Artificial Intelligence (AI) and Machine Learning (ML) can be vital tools for any real estate investor. While it can seem daunting to incorporate this relatively new technology into your existing investment process, it can be an invaluable resource when you take the time to learn about it and integrate it into your routine.
Capabilities of the Technology
Machine learning is a type of artificial intelligence that can learn from past experiences without requiring additional coding. AI is a computer science that takes advantage of the capabilities of humans to perform complex calculations at a faster rate than we can. With the help of these technologies, you can quickly analyze and visualize data in ways you would not be able to independently.
You can identify which markets to focus on in the future using AI and machine learning. These technologies take into account both the past and the future performance of a property to come up with a set of assumptions that can be used to predict how a market will perform.
Aside from standard metrics, such as the average vacant days and retention rates, AI can also analyze other data points to develop a more accurate market assessment. For instance, it can provide you with sales comps and lease transaction details to help you understand the competition in the future.
Through the use of AI, you can also come up with more accurate predictions about the future performance of a property. These predictions can be performed on various data points such as tenant patterns, neighborhood forecasting, and predictive maintenance.
One of the most critical data points to use in your analysis is the potential rent growth. Since so many variables can affect a property’s performance, you should use machine learning and AI to create hard data to use in your projections.
The accuracy of the data you collect through AI and machine learning allows you to make more accurate predictions about the future performance of a property. Not only does it allow you to analyze the property’s overall performance, but it also allows you to monitor the submarkets and market levels.
How to Start Using the Technology
Before investing in a property, you must ask the company how it collects and uses the data it collects for its projections and underwriting. Doing so can help minimize the risk of errors and ensure that the information is based on facts.
Since most individual investors do not want to spend a lot of money on AI for their investment decisions, it’s also important that the sponsor provides you with the necessary reports. Some of the most reputable sources that can provide essential reports include Yardi Matrix, Axiometrics, and CB Richard Ellis. When analyzing the reports, ensure they are accurate and provide you with the necessary insights to make your decision.