When we are talking flipping intelligence, we’re talking about an industry specific version of business intelligence. And it is extremely important if you want to rely on more than luck in property investment. But what are we trying to do in utilizing this flipping intel?
Well, we want an approach to investing where our success is repeatable not a maze of trial, error, and hope.
We want to reduce our expense (poor investments) and maximize our returns (high resales through excess demand). Flipping Intelligence helps you get there.
Be A Follower
Sometimes the more financially savvy route is being a follower than a leader. When capital is scarce, would it make sense to invest heavily in a blighted area that you thought was ripe for development? This would definitely mark you as a trailblazer, but a potentially poor one.
It is better to be average in a high growth industry than an all-star in a low growth one.
Compare that with looking at where growth is established. Yes, you will pay more. But in exchange, you can execute on what others have done before you.
Remember, in any entrepreneurial effort, you will want to find and then leverage growth. Demonstrated growth is easier to build upon than creating the demand on your own. Think modest investments in desirable locations rather than bigger, flashier expanses in undeveloped areas. Said another way, it is more about the landscape you are competing in (high growth) than your uniqueness (all-star).
Success Is Data Analysis Not Intuition
Part of targeting properties is understanding the realities of the larger environment you are working in. That usually appears to flow from years of experience. But in this day and age, it can (and should) come from data analytics, the smart basis for our flipping intel.
We want to rely on the latter for two reasons. First, most practitioners reading this don’t have deep experience in the field.
And second, there is far less likelihood of subjective mistakes if we base decision making on data rather than intuition. Central to our success is demand. What is the prognosis for demand in our particular location?
Well that comes back to growth. And we can get to some sense of that by asking a variety of questions: What are the population trends for your state? How about average DOMs (days on market).
Are pricing models going up, down, or sideways? And what is the longer term trend relative to regional pricing models on a per house basis?
Where To Put Our Dollars?
OK, where do we put our real estate dollars to get the return we seek? As for the answers to our flipping intel questions, turn to the well vetted resources below.
They are free. Think about that for a moment. Getting professional grade flipping intel for free. It’s an amazing thing and a great time to be in this business for that alone. And you can get it right from your own desk.
Note: the assumption here is that you are operating in the United States. If this is not the case, do not fear! Much of this data should be available in your region though it may have a different route to get to. This information will still give you a roadmap to apply to your specific circumstances.
US CENSUS
The US government bureaucracy gets a bad and undeserved rap. The truth is you can get professional grade information from the government and at no cost.
And even better, the information is presented in graphical user interfaces for ease of understanding and quick parsing. The information is robust and can also be used for more high end statistical analysis if you really want to dig into the weeds.
A Quick Run Through Of The Trends
Here’s a quick example of what we are talking about for this top level review of flipping intel. Using the US Census data for 2010 (most current data available), in less than five minutes of research I can tell you the following facts about what the trends are for the United States:
- Total population growth for the US in the ten years ending in 2010 was just under 10%.
- The Northeast grew the slowest at about 3%. The Southwest the fastest at over 14%! And the Western states were no slouch either at over 13%.
- Going over a period of twenty years, there are some additional insights. The Midwest’s growth rate, while better than the Northeast, has dropped by about 50% in that period. The latest figures putting its growth at 4%. The Northeast drop is close, though not as significant – and economic centers in the Northeast probably help counter this downward effect.
- In the Western States, where perhaps we want to put our investment dollars…California is looking pretty darn good – with a growth rate of 10% from 2000 to 2010. That means big demand.
- But housing in California is also pretty darn expensive. Nevada, just next door, has historically better housing pricing….and an unbelievable growth rate of 35% in the same ten year period.
Where To Get It?
Those are just some quick back of the envelope conclusions based on a great little system interface. But you get the idea. We ideally want data to drive decision-making.
Remember that whether you informally source your analytical data set from experience and ‘intuition’ or formally through proven statistic, we all use some sort of analytics every day when making decisions. Best to know what your assumptions rely on and go the formal route. The link below will take you to the official government site.
How About Granularity?
ZILLOW
Now that we have a broad view of growth, how about getting to some detail. Zillow.com is just one of many online options to consider for specific property data, and it remains a powerful one.
You can slice a lot of different information in it. Information that is updated fairly regularly from the Multiple Listings Service in your area (MLS) at no cost to you.
To give you a sense of its usefulness for flipping intel, the site makes it easy to investigate the potential current and future sales competition in your geographic area. You enter an address or town, and will get relevant property targets (by geographic proximity).
Users can click on potential target homes and do virtual walk-throughs, gaining some top-level visual bench marking. A user can also filter by listing price, bedroom count, bath count, lot size, amenities, and key metrics like DOMs.
Intelligent use of these and a variety of other filter options allows a user to quickly get a sense of the potential competition in a chosen area. Are things looking up? Are things looking increasingly risky? Should I move now or hold on a bit?
The private sector sites like Zillow help you begin answering those questions with hard facts and comparative analysis based on your inputs. Link below.
S&P CASE-SHILLER
Imagine you hired one of the best economists available on the open market…and a famous one to boot. Money obviously was no object, nor was time. You instructed that economist to devise a means to gather as much carefully sifted data as required to give you an objective read on the current housing market.
Moreover, you demanded that he or she adjust the data to normalize it for key variables that could throw off results (renovation, lot size changes etc). And most importantly, you told them to limit the data to homes that have an existing sales record. Are these specific homes growing in value, dropping in value, or holding steady in value over time relative to their ‘past selves’?
And lastly, keep it simple high-caliber economist. Don’t just give it to me by Northeast, Southeast, etc. I want to know it by CITY, on a month basis via a 3-month rolling average. Get on it. And by the way…I don’t want to pay for any of it.
Welcome to the Case-Shiller. Or more formerly, the S&P CoreLogic Case-Shiller Home Price Indices.
By using this goldmine of data, you can evaluate your area of the country for inflationary and deflationary trends in actual housing market sales. You can do 10 or 20 city composites too.
The analysis relies on weighted “sales-pairs”. That is, it does a statistical analysis of each sale of an existing home, relative to the last time it sold.
The Index normalizes the data for a host of variables, and then aggregates it all into these indices.
For instance, home prices for the 20 city cohort are up an average of 2% relative to the same time last year as of this writing. If you care about a shorter time frame. The same broad classification tells you that home prices are up 0.13% in a one month period.
But for the 10 city cohort, we get a different result – an average of 1.5% relative to the same time last year and a monthly change of 0.02% in a one month period
The service is about as close as you can get to a crystal ball into what is happening over time with same sales trends by area of the country – where data has been thoroughly vetted. You will have to register for use, but it is free. Link below.
S&P CoreLogic Case-Shiller Home Price Indices
Conclusion – Simplify
Flipping intel is admittedly some work up front. But in return we get to simplify our path. Because the end result is the best choice to proceed with our capital becomes apparent.
Using these kind of disparate resources in a symbiotic fashion can give you insights. Insights your competition simply won’t have because they are relying on luck or instinct when trying to select the right town, the right property…the right price. They should be leveraging free flipping intel. Instead they are increasing risks, needlessly.
Insights your competition simply won’t have because they are relying on luck or instinct when trying to select the right town, the right property…the right price.
With data driven web resources like those above…you are moderating your trend analysis. And moving from a macro-view of market forces (Census) to a focused, granular, & short term trends (Zillow, Shiller).
Then of equal importance is supplementing those data-driven perspectives with pragmatic approaches. Here we are talking focal points, key repairs, and approach. Material items that we cover in other posts, and in The Pessimist’s Guide.
These things can become big differentiators in the right property. It can make the difference between being just another flipper or an investor with a leg up on a sea of endless competition. Take flipping intel seriously to help make those serious decisions.
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