The Power of Data Analytics in Rental Property Investing

In rental property investing every decision counts, whether you’re buying property, setting rent prices, or managing tenants. Landlords often rely on gut instincts, past experiences, or friendly advice. Today, however, there’s another tool that can help you to improve accuracy in your investments: data analytics, the game-changer that can help to take some of the guesswork out of the equation.

Relying on hunches can only get you so far. What if you could actually see where the next hot neighborhood is? What if you can confidently set a rental price, without backtracking and worrying if you’re pricing too high or too low? The good news is you can! That’s the kind of clarity that data provides.

Data analytics may sound intimidating, but it doesn’t have to be. Data today is more accessible than ever, and knowing how to sift through it can give you the information that you need to make sound investment divisions. Below, we’ll walk you through how you can use data for your rental property investments.

How Data Analytics Works for Rental Properties

Data analytics is simply using information to make better decisions. Think about it this way. If you were opening a coffee shop, you wouldn’t just pick a random location, right? You’d want to know how many people in the area drink coffee, what they typically spend, and whether there are other coffee shops nearby.

For landlords and real estate investors, data analytics works in a similar way. It involves gathering and analyzing key pieces of information about properties, neighborhoods, and market trends to help you make informed decisions about buying, renting, or managing properties. It’s a tool that can help you keep more money in your pocket while also managing risks.

Even after you’ve set up your rental business, data remains a valuable asset. It can help you figure out what amenities your tenants need or how to enhance their living experience. Let’s say your rental is in a city with a lot of remote workers. Converting an extra room into a home office or installing fast, reliable Wi-Fi could help to set you apart from other landlords. Data analytics can guide you in adding value to your properties, whether that’s through strategic renovations or marketing tactics that attract tenants.

Data can also be used to manage expenses effectively. It can also give you a glimpse into how your investment is performing, and predict how much you could potentially earn in the future. In short, data isn’t just a one-time tool. It’s an ongoing resource that can help you grow and improve your rental portfolio.

How Landlords Can Use Data for a Comprehensive Rental Analysis

1. Finding the Best Rental Markets to Invest

Without data, finding the right neighborhood or city to invest in can feel like shooting in the dark. You might hear from a friend that a certain part of town is up and coming or see new construction going up and assume that means the area is a good investment. But unless you have the numbers to back that up, it’s a risky bet.

That’s where data analytics in real estate step in. Instead of relying on speculation, you get a clear view of key factors that influence rental success, like population growth, local job markets, and housing demand. You can check whether an area is seeing an influx of young professionals or college students, who may be more likely to rent. If there’s a new tech hub opening nearby, it’s a strong sign that demand for housing may rise, too.

To gather information related to economic trends and news, turn to reliable sources like the U.S. Census Bureau, Bureau of Labor Statistics (BLS), AreaVibes, local government websites, and local chamber of commerce websites.

The Data You Need:

• Population growth trends

• Employment rates and job growth

• Housing demand

• Median household income

• Future development projects

• Crime rates

• School ratings

Don’t invest without performing a thorough market analysis first. Here’s a FREE guide on How to Perform a Real Estate Market Analysis.

2. Rental Analysis for Pricing: Setting the Right Rent

Setting the right rent for your property is one of the most critical decisions you’ll make, but without data, it’s tough to get it right. Pricing too high can scare away potential tenants, while pricing under market rate can leave you scrambling to pay off expenses. Yet, many landlords guess or price based on what they feel the property is worth, without looking at what similar properties are charging. This is where things get tricky.

With rental property data, you can fine-tune your price to attract tenants and maximize your income. You can compare your rental to others in your area (those with the same number of bedrooms, similar square footage, and similar amenities) and set a price that makes sense to you and the local market. You can also look at pricing trends over time, which is incredibly useful.

If you don’t look at data, you risk setting a price that either leads to long vacancies or makes you miss out on the extra income you could be earning. Tools like Rentometer, Renters Warehouse, and Zillow let you quickly compare rental prices and historical trends, giving you the confidence that your property is priced right for the market.

The Data You Need:

• Comparable rental rates in the area

• Seasonal rental demand

• Vacancy rates

• Historical rental price trends

• Economic conditions

• Feedback from current tenants

3. Minimizing Vacancies Through Data-Driven Rental Analysis

Few things are as frustrating for landlords as an empty property. Each month that passes without a tenant is lost income, but if you can’t figure out why your property isn’t renting, it’s hard to know what needs to change. Is your rent too high? Is there too much competition in the area? Are there economic or seasonal factors at play? These questions are hard to answer without data to guide you.

By looking at local rental trends, you can see exactly when demand peaks. In many areas, rental demand is higher in the summer when people tend to move. If you know this, you can plan to have your property ready to go when demand is at its highest, reducing the chances of a long vacancy. On the flip side, if you’re trying to rent during a slower season, you might consider offering incentives like discounted rent or a more flexible lease term to get a tenant in the door faster.

Analyzing your local competition can also provide clarity. If nearby properties are renting faster than yours, you can dig into what they’re offering. Is it a lower price, better amenities, or just better marketing?

Find relevant data by consulting real estate market reports and local government agencies. Connecting with local real estate professionals can also provide valuable insights into the market dynamics at play.

The Data You Need:

• Vacancy rate trends

• Average days on the market for similar properties

• Tenant demographics and preferences

• Local economic indicators

• Seasonal demand fluctuations

• Competitor rental prices

• Marketing effectiveness and channels

• Tenant retention rates

4. Tenant Screening: Data Analytics for Finding Reliable Tenants

Choosing a responsible tenant can make all the difference when managing rental properties. Someone may seem friendly and responsible during a walkthrough, but without diving into their rental history, creditworthiness, or background, you’re essentially rolling the dice. The wrong tenant choice can mean months of missed rent, costly property damage, or stressful legal battles that eat away at your profits.

Using tenant screening tools streamlines this process and helps you make an accurate choice. These services gather details like credit scores, payment history, and other relevant information, giving you a better idea of the tenant’s financial reliability.

As powerful as data-driven tenant screening tools are, you need to watch out for risks like algorithm bias, which can get you in legal trouble. As a landlord, it’s your responsibility to make sure that the software or service you’re using complies with anti-discriminatory Fair Housing Laws. Some tools have built-in safeguards to ensure decisions are made based on legitimate financial and rental history data, rather than personal characteristics that could lead to discriminatory practices in your screening process.

The Data You Need:

• Credit history

• Income verification

• Rental history

• Background check data

• Employment history

• Personal references

Find reliable tenants using our Renters Warehouse Resident Placement Service. With our commitment to fair housing laws, you can confidently find great tenants while staying compliant.

5. Monitoring Finances and Predicting Rental Yield with a Rent Analyzer

Using real numbers helps you stay on top of your investment’s performance and avoid costly surprises. You need to know if your property is making money every month after all your expenses, like mortgage payments, repairs, property management fees, and taxes, are covered. Regular reviews help you spot any areas where you might be overspending, and you can fix them before they hurt your bottom line.

Data also helps you predict rental yields, or how much income your property is generating compared to its value. On top of that, analytics can also help you to project appreciation and returns. Looking at neighborhood growth, upcoming developments, or rising property values can give you a clearer picture of how your investment could pay off in the long run. Without predictive data, you might miss out on these strategic opportunities. You could sell too early, missing out on future appreciation, or hold onto a property that’s about to lose value. 

The Data You Need:

• Rental income

• Operating expenses

• Property appreciation rates

• Vacancy rates

• Local market trends

• Tax implications

• Comparable rental rates in the area

Organizing Your Rental Analysis Data for Optimal Decision-Making

Before diving into your data, take a moment to think about your goals. Do you want to maximize rental income, cut down on expenses, or make tenants happier? Having clear objectives will guide your data analysis.The next step is to get organized. Sort your data into categories like financials, tenant info, and market trends. This way, you can find what you need without sifting through a chaotic mess.

Next, consider using some easy-to-use tools. Specialized property management software or a good old spreadsheet can be a lifesaver for tracking and sorting your data. These tools can help you crunch the numbers and visualize the data with charts and graphs, making it easier to see trends and patterns at a glance.

Empower Your Investment Decisions with Data-Driven Rental Property Analysis

Keep an eye on key metrics that matter most to you and your goals, and don’t forget to compare your findings with industry benchmarks. This can give you a good sense of where you stand and what improvements might be in order.

Data can be a fantastic tool for rental property investing. When used correctly, it can help you to spot new investment opportunities, or provide insight into your current rental’s performance. With the right approach and data at hand, you can empower your investing decisions.  

Find the data that you need for your rental investment journey. Check out the Renters Warehouse Market Research Center, where you can find market data and insights that you need as a rental investor. Do you already own a rental property? Get started with a Free Rental Price Analysis.