Using Data Analytics / Market Data as Denver Real Estate Investor

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Hello All!

I'm such a data nerd. Let's just get fact that out of the way. I got so excited about my current project that I felt the need to jump on here and share some details with the BP community. This is a long post, but there is a question near the end to all of y'all - I promise. 

First, some light background review. My old job was in the pharmaceutical industry, through various departments including Finance, Marketing, and Business Strategy. My biggest strengths were throughout those years were Strategy and Data analytics. So, when I finally decided to quit my career and start my own real estate investment company, I had all of these...mechanisms and methodologies...engrained in my head as the right way to approach any problem - PARTICULARLY, the right way to run a company (and I still believe this is true).

So, through my real estate journey, I have noticed that most (not all) real estate investors don't really like to, nor see the need to, approach investing from a bigger picture. The GREAT investors I have encountered are very good with property-level analytics (i.e. the investment economics of a property). The decent/average investor knows their neighborhoods well. But only a small fraction of those great ones look holistically at more than just the property and neighborhood. But hey, everybody has their own way of approaching their business - and there is more than one right answer. 

Anyway, to make a long story short (maybe I should blog about this topic in more detail?), this bothered me. Given my background, it drove me nuts, actually. So, I took some time to assess this industry and now I have started on my project. 

I call her Maximus. She's a visual database. That's right - not only have I personified a personal database (because I'm a nerd), but I have also named it. I mean..her. 

The short-form of my real estate strategy is to flip out-of-state and re-invest in rentals back in metro-Denver. So I decided to build Maximus to help me navigate real estate and decide the best locations for me to invest. I believe that the more data and metrics you have and can manipulate, the more trends you can start to see, and this should guide where/when/how you invest. I'm not trying to predict the market - which I know is impossible - but with the data anything is possible :-). Basically, my business operational model begins and ends with Maximus. 

I have used Maximus so far once, for a flip I am working on right now in Cincinnati (flip should be completed by end of January). 

Maximus is not complete yet - but here are some details so far:

What do I use? Combination of Excel and Tableau (I already had a license, so no cost to me. If you're thinking of getting one, it's about $1,000). Data is held in Excel and visualized through Tableau. 

What area-level data? National, State, Metro Area, County, City, and Neighborhood

Time Period? Monthly, Annual, Quarterly

Analytics? All in Tableau. The software has everything from heat maps, all kinds of charts and tables, and literal maps of the US. So, for example, once loaded in, I can look at a map of the US and just drill down to a state...county...neighborhood.

Can I share? Not yet! She's not done. And she may not be for a long while.

What metrics? This is the part that is not 100% completed yet. But the goal is to compile all the major personal and economic forces. So far: quarterly % change in Real GDP, YOY % Change in Monthly home prices, job growth, interest rates, population shifts, rising wages, area revitalization, relocation, marriage, family growth, divorce, death, debt, active inventory, sold homes, avg. sold price, average days on market, Concentrations of jobs by occupational category, average level of education, school rankings, crime, appreciation, property tax rate, state tax rate, positive/negative RE legislation, monthly rental income, average age, inflation, popular property types and configurations, vacancy rates, volume of rental units added to market, time to rent, months of supply, volume of new home construction. 

CRAZY, RIGHT?

QUESTIONS to the community: 

• What kinds of metrics do you use to evaluate where and when to invest? 
• What am I missing from my list? 
• Also, I'd like to somehow add in a "Neighborhood Grades" for areas all over the country. Is the only source of that kind of data from property managers and local agents/investors? I fear the answer is yes - but BP may surprise me with some sources!

Thanks for reading! I'll put this in a blog post when she is more complete.