Location Analysis Method

[Alexander Blake Summers]

Greetings all,

We’ve all read methods on how to analyze a real estate deal, running numbers, estimating rehab costs, incorporating taxes, capital expenses, etc. How much time and effort do we put into analyzing the location of the property in comparison? How do we know that diamond deal with all the right numbers is the worst house in the best neighborhood, and not the worst house in the worst neighborhood? Some of the only methods Ive come across involve simply looking at the age of the homes in the neighborhood or comparing the amount of development in the area to surrounding areas. I’ve always found these methods lacking, based in intuition or guesswork instead of any objective assessment. There had to be a better way. After several years of studying and trying different methods, I’ve cracked the code. A couple notes:

1. This methodology uses a handful of actual data to create a ‘Demand Ratio’ for the neighborhood the property is located in. The ratio itself matters little until compared to surrounding areas, only then revealing which areas are more or less desirable than others. Because this is information on the neighborhood and not the property, a location can be analyzed using the info without ever having to see the property or knowing anything about the area. 
2. This methodology does not take in consideration the demographics of people who live there, nor crime rates for the area. Age, Race, Familial Status, etc, are irrelevant. Generally speaking, as crime rates trend down, the demand ratio often trends upward, but it is not a given. Because this method disregards demographics, it could reveal areas still suffering from the aftermath of redlining that would be prime targets for revitalization and investment.

3. With this methodology, high real estate prices and high turnover in properties do not equal A neighborhoods. Like crime rates, generally speaking, the higher the value of the real estate, the higher the demand ratio, but not always, and not even a large majority of the time. We all remember what happened in 2008, how do you know that $1 million dream home isn’t a McMansion worth half that, and one you won’t be able to resell? High price + Low Grade = Bubble

Low price + High Grade = Opportunity 

Ive told a few brokers I know about the method, all who acted interested but didn’t necessarily understand. They are your stereotypical ‘salesman’ type brokers, more about just selling any and all homes than they are studying the markets. Thats why I decided to bring it here. 
For now, free time allowing, I would like to take the opportunity to use my methodology to give my free opinion on locations for you. I simply need a location, and I can provide a report comparing it to surrounding areas and determine whether it has a better or worse chance of appreciating compared to said areas. In addition to doing specific addresses, I can also compare zip codes, cities, counties, or states. For example, I can tell you Hawaii has the highest grade of any state, and Iowa the lowest. However there are plenty of areas in Iowa that are better than plenty of places in Hawaii. Wouldn’t you love to know which are which? I can also answer questions further explaining my methodology. I seek only feedback, thoughts, and perhaps constructive critiques.
Looking forward to hearing back and doing my first location analyses for you all! 

[James Wise]

Quote from @Alexander Blake Summers:

Greetings all,

We’ve all read methods on how to analyze a real estate deal, running numbers, estimating rehab costs, incorporating taxes, capital expenses, etc. How much time and effort do we put into analyzing the location of the property in comparison? How do we know that diamond deal with all the right numbers is the worst house in the best neighborhood, and not the worst house in the worst neighborhood? Some of the only methods Ive come across involve simply looking at the age of the homes in the neighborhood or comparing the amount of development in the area to surrounding areas. I’ve always found these methods lacking, based in intuition or guesswork instead of any objective assessment. There had to be a better way. After several years of studying and trying different methods, I’ve cracked the code. A couple notes:

1. This methodology uses a handful of actual data to create a ‘Demand Ratio’ for the neighborhood the property is located in. The ratio itself matters little until compared to surrounding areas, only then revealing which areas are more or less desirable than others. Because this is information on the neighborhood and not the property, a location can be analyzed using the info without ever having to see the property or knowing anything about the area. 
2. This methodology does not take in consideration the demographics of people who live there, nor crime rates for the area. Age, Race, Familial Status, etc, are irrelevant. Generally speaking, as crime rates trend down, the demand ratio often trends upward, but it is not a given. Because this method disregards demographics, it could reveal areas still suffering from the aftermath of redlining that would be prime targets for revitalization and investment.

3. With this methodology, high real estate prices and high turnover in properties do not equal A neighborhoods. Like crime rates, generally speaking, the higher the value of the real estate, the higher the demand ratio, but not always, and not even a large majority of the time. We all remember what happened in 2008, how do you know that $1 million dream home isn’t a McMansion worth half that, and one you won’t be able to resell? High price + Low Grade = Bubble

Low price + High Grade = Opportunity 

Ive told a few brokers I know about the method, all who acted interested but didn’t necessarily understand. They are your stereotypical ‘salesman’ type brokers, more about just selling any and all homes than they are studying the markets. Thats why I decided to bring it here. 
For now, free time allowing, I would like to take the opportunity to use my methodology to give my free opinion on locations for you. I simply need a location, and I can provide a report comparing it to surrounding areas and determine whether it has a better or worse chance of appreciating compared to said areas. In addition to doing specific addresses, I can also compare zip codes, cities, counties, or states. For example, I can tell you Hawaii has the highest grade of any state, and Iowa the lowest. However there are plenty of areas in Iowa that are better than plenty of places in Hawaii. Wouldn’t you love to know which are which? I can also answer questions further explaining my methodology. I seek only feedback, thoughts, and perhaps constructive critiques.
Looking forward to hearing back and doing my first location analyses for you all! 

 Sounds like you're aiming to make some type of algorithm or software that tries to eliminate the need of competent real estate people utilizing their experience in markets they are very familiar with..........Didn't Zillow lose about $500 Million flipping houses using this exact type of model?