Open Source Data Sets for Real Estate Investors

Every time I hear a real estate financial analyst say that we need more data, my eyes tend to narrow.  There is such a thing as too much information, as an overload of data can distract from making quality decisions.  Real estate investors are people also: we do the same thing in real estate acquisitions that any graduate student does when writing a term paper;

  • Review the literature to expand our knowledge about the topic (the property and market area)
  • Survey existing knowledge and best practices (competitors and best operators)
  • Seek information that leads us to knowledge to inform our decision-making (go, no-go decision)

The next step, in our search for knowledge, is to synthesize this review into written form. The result of this “paper” is to present our opinion in the form of actionable information that leads to purposeful decision-making.  Granted, many a term paper and due diligence reports are entirely worthless. From OpenDataSoft:

Data analysis plays a significant role in the Real Estate world. It reveals and comforts buyers with knowledge and facts about the neighborhood, its people and trends. It reduces risk of buying and predicting changes in… value for potential buyers.

Open-source Data Sets is a Bridge to Better Decision-making

How can we shorten this process, this learning curve, to obtain market due diligence? Focus first on data that provides a macro understanding of your markets. The data sources within this article present those broad brushstrokes that lead to gaining a high-level understanding of markets in market data. Yes, there are additional steps to get to decision-ready information. The information presented here is a bridge for getting to the next level.

Where can real estate investors find data, factual information, about people, places, and property?  Institutional real estate investors devote time and resources to determining where to place their next investment. Often, property type is a given.  A cold storage investment firm is going to invest in cold storage.  The bigger question is where are they going to be building or buying cold storage facilities.  The underlying reasoning is based on market data that includes demand statistics and an assessment of competitive factors.  When the investment committee meets, and the VP of Acquisitions says we are investing in Ohio and Arizona next year, the executive team wants to know why.  Why those places versus any other site?

Choose Data that Delivers Actionable Outputs

Granted, sometimes, the reason for market selection is anything but financial on its face. The reasoning could be that the CEO winters in Arizona (really – I’m not kidding).  Then some metrics have nothing to do with numbers or financial outcomes.  Everyone believes their operations perform better when they own at least 100,000 square feet in a single market, and a particular market only has 80,000 square feet owned.  So we need to buy an additional 20,000 square feet.  No one mentions that thinking is based on a seven-year-old business plan.  Has anyone looked to see if that 100,000 square foot premise remains true today?  Perhaps not.

My point is that everyone wants data, but everyone doesn’t use it for financial gain; sometimes, the reasoning is to justify an investment decision that supports the norm or outcomes different than maximizing economic profit or return on investment (ROI).

Free Open-source Data Set Resources

Start with the links here and build your data sources.  When you are working with a demographics service provider, you must clearly express your request.  They must know your end-goals for them to price and deliver outputs that meet your criteria.  Saying you want lifestyle analysis, for example, is too generic (and expensive). Assuming you are seeking lifestyle areas representing Military Havens versus Family Foundations narrows the focus significantly.

ESRI Zip Tapestry. The mapping giant ESRI has a web-based tool that provides a “lifestyle” moniker based on zip code.  Note the tabs above where you insert a zip code for information about income, age, and population density.

My favorite book about lifestyle and community types is Our Patchwork Nation by Ray Suarez.

U.S. Census.  There is Census.govAmerican FactFinder, and State and County “Quick Facts”    All of these are courtesy of the U.S. government.

State and Local government offices.  Many governmental departments found at the Federal level are also in place at the state level.  For example, every state has it’s own Department of Agriculture that is similar to USDA, but state-wide only.  Same for Commerce and many others.  Many of these departments create and use demographic information and also make their data sets available to the public at no cost.

Bureau of Labor Statistics. BLS.gov provides a free mapping tool with a vast cache of data related to economics and demographics.  This Federal government website has tables and on-screen data on Inflation and pricing, Employment, Unemployment, Pay and benefits, Spending and time use, Productivity, and employment projections.  BLS is free to access.

Universities.  The Departments of Social science, Economics, and Agriculture use and produce data sets for research purposes.  And not just four-year schools.  There are many 2-year colleges providing local research in study areas that attract and acquire local demographic data sets.  Many universities also have Extension departments that catalyze data for the university to connect and provide services about state-run programs in local communities.

As a real estate professional engaged in the asset management of more than $500M in assets, I devote a significant part of my workday to just a few things:

  • Property preservation and improvements (Capex)
  • Controlling controllable expenses
  • New investment opportunities

Aside from real estate investing, Forbes list 33 free government significant data resources.  First on the list:  Data.gov.

Paying for the Data You Need

Knowledge is far less expensive than ignorance. Market and demographic information is a crucial component of making real estate investment decisions? It is also costly to acquire.  However, there are places on the web that can provide quality information to get you started in the right direction before having to devote dollars to obtain demographics. Some of those free resources are provided below. Achieving demographics information in detail, such as for a specific address or ring study analysis, requires an investment as this type of real-time information has a cost of collection and analysis for delivery to an end-user – you.

Some of the recommendations here provide easy-to-download open-source data sets; other sources utilize their significant trove of data to provide the public with a glimpse into what they have available.  All of these resources will round out your knowledge about available inputs available at your fingertips for creating decision-making reports to assist in making real estate investing decisions.

Rent growth, insurance matters, property management accounting, these items do not sit on the sidelines while we focus on the data. Operations are always top of mind. That said, making a new acquisition, bringing a new asset into your purview regularly, if not daily, is a big deal.  A new purchase is an important decision and represents why it’s important to slow your roll long enough to review open-source data sets going into the decision making process. I hope you have the opportunity to use this information regularly and heartedly.

John Wilhoit is the author of the best-selling book on rent roll analysis: How to Read and Rent Roll. See also the companion guide to measuring the quality of rental income: Rent Roll Triangle.  Find JW’s Podcast here.

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