Ways I Use Technology to Find the Best Real Estate Deals

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When I first searched for investment properties in 2005, I relied on Excel. This approach quickly proved impractical due to its time-consuming data-entry process and limited analytical capabilities. The need to evaluate thousands of properties daily demanded a more efficient method.

In 2007, I started developing a data mining engine, experimenting with various algorithms. Unfortunately, none of these initial attempts yielded satisfactory results. In 2015, I developed a rule-based engine that compared every property against about 40 historical tenant behaviors. Any property that failed any test was eliminated from further consideration. This approach proved highly effective.

Before I continue, I need to explain two important concepts.

• No property ever pays rent; the tenant occupying the property pays the rent. A rental property's sole purpose is to attract tenants who stay for years, pay on time, and maintain the property well. The property type, configuration, and location do not matter as long as it attracts a tenant segment with a high concentration of reliable people.
• Every tenant segment has specific housing requirements. For example, a single person aged 20 to 30 is likely to rent smaller properties, such as one or two bedrooms, and prefers to be near the "action." They are unlikely to rent a four-bedroom house in the suburbs. Conversely, a family of four is unlikely to rent a one or two-bedroom condo near the "action." Instead, they are more likely to rent a three or four-bedroom single-family home in the suburbs.

How do you identify a tenant segment with a high concentration of reliable people? Through property manager interviews. Once you identify the properties that attract reliable people, purchase properties similar to what they currently rent. You can describe these properties with four criteria.

• Location: Identify the locations where significant percentages of the target segment currently reside.
• Property type: Determine the type(s) of properties they currently rent, such as condos, high-rises, multi-family homes, or single-family homes.
• Rent range: Determine the rent range of these properties.
• Configuration: Determine the desired features of the property, such as two bedrooms, a three-car garage, a large backyard, or a single or two-story home.

As an example, below is our property profile:

• Type: Single-family
• Configuration: 3+ bedrooms, 2+ baths, 2+ car garages, 1,100 to 2,400 SF, one or two stories, lot size 3,000 SF to 6,000 SF.
• Rent range: $1,800/Mo to $2,400/Mo
• Location: See the map below for the general areas

Evaluating Thousands of Properties in Minutes Using Technology

I started with the four criteria I listed above. Over the years, I've researched our target tenant segment and now have about 40 criteria. These criteria include:

• Location
• Square footage
• Lot size
• Number of bedrooms and bath
• Primary bedroom dimensions
• Any known HOA rental restrictions
• Recent rents generated by nearby, similar homes
• Recent sale prices of nearby, similar homes
• Property taxes
• Any HOA dues
• Home age
• Floor plan
• And many more

If a property doesn't match all the segment's housing requirements, it's eliminated from further consideration. Our software evaluates thousands of properties in minutes and outputs a small set that meets all criteria. These properties are then manually assessed. The software is crucial for swiftly identifying good investment properties, especially in today's market with limited inventory and only a day or two to submit offers.

Summary

The era of browsing Redfin and Zillow to find good investment properties manually has passed. Today, you need specialized software and a team of experts to sift through the vast ocean of available properties and identify the few gems worth investing in.