By Patrick Rafferty (MultiFamilyExecutive.com Article) — After a healthy 2018, it’s predicted that demand for multifamily housing will continue to grow through 2020—even as supply continues to rise alongside it—putting investors and brokers at an interesting juncture. On one hand, the window of opportunity is wide open, attracting an abundance of interest ranging from individual hobbyists to large institutions and REITs. On the other hand, competition is rising, meaning multifamily investors and brokers need to be on their toes.
How can they stay ahead? Market tools and technology certainly help and are becoming vital components in the decision-making process—particularly those that leverage big data.
Big data is more than just a buzzword. The term, which is used to describe immense datasets and how technology cleanses and structures information for strategic analysis, is actively revolutionizing modern commercial real estate deal-making. In a market as saturated as multifamily, big data can propel professionals past the competition to find better deals and make better decisions. How? Read on to learn four different ways big data can unlock actionable insights for multifamily investors and brokers.
1. Big Data Can Unlock Total Off-Market Scope
Until recently, most multifamily data was gated by large firms, forcing small businesses and independent players to rely on manual sourcing strategies and public listings platforms. While listings provide a solid baseline to finding new opportunities, they only account for a small sliver of the entire commercial market and neglect to address the unmarketed, unlisted spaces potentially available. Now, big data is ushering in a new level of accessibility to off-market insights for everyone—especially multifamily investors and brokers.
What makes this information so valuable? With off-market insights, multifamily professionals can significantly expand their realm of possibility. Comprised of the country’s total multifamily stock—a combination of more than 4.3 million different assets, according to Reonomy data—off-market data broadens the scope of pursuable properties. When armed with an unobstructed view of the market, industry investors and brokers have a better chance of finding high-demand assets first, while the less-sophisticated competition is limited to just the listings.
2. It Can Uncover Potential Sellers
Big data allows investors and brokers to access and analyze copious amounts of sales, debt, portfolio, and ownership information with ease. So, when exploring a specific property, they can evaluate respective intel, like holding period, mortgage maturity and origination dates, and owning entities to gauge whether or not that owner might be interested in selling.
For example, maybe a multifamily investment firm is evaluating two apartment buildings—one of them last changed owning entities in 2014 and isn’t coming to terms on its mortgage for another 15 years. Contrarily, the second building has been held by the same owner for the past 20 years and is entering Lis Pendens, flagging financial disarray. By comparing the holding periods and financial health of both assets, the second apartment building would clearly have an owner more likely to sell. With big data to back due diligence, investors and brokers are more equipped to pinpoint their next pursuits.
3. It Can Serve Up Favorable Comparables
The third way big data can help brokers and investors find their next multifamily deal? Through comparables. Whether professionals want to deepen their understanding of the overall market, assess the value of a single property, or expand their pool of opportunities, access to properties that share similar building and lot, transactional, and debt details can help move the needle for CRE professionals.
So, maybe a broker is on the hunt for duplexes to flip in the Miami-Dade County area of Florida for a client. She finds one that might be a promising pursuit—it hasn’t been renovated since 1995, has been held by the same owner for 10 years, and appears to be approaching its maturity date. While this broker will definitely add this property to her list of possible properties, she’ll still need to find more to explore. With the right technology, finding these comparables is easy. By analyzing specific physical and transactional lot characteristics of the “base” property you want to compare, certain technology can serve up similar assets using big data as a baseline. Not only does this enable more comprehensive market understanding, it also offers up more opportunities.
4. It Can Fuel More Personalized, Compelling Pitches
Finally, with the help of big data, multifamily investors and brokers are armed to close deals faster, way before the competition. By both unlocking accurate ownership contact details to build targeted leads lists and providing insights to pad pitches accordingly, big data ensures cold calls aren’t so icy and deals are presented in more persuasive ways.Despite ownership information often being hidden behind umbrella LLCs or other elusive gatekeepers, big data actually pierces these private holding entities to uncover actual decision-makers. By parsing a combination of private and public records, individual owner names, mailing addresses, emails, and phone numbers are served up in the click of a button.
So, instead of tracking down disparate, physical records or scouring the Internet to find contact details on their own, multifamily investors and brokers can find ownership information in minutes. Then, using the unique insights they unearthed earlier in discovery and exploration, they can completely transform their pitches to resonate directly with owners. This is what makes big data really invaluable. While some investors and brokers reach out cold to learn more about a property, those who harness insights are equipped to propose something more knowledgeable and compelling. Maybe they mention financial findings or recent portfolio movement—however they choose to perfect their pitch, it’s more persuasive to use personalization than reaching out blindly.
As the multifamily sector continues to climb, investors and brokers need to stay ahead of the curve. With big data, these professionals are armed to unlock actionable insights and to beat out the competition and find deals faster. From expanding their pool of potential options to perfecting their pitch, big data transforms how business is done.