Imperative to real estate investment are key market fundamentals, including economic opportunities and possible housing supply shortages in any given area, and then making a calculated decision about whether or not a property will have cash flow adequately.
“Depending on location, walk scores can be important,” said Paul D’Abruzzo, a sales agent and investor with Rock Star Real Estate, who carries 58 units in his portfolio. “If driving is challenging, like it is in downtown Toronto, you want something with a good walk score so people can move around freely. Economics, population density and income data are all things we track at all times, and once we find something good it generally lasts for a long time.”
D’Abruzzo mentions Hamilton as a city rich in cash flow opportunities because rents are still reasonable and the buy-in costs are much lower than in the GTA.
“The economic data we follow the most are jobs and employment,” he continued. “Employment growth and transit—if there’s more that’s coming, that’s obviously a good thing—and population growth as a whole are important for us. If there are more people coming than rental units in the market, that means housing is in short supply and we can take advantage of supply and demand economics.”
The tools at investors’ disposal are becoming exceptionally sophisticated and can help build more robust long-term projections. Local Logic, a Montreal-based online platform founded in 2016, boasts over 30 billion unique data points to help Canadian and American investors ascertain not just a property’s value but a neighbourhood’s appreciation potential.
Vincent-Charles Hodder, Local Logic’s co-founder and CEO, says there has traditionally been more information on the supply side of the equation, but the company provides more intricate data pertaining to demand.
“We have a ton of demographic data—we can do it at a very small scale and zoom in and look at what trends there are today and predict how these trends will exacerbate over time,” he said. “That’s one of the factors in addition to other data we bring to the table that can be used in correlation with demographic data to reveal a more in-depth portrait of what will happen over the next few years.
“The Holy Grail is price per square foot, which is what use too, but we go beyond how much it’s worth and we tell you why. We explain the factors in the values that led us to that conclusion, and we go about that by explaining trends we see in the real estate market.”
Local Logic assesses demand for specific locations and predicts how the underlying levers of an asset’s value will change in the future. Essentially, the platform determines which way the market will shift over time, and why.
The platform isn’t only useful for investors; it also helps developers figure out where to build.
“Real estate professionals can input their investment thesis, saying they want to target a specific kind of consumer, and we’ll match them with specific parcels of land,” said Hodder. “It would correspond to that type of product in that location. Inversely, if you have a piece of property and are looking for the highest investment use, we can mine the data of what we’re seeing to show what the market values the most.”
Carolyn Cheng, COO at Royal LePage, noted that Local Logic, with which the company partnered three years ago, helped its lead generation surge by 36% when they partnered for a pilot. She added that investors are typically in the market for the same things as end users, and according to the data, schools, grocery stores, quiet locales, and restaurants are consumers’ top-four points of interest.
“For investors, they’re going to want to know the same things as someone living there who wants to know how desirable a neighbourhood is,” she said. “With a pandemic, green space, for example, is more important than it used to be, which is similar to what buyers are looking for.”
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