All Forum Posts by: Jason Ling

@Account Closed - Hey Dani, I haven't thought ahead to the point of deploying the tools just yet. I'm working on the base algorithms and all the code is just a proof of concept. I've already tried a few very simple methods of price prediction - using median price/sqft of SFH and it's failed fantastically. Although my mean error rate is 3% the standard deviation of the error is 20%+... So now I'm starting to investigate if machine learning will produce a good model.

>>How do you imagine deploying them for REI, and for which section of the market? SFRs? Commercial? Something else?

• As far as technical deployment goes - there are no plans, right now everything is working towards a proof of concept. Bells and whistles will be added if the proof of concept goes well.
• As far as deploying it for REI (not sure if I understand the question fully) but the objective is to identify on market, public deals far faster than any human could possibly do so. Objective is to do this analytically, without bias and consistently. Since it is machine learning the model would be iteratively updated, so as market conditions change so does your model. I'm sure if the idea pans out, many insights will be gleaned.
• Which section of the market? SFR is the only area I can remotely wrap my mind around. Commercial is a big scary monster to me - I don't even know where to start with Commercial. Plus, you must remember that the more data there is the better machine learning will generally work. There are a lot more SFR samples (think home sales) than commercial - therefore I think SFR would be easier to apply machine learning to.
  If SFR works out well then I'd spend time on commercial.
• As far as Zillow and Redfin goes - I'm honestly surprised at how off Zillow's estimates are. I was convinced they must be using machine learning. Also, as far as I'm aware - neither service alerts you of undervalued deals.

Also another thing to note is that the idea can easily be modified to simply analyze the cash-flow potential of homes or even entire regions of the US (although scalability could be a problem).

In the end, if everything goes well, it might end up being a tool that gives you a shorter list of homes you'd have to go in and make the final call. But even if it reduces your work-load by 80% or increases investment discoveries by 50%, that has to be worthwhile right?

>> I make my living doing that, for REI it's a long shot too many other things need to happen. With 700+ face book likes AI >>knows you better than you know your self.

@Vivek Khoche - Would you mind elaborating? What do you mean by too many other things need to happen. Any sort of insight you'd be willing to share would be greatly appreciated.

@Kim M. - Thanks, I've reached out to him to see if he's willing to share any insights.

Big question - why hasn't anyone applied data science and machine learning in the real estate domain?

With the recent (7 years?) advances in natural language processing, image recognition and the validation of various machine learning models why haven't savy investors started a mad race towards developing the ultimate valuation tool?

I've been dabbling in tackling this problem - and so far, it's not that bad.

The only big problems I see is that the data sources for national markets are not uniform.

That the given data might be incomplete or even contain errors (which will affect your model).

That the sample set might be orders of magnitude smaller than your feature space (fixable via removing or combining linearly correlated features to yield an orthogonal feature set)

...So why hasn't anyone done this yet?

It really depends on what you're doing. The answer is different based on the situation.

If you're leveraged with insufficient reserves and your only option is to flip the properties (re: these are negative cash flow properties) then you're screwed in a market down turn.

If you're leveraged with sufficient reserves and you can only flip then as long as the downturn doesn't outlast your reserves you'll still be limping but  you'll come out of the situation with a significant but survivable loss.

If you're leveraged, have good reserves but you're cash-flowing your property (it's a buy and hold/rental) - then as long as  you have renters you don't really give a crap about what the market does.

And yes, you can de-risk by owning free and clear but you're giving up one of the biggest advantages of real-estate : The ability to leverage.

By owning free and clear your returns (cash-on-cash) will look horrendous - and at this point other non real-estate investments will start to make more sense.

That's my 2-cents anyways