The Future of Real Estate Investing Looks Like Breneman Capital
Real estate has been an industry that has lagged when it comes to technology. It has long been dominated by old school owners who have overlooked the value of modernizing their approaches to research, investor experience, and investment strategies–or are simply just set in their ways.
As these owners and firms continue their current strategies, Breneman Capital intends to propel the industry into the future with our modernized approach to multifamily investment–one that is heavily data and technology-driven. We implement data-driven strategies customized to markets, focusing on finding the best regions across the country for multifamily deals and then finding the best deals within them–both for ourselves and our investors. How do we do this?
Data
At the heart of our research and technology is quality data, and for quality data, you need quality providers. Our data team has acquired millions of data points used in predictive models for various crucial multifamily real estate metrics. We get our data from multiple sources, from places such as the federal census or public providers like Zillow and government websites and other providers that would surprise the average investor. In addition to free sources, in our quest for the best data, we have invested in data providers such as CoStar and Moody’s REIS platform, offering us data on a metro-market level that we can use for our analysis. We’re looking everywhere for relevant data. Data acquisition is the most crucial and understated part of using technologies such as machine learning and other artificial intelligence because without the correct data, valuable insights cannot be generated for your organization.
After we double-check to ensure that every data source we use provides accurate data, cross-referencing across different sources, our team then cleans the data in a fashion that can later be easily interpreted by our in-house machine learning models.
AI and Machine Learning
At Breneman Capital, we had a vision for the AI and predictive technology we wanted to use. What we found is that what we wanted did not exist yet. So, we set a goal to build it.
Our data science team is pushing the multifamily real estate industry forward with our predictive machine learning algorithms and generating insights that significant institutions do not provide. It is possible to find projected cap rates and rent growth for major metropolitan cities, but that sort of data isn’t usable for understanding the actual prospects of every property in that city. To generate the most insight, you need to analyze data on a highly granular level–such as by zip code or neighborhood. We use the best granular data to create forecasts that inform us on the hottest markets, the best entry points, and future outlooks for our current and prospective investments.
The data we amass is then leveraged by our machine learning models. We leverage the processing capabilities of cloud-based computing to run our complex algorithms-utilizing phenomenal platforms like Amazon’s AWS and using machine learning packages developed by Google. We do this to make sure that our forecasts are industry standard, not just for real estate but for the finance and technology industries as well.
Once we find the optimal approach for any particular forecast we may be doing, we take additional steps to ensure its accuracy through our rigorous backtesting process. We work hard to maximize the accuracy of our predictive models and would never go forward with subpar projections.
Our primary use of machine learning is to have an edge in selecting submarkets in a data-driven way that uses cutting-edge technology and eliminates biases. Once a submarket is set, we then target off-market opportunities within it.
Sourcing Opportunities and Underwriting Technology
At Breneman Capital, we don’t just leverage technology for the research. We are also using the best tools available during our deal sourcing and underwriting process. Breneman Capital is building out a proprietary database of target properties, brokers, and individual owners in our target submarkets. We are leveraging Salesforce’s platform this database. After logging in each property into the database, we then contacted the owner and began a relationship with them. Our database can store individuals such as brokers or property owners along with the properties they own. We can also track individual properties independently from the owners should we choose to do so. By tracking individuals with their properties or properties independently, we can organize or use the information in several ways quickly. We also have a mapping feature to visualize where the opportunities are located or see who owns a nearby property to one we are working on or already own. We manage our broker relationships this way, too - keeping track of them in an organized fashion in our database, logging in what property types and geographies they cover. This then helps us reach out to the right brokers quickly when we need their expertise.
Our underwriting team has developed a state-of-the-art financial model. Our institution-caliber model is designed to take rent and expense history provided by the current owner cleaned and organized in a standard format. To accomplish this quickly and accurately every time, we use RedIQ. The RedIQ platform is powered by machine learning and AI and allows us to extract data automatically from rent rolls and to operate statements, and to sync standardized data into our models, and includes the ability to generate comps from highly reliable underwriting data sets, among many other powerful features. This process saves us time and reduces errors.
It is important to note that even if our machine learning models were to predict cap rate decreases or abnormally high rent growth over a long time, we do not necessarily assume that in our investment property underwriting. We still follow conservative best practices for underwriting deals, like assuming our exit cap rate increases over time and not predicting higher than 3% rent growth over long periods of time, even if our machine learning models tell us higher rent growth and cap rates will decrease. Underwriting increasing cap rates and conservative rent growth allows us to exceed expectations of our investment projections when our machine learning models prove to be accurate in the future.
Investor Technology
After we underwrite a deal and feel it is suitable for our investors, we then use phenomenal investment management software developed by Juniper Square to distribute the opportunity to our investors. Juniper Square gives our investors the freedom to quickly evaluate future investments and manage their existing investments. The platform provides our investors with a best-in-class onboarding experience while we acquire the property. Once a property is acquired, each investor can access all reporting, communication, tax documents, and financial records all in one easy-to-use single location - their Breneman Capital account powered by Juniper Square.
Technology Driving Investment Results
At Breneman Capital, we believe strongly that technology can be a significant differentiator between ourselves and our competitors. We have invested heavily in the best data providers such as CoStar, Moody’s, and YardiMatrix so that we always have current data and can quickly adjust to market shifts.
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.
Additionally, machine learning has made us sharper investors. We have analyzed which variables drive rent growth and cap rate compression most, testing variables such as population and job growth, affordability, and household income. As we find a correlation between industry metrics, we become more informed about the differences between markets and know what to expect today and going forward everywhere Breneman Capital is investing. The team has come away with more knowledge thanks to our commitment to being a data and technology-driven firm
Salesforce, RedIQ, and Juniper Square allow us to excel in the core functions of sourcing, analyzing, acquiring property better while providing a world-class investor experience and be the best investment manager for your money.
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.
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