todd is the Chief Product & Technology Officer for ATTOM Data Solutions – one of the nation's leading providers and aggregators of data relative to the real estate industry, real estate investors, and mortgage companies. What most people don’t realize is that ATTOM is also the parent company of RealtyTrac, which many investors use to generate list of potential property deals in their particular market. 

During our talk, Todd addressed some of my most pressing questions, including how big data and AI can be best used by real estate investors. 

So let’s get right into it…

What is big data and AI?

This is a legitimate question. Although you may be vaguely familiar with the terms, I asked Todd to specify exactly what these two terms are used for. 

As he explained, big data is about the content or information itself. It’s the raw information that is collected, organized, and stored in a way that makes it consumable. 

AI is the software or technology that is developed to “think” or operate like a human, in terms of assessing and analyzing the data. A good example of AI is Amazon’s Alexa or Apple’s Siri. These technologies are designed to mimic a human’s conversational speech and to pull from a mountain of information and data in order to respond to an actual human. 

So, what exactly does ATTOM do?

The team at ATTOM collects and curates 50 to 60 different data sets about the real estate market, and then organizes that information into their products (data solutions, as they’re called) that they sell to the real estate market, investor market hedge funds, and institutional investors. These companies benefit from the data in two ways:

  • Concentrating their marketing efforts. The data solutions help real estate companies, mortgage lenders, and institutional investors make smarter decisions about who to market to or what the content of the marketing campaign might be.
  • Assessing risk. ATTOM’s products also help real estate investors determine whether they should  enter a market or purchase a specific property. Also, for mortgage lenders, the data may help them understand the risks associated with underwriting a particular hard money loan. 

To help real estate investors and professionals in the financial services industry concentrate their marketing efforts and assess risk, ATTOM gathers data and organizes it into 4 specific “buckets,” which include:

  • Property details from tax assessor records, mortgage history records, MLS listing information, etc. 
  • Neighborhood data such as demographics, crime rates, local amenities and points of interest, and more
  • Geospatial data like school district boundaries 

When ATTOM has gathered all the data about a property in these 3 categories, they then combine this information into the fourth bucket, which is how they develop their data analytics products. The cumulative data in these products allows them to place a value on a property that is more precise and comprehensive than what may be listed in the property’s online purchase history. 

What does this new data mean for investors?

The biggest way that Todd has seen the new, emerging data helping investors is that it allows them to have a much deeper look at some of the information that is relevant to a property’s value. 

For instance, in the past, investors might know some of the basics about the property’s history (when it was sold, purchase price at each sale, renovations, etc.) But now, some of the emerging data allows us to know more detailed aspects of a home, such as its level of energy efficiency (thanks, in part, to smart thermostat systems like Nest). This gives us a more accurate picture of how the home should be valued. 

As another example, traditional, stagnant data can tell us the demographics of the neighborhood where a particular property is located. But newer, more dynamic artificial intelligence takes it one step further by telling us the preferences, needs, and wants of the homeowners in that community (for instance, are they looking for a family-friendly neighborhood, a long-term place to stay, a home that is close to amenities, etc.) Todd even mentioned a new set of data that determined how a home’s proximity to a grocery store can have an impact on its value. 

So, all in all, newer data is giving us a much more detailed picture of all the characteristics that contribute to a home’s true value. 

How do we use the data?

While AI and big data are becoming increasingly helpful for real estate investors and larger companies that want an accurate picture of home values, Todd explains that it’s important to remember that no technology will ever fully replace human decision-making. 

At the end of the day, when Todd invests in his own property deals, he knows that his own experience and knowledge will have the “final say” in whether or not he buys a specific house. But, as he explains, the emerging data that is available certainly helps bring efficiency to his process, because it greatly narrows down potential listings that he considers – so he may have 2 or 3 properties to choose from, rather than 100. 

It’s also essential to make sure you’re getting your information from a reputable source. A great place to start is the newsroom on ATTOM’s website. This includes free articles and information on the latest trends in AI and big data for the real estate and mortgage industries. From there, you can explore more about ATTOM’s unique solutions and product offerings. 

Remember, you don’t have to be an expert on all of this stuff. But, if you’re serious about long-term success in real estate investing, it’s crucial to stay informed on emerging trends, technology solutions, and more. Your business (and your profits) will thank you for it. 

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