How Artificial Intelligence Can Boost Your Real Estate Investments
Artificial Intelligence
Artificial Intelligence, called AI for short, has revolutionized the way humans analyze data around the globe. It has allowed individuals and firms to research and gain insight into just about every industry and provides users the tools they need to make more informed decisions. But what exactly is AI?
You can think of AI as a computer imitating the human learning process. It works in the same way a child learns how to ride a bike. They have a goal—do not fall off the bike and go forward—and they try different methods, failing along the way until they finally find the best way to remain on the bike and stay on course. They become more skilled through attempts, and that is, in simplest terms, what an AI does as well. If a computer is trying to learn how a human would, you could confidently call what it is doing AI.
Machine learning is a type of AI that uses different algorithms to analyze data, identify trends, and produce an output that can be interpreted by the user for research or business purposes. It is a tool that is especially useful for forecasting time series data, that is, forecasting data out into the future for a specified amount of time. Machine learning is a growing field in the data science world, having unparalleled utility in financial sectors. Traders can leverage machine learning and big data to predict stock movements. Corporations can predict seasonal fluctuations in demand with accuracy levels that human analysis could not provide in a timely fashion. At Breneman Capital, we use machine learning to make more informed decisions, and at the heart of good machine learning is a well-chosen algorithm.
Algorithms
In simplest terms, an algorithm is a set of instructions you are using to find patterns in the data. Going back to the previous metaphor, think of the algorithms as different approaches to riding a bike. One may be better suited to going down a mountain, and another may be best suited to climbing up a mountain. The data, on the other hand, is the terrain in this analogy. There are different ways to ride a bike, and the algorithm you opt to use will be heavily dependent on the type of data you have access to.
How AI is Used in Real Estate
Artificial Intelligence has a multitude of uses in the real estate industry. From generating leads through chatbots to creating market insight with machine learning, there are plenty of ways that firms can make the most of technology to redefine what success can mean to them. It solves problems that would take humans days, if not weeks, to figure out in minutes and leads to a more productive work environment where less time is spent doing mundane tasks. More is devoted to problem-solving and evolving your business strategies.
When it comes to lead generation, AI is already being used by many firms in a way that many do not identify. If you have ever been on a website that offers a service or product and been greeted with a chatbot that guides you through their products—that is a form of AI. Firms use this to learn more about individuals who are looking at their products and will collect data from interactions to improve their chances of successfully acquiring a new customer online.
Marketing data can then be run through a machine learning model to identify trends, such as where most investors are coming from (google search, direct website search, etc.) and the time of day and can then improve their marketing techniques while lowering costs thanks to knowledge that is much more hidden to the human eye.
Machine Learning for Market Analysis
Sometimes, you have spreadsheets full of data that you may collect from the Census or other websites about a market you are interested in but going through line by line to identify what you think is the most attractive submarket and what is expected to grow the most can be time-consuming. Many times, it can be impossible to tell! Here is where machine learning can help firms make informed decisions about where to look for their next investment.
Suppose you are a firm looking to venture into a new metro market. There are plenty of articles and opinion columns trying to sell you on just about any city in the country, but you want more profound knowledge on your top markets before you decide.
Time is money. With machine learning, you can analyze historic performance quickly and effectively, leading to more timely decisions and allow you to get offers in on deals sooner, potentially leading to better returns.
How Breneman Capital leverages data and artificial intelligence
At Breneman Capital, we believe that it takes more than just having the right knowledge to succeed; it also takes having the right data. We have taken the task of acquiring millions of data points that can be analyzed with deep learning models and forecasted forward with machine learning. We use this technology not just to understand the past but to see the possible futures and get ahead of the competition.
We track data such as historic rent growth, historical cap rate movements, job growth, population by age group, % of renters in a given area, and other demographic statistics (to name a few) in the most granular fashion available, creating an extensive database of metrics we can feed into our models at any given time. The granularity of the data allows us to be more targeted and focused on specific areas that we want to understand; after all, no two areas of a city are the same, and general rent or cap rate movements for the entire metropolitan area may not accurately reflect how any particular property is going to change in the future.
Machine learning helps us identify target markets, find the best submarkets within them, and project key multifamily metrics like rent growth and cap rate movements going out many years into the future. When deals are presented to us, we can refer to our machine learning models to see how the area is projected to grow in the future, using data as granular as the specific zip code a property may reside in to generate insights. If we pursue the deal, it also is good guidance in the underwriting process of what we can expect going forward in any particular market we are looking to enter.
Having this much data and such robust predictive capabilities allows us to understand the relationships between critical real estate metrics better, which makes us sharper investors. Thanks to machine learning models that can determine the correlation between items like rent growth and population growth, we are able to make more informed decisions for our partners.
Breneman Capital For You
Breneman Capital is a data-driven multifamily investment firm pushing the real estate industry into the future with a modern approach to direct real estate investments.
We focus on providing our investors with the best risk-adjusted investment opportunities in carefully selected markets across the U.S., researched and underwritten with extreme detail from our headquarters in Chicago.
The best part, you don’t need any experience with artificial intelligence to benefit from its insights—Breneman Capital has got you covered.
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