Valuing real estate and finding deals is always the hardest part of making sure you are getting a good deal. As a data analyst, I prioritize working first with the market and property information in the valuation process. As a result, I invest in properties because of their worth, not because I think that the already-done paint colors provide nice accents in the common rooms.
If I can’t fix something because it is truly obsolescent, I will concede that I can’t create more value and as a developer, the mantra is to buy low, add value, sell high. It’s how you turn a profit.
Take a look at the three charts here. Perhaps you think they are like a psychological inkblot personality test. However, they provide a few ways to look at property values by analyzing the data. Two of them don’t show any unique trend. But one of them shows a definitive trend up from the lower left to the upper right. That is what I look for in a market because it gives me a chance to make comparative judgments of one value to the next. For value purchases, I look for outliers above and below the trend as well in the lower left. And, with the more rent you collect, the higher the value of the property. That is the core trend we can see from the data illustrated. When looking at rent, if I can find a property that is under rented, I can create more value and raise rents to increase it. Some properties have the potential to be repositioned to increase rent prices by 30%. Those are the properties you should be looking for in your next property acquisition. For example, if a property has high rents but the price per SF is low, then there is a problem you might be able to fix by expanding spaces or “creating space” and increase the value. Maybe the price per SF is high and that could serve as a sign of a value and repositioning opportunity.
These charts might not tell me which property to buy, but they do tell me which ones to look at first to find the best values. And leading with the analytics is far more likely to bring you to a much more informed and profitable outcome.
If you don’t understand data, finding someone able to present the right opportunities you are looking for is essential. If you understand such data, finding partners that can work alongside you in this analysis will pay off. Following the data can lead to faster results, property acquisition and profit. For those focused on growing their portfolio, finding data nerds like myself will pay off in both the short and long term.
