The Science Behind Your Investment Properties
Neighborhood Investment Rating™
Where to invest is often the question real estate investors struggle to answer, which is unfortunate since location can make all the difference on an investor’s returns. Solid investment properties can be found all across the United States, and to help you easily assess these neighborhoods remotely and without familiarity to the area, we’ve developed the Neighborhood Investment Rating (NIR).
The NIR evaluates a neighborhood based on a variety of economic, environmental, and demographical characteristics in relation to other neighborhoods locally and nationwide. The goal of the NIR is to help you quickly identify the ideal investment market that’s right for you and in line with your financial goals, without ever leaving your home.
How the NIR Works
To create the NIR, our data scientists completed, and continue to refine the model by accomplishing the following steps:
1. Gather Data – We gather specific data points about every neighborhood via public and private data sources, like US Census and IRS.
3. Rank & Grade – All neighborhoods are then sorted into five rankings from A+ to D, depending on the neighborhoods correlation to risk and reward.To simplify our millions of data points, HomeUnion has developed an effective rating system. When looking at investments, all neighborhoods can be measured in a risk/reward scenario where the higher the risk the higher the reward.
A+ neighborhoods generally offer the lowest risk exposure and highest appreciations but with the lowest yields. On the opposite side, D neighborhoods come with the greatest risk that we do not recommend to our investors. In the middle are B neighborhoods that offer moderate risk exposure, a balance of yield and appreciation with mid-priced properties.
Vetting the NIR
Just like we tell our investors, we did our due diligence on the NIR and continue to vet the model as it evolves. Here’s a couple of ways the NIR is validated:
- Local Experts – Our on-the-boots Investment Location Managers (ILMs) verify their territories and NIR in their locations to ensure it is working efficiently.
- Performance Metrics – We take a look at multiple correlated risk-and-reward factors to see how the NIR neighborhoods react in comparison to predictive trends. For example, median home prices and rent tend to be higher in A+ neighborhoods than D neighborhoods.
Benefits of the NIR
When it comes to the advantages of the NIR, Dr. Joseph Barr, Chief Analytics Officer at HomeUnion, says, “All of our investment properties use the NIR to match the right investment opportunity to your financial goals. Our unique and innovative NIR provides you with access to remote investing opportunities all across the United States. You are no longer limited to areas within close proximity to your home when it comes to real estate investing.”
HomeUnion was the answer to my problems. They gave me access to markets outside my own by providing professional insight into real estate investing in other markets. The entire HomeUnion team has been extremely helpful from start-to-finish. Working with them has been a truly satisfying experience. Everything that HomeUnion has advertised has been executed wholly.
HomeUnion’s technology driven platform is easy to use and gave me a level of control over my investment that is otherwise missing when you invest remotely.
I decided to work with HomeUnion because their plan was straightforward, their service was impeccable, and their website showed all the numbers I needed to make an informed decision.
Rental Automatic Valuation Model (AVM)
How do you accurately price rent?
If you own an income property, knowing how to accurately price the rent can be incredibly difficult. If you charge too much, you might be stuck with extended vacancies; if you charge too little, you run the risk of having an investment that isn’t profitable.
Some investors go by the 1% rule of thumb, which simply means that you charge 1% of the purchase price. This number doesn’t account for additional local factors to make sure that your real estate is competitively priced.
The Solution: Data Driven Analytics & Verified Statistics
In collaboration with UC Riverside researchers, HomeUnion has built an accurate rent prediction model based on more than one million property rent prices across the US.
We’ve evaluated neighborhoods across America and looked at important factors, covering years of market performance to quantify and score the results. Our Automated Valuation Model (AVM) is comprised of a detailed algorithm that is based on some of the following data points:
In addition to our AVM, our team of local real estate investment professionals are strategically located in cities across the country to accurately gauge the rental and purchasing climate. Having access to these local realtors ensures that we have our finger on the pulse of what is going on in each local market.
Accurately Priced Rent Cash Flow
One of the most important factors in calculating rent is cash flow. When the rent is calculated correctly, you’ll know exactly how profitable your income properties are. Our tools have been tested and proven to ensure that your rent is priced correctly for the overall market and the specific local area.
Data Driven Location Intelligence
Real estate investing can be exciting and profitable, and knowing how to properly select neighborhoods that offer a safe mix of risk versus reward can be difficult. Using the power of data science and analytics, our team here at HomeUnion looks at numerous data points to determine which areas will present the highest returns on investment.
We start by looking at large scale metro areas across the U.S. and then qualifying them down to specific neighborhoods. From this level we then have a set of select criteria that we use to help us choose which investments will be the most profitable in the area.
Here are some of the things we look for in potential properties:
By starting with properly analyzed data and applying the criteria listed above, we present our customers with pre-vetted properties that are tailored for their financial goals. Would you like to learn more about this process or see our list of pre-vetted properties? Sign up for a free account today to learn more.