"The biggest challenge most real estate investors face — especially those in the single family market — is finding investment properties."
In the world of real estate investing, there’s a common challenge that most investors face these days.
The first inclination might be to think it’s funding. But much has changed, and in fact improved, in the world of investment property funding since the hangover and recovery from the big crash.
The biggest challenge most real estate investors face — especially those in the single family market — is finding investment properties.
The Multiple Listing Service (MLS) — while it works for the typical home buyer — offers little for the active real estate investor in most markets. The upswing in the market has created competition for both owner occupants and potential investment property buyers. This creates a big demand for properties.
The result? Agents need listings and investors need properties.
The Market Disruptions
The influx of buyers into the market and the availability of capital from banks and private money lenders that drives up demand on the MLS aren’t the only factors at work when it comes to buying and selling real estate.
Tech innovations have opened the door for alternatives to listing properties on the MLS through an agent. Home buyers and sellers — whether owner-occupant or investor — now have choices.
For years, word on the street was that the Internet would send both the MLS and the Realtor the way of the dinosaur. That hasn’t evolved but alternatives have. Necessity and demand is the mother of invention, and technology has stepped in to solve the inefficiencies of the status quo.
Opendoor.com provides sellers and buyers an alternative to the traditional buy-sell model. Real estate agents are still an important part of the Opendoor equation, but the process doesn’t look quite the same.
Zillow Instant Offers allows home sellers to get offers from qualified and pre-screened corporate and local investor buyers. Both of these services represent a blow to the traditional U.S. home selling model.
Big Data — The Game Changer for REI
Despite these types of tech innovations, there hasn’t been a big game changer for the average on-the-street real estate investor until now. For years, big data has been at work for the institutional-level investor looking for bulk REO purchases. The smaller investor has had to rely on data services like Connected Investors’ Deal Dog that pulls together quasi-off market property listings from dozens of online sources. While this represents an improvement over a more laborious internet search, it doesn’t quite do what big data can.
Investors looking for off-market properties have relied largely on “list providers” to connect with homeowners who may or may not have an interest in selling their property. These marketing lists — a form of big data — give investors access to data taken largely from tax records. A typical list might include absentee owners, high-equity owners or landlords that investors used largely for direct mail campaigns.
But data, being what it is today, is able to simplify the job of the investor looking for properties. Using the latest technology and advanced algorithms, smart data filters and overlays, real estate investors can access big data that provides more than names and addresses. Smart tech and big data combined also puts phone numbers, email addresses, social profiles into the hands of investors making direct mail an alternative rather than the norm. With the wealth of data now out there, it’s a fact that the aggregation of the right data for the job can empower progress in any industry.
Another big data plus for the real estate investor is the availability of information regarding the financial position of a property. It’s now possible to assess debt-to-value — a key indicator of a property’s viability as a potential purchase. Plus, information on the property’s mortgage status is now readily available giving pre-foreclosure investors’ unparalleled access to potential property purchases from sellers hoping to avoid foreclosure.
Is the traditional buy-and-sell model dead? No. But the alternatives available to investors and the public alike are heralding in an entirely new and in most cases, more efficient and cost-effective way to move properties in our market. Tech and big data have disrupted the status quo and it’s a welcome change for buyers and sellers of any stripe.
Ross Hamilton is the founder and CEO of Connected Investors. Launched in 2005 as a social network for real estate investors, the company has grown to more than 250,000 community members. In 2015, CiX.com was launched to serve the funding needs of investors giving them direct access to hard and private money lenders who specialize in investment property funding. Earlier this month, Connected Investors launched its PinPoint Profits database, opening up big data for the average real estate investor.