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You can’t turn around these days without being bombarded with headlines touting “Big Data…”, “Predictive Data Analytics…” and “Artificial Intelligence…”. These topics has eclipsed other emerging business trends, due, in large part, because they apply to so many different business categories, including real estate.

Commercial and residential real estate brokers, investors and developers have jumped on the “Big Data” bandwagon. They use it as a strategic and decision making tool, one - it’s now hard to believe - that didn’t even exist a few short years ago. However, many think that only large enterprises can collect, use and profit from big data analytics. That’s not the case. Small businesses, individual investors and brokers can run with the big boys when it comes to data.

But what, exactly, is data analytics anyway?

Data analytics

Put simply, it’s just a fancy way of saying market research based on numbers. In other words, its nothing more than collecting information, analyzing it and modeling the data to discover insights – behavioral patterns if you will - into a market. This information helps real estate investors, developers and brokers make sound business decisions based on facts rather than on feelings or guess work.

When you throw the words “Big Data” into the data analytics mix, it’s pretty much the same thing except that the amount of data is larger, as the name implies. Companies that have access to large amounts of customer data, for example, can use that to discover patterns, trends and associations among their customer base, or among those who they want to be their customers. Facebook is a perfect example. Watching what their billions of users do, Facebook can reliably predict the behavior of certain groups based on past behavioral patterns of similar people. Thus the word “Predictive Analytics” comes into play.

All of these new, fancy terms lead many smaller businesses to simply walk away from the topic. And why shouldn’t they? Where are they going to get all this “data” from in the first place? Never mind using it as a business tool. However, even the smallest enterprise can leverage this data and prosper from it, particularly those in real estate. 

Data analytics and real estate

Zillow, Realtor.com, Redfin and others were in the forefront of using Big Data in the real estate category. This allowed them to develop break through algorithms which estimate the current market value of homes, for example. It also allowed them to help buyers customize their online search while providing in-depth data on neighborhood schools, crime, home affordability, walkability and the proximity a home has to retail outlets and other services.

Commercial real estate has also benefited from this transformative innovation. For example, there are a number of well-funded tech startups which gather data on multi-family rental buildings. Using data analytics, these companies can provide investors and developers with the demographic makeup surround a building, the area’s crime level, employment rate, prevailing rental fees, as well as profiles of the neighbor’s ethnic composition.

All this information is continually updated painting a clear picture of the property, its place in a neighborhood and its current market value. Importantly, using predictive data analytics, these companies can run different hypothetical outcomes based on changing economic conditions. For example, if the area’s unemployment increases by 2%, these programs can predict a rental property’s likely internal rate or return (IRR).  In other words, investors can see what their profits might be if economic conditions change for better or worse.

Data analytics: not just for big players. Small brokers can leverage Big Data

There are two misconceptions about this new wave of computer generated real estate data. The first is that artificial intelligence (AI) driven robot-like machines are going to replace real estate brokers just like they did to many auto workers in the Midwest. That’s not going to happen. Property transactions require “high touch” human interaction. The fact that buying a home is probably a person’s single largest financial transaction of a lifetime, people aren’t going to leave that to faceless, computer driven machines.

The second fallacy is that you need to be a deep pocketed IBM or Google to take advantage of data analytics. That too is untrue. There are a number of companies right here in Washington that provide sophisticated, state of the art predictive data analytics, AI and other information based products that benefit small investors and brokers. 

The utility of data can provide brokers with countless benefits, most of which can go to the bottom line or directly into a broker’s pocket. For example, it can help pre-qualify leads, predict which homes in a given neighborhood are most likely to be put on the market. It can accurately determine property valuations. Most of all, it can save time. Who has the spare hours to crunch mountains of numbers, or, for that matter, the training to do so?

Data can generate extra income for brokers

One way brokers can generate extra income is by mastering the numbers behind local real estate transactions. Real estate investors want to work with brokers who know and understand the economics of “the deal”.  What’s nice to know is that brokers can easily acquire this information and thus become “value add” partners with high commission generating real estate investors.

Right now, there aren’t many brokers who know their way around real estate data, the kind that every investor lives and breathes. Brokers who become familiar with the basics are highly prized among this ever growing client sector. And brokers don’t have to have a degree in data science or statistics because a company called RealPeek, www.realpeek.com , a leading provider of real estate data analytics located in the Pacific Northwest, can give regional brokers the information they need to have an informed conversation with any real estate investor.

Realpeek has real-time search, advanced AI and data analytics that are used by investors, developers and a small group of brokers. This unique database has filters that search based on cash flow, cap rate and rent-to-value projections, and all the metrics real estate investors use when evaluating a property. Put that together with a broker who knows their own real estate market, and you have a winning combination that is sure to attract new commission paying clients.

As Gordon Gekko, the super-rich Wall Street broker from the hit movie “Wall Street” said, “The most valuable commodity I know of is information.” This applies to real estate brokers too.