(This advanced blog summarizes real estate investing tips and insights Lofty AI has acquired from working with thousands of investors and institutional funds.)
What is Lofty AI?
Lofty AI is a real estate investment software.
We instantly find investors the highest returning, cash flowing properties in over 40 U.S. markets.
To do this, we start by leveraging artificial intelligence and alternative data to pinpoint which micro-neighborhoods are primed for rapid appreciation.
We then identify undervalued, cash flowing properties within those neighborhoods, and present them to you in an easy-to-use interface. It's that simple.
Because we're picking up on real-time nuanced data from social media and other sources, we're able to provide out-of-state investors with automated local knowledge in markets they've never been to before.
This automated local knowledge allows you to instantly know the ins and outs of every neighborhood, without actually having to be there. The obvious advantage of this automated local knowledge is that you can now invest in real estate outside of their home city, or even home state.
We save you hours by instantly showing you the best investment properties, using this automated local knowledge, in 40+ US markets, all from your desk at home.
Have you ever talked to an investor who only invests in one specific city, and has been doing so for some time? They might even have multiple properties within a few miles from each other.
Chances are they know all the little details about their hometown. This includes which blocks are up-and-coming, the most popular bars, which side streets are the busiest during rush hour, and so much more.
Keep in mind that the majority of investors barely use any data when purchasing properties. Most investors are basing decisions on gut instinct by driving around an area briefly or getting a tip from a realtor who simply saw more inquiries in an area or more "for sale" signs. These are not reliable methods to predict future appreciation.
It is as if we have millions of boots-on-the-ground analysts walking around every single neighborhood in the US, 24/7. Each analyst is picking up on the nuances and social cues that someone living there would notice.
These social cues and nuances are then put into a neural network allowing us to make sense of these millions of data points, whilst training this data on historical property price transactions.
This allows us to predict, down to the block level, which micro-neighborhoods are the most likely to see rapid appreciation over the next 3-5 years.
How to use Lofty AI's app for real estate investors
Lofty AI's web app for real estate investors is very simple to use. The beauty of the technology is that everyone can use our web app, even those with no prior real estate investing experience.
It all starts out with the heat-map.
To form our heat-map, we use deep learning, alternative data, and over 50 leading indicators to showcase neighborhoods that contain cash flowing properties that are primed for rapid appreciation. A few of these leading indicators include:
Types of jobs in the area
Certain types of dog breeds
Types of crimes in the neighborhood
Trendy businesses in the area
At Lofty, we feed all of these metrics into our neural networks and let the A.I. decide which data points matter more and accurately change its decisions based on how people's underlying preferences change. This gives us the advantage of being more accurate especially in more dynamic markets.
The properties (pink dots in the image above) you see above have all been vetted by our A.I., using these leading indicators.
Our models have determined they will see significantly higher returns in the future than any other properties, purely from a raw land appreciation standpoint. The social nuances and cues mentioned previously are considered in our leading indicators to provide the user with real-time, accurate data about the future appreciation of a property.
For example, when looking at crime data, Lofty AI takes a series of data points into consideration.
At Lofty AI, we have found that crime data is typically not used in the correct way by real estate investors. The traditional train of thought is that the more crime an area has, the less desirable it must be. Therefore, those areas make for bad investments.
Now, if you only care about protecting the value of your existing investment, then that would be a correct assumption. But there is really more to the story and importance of crime data.
So, if you are looking at properties for future investments, the crime metric becomes more nuanced. Therefore at Lofty, we actually do not really care about the crime count. Rather, we care about the types of crimes reported.
An area with higher violent crimes such as homicides or carjackings does indeed perform poorly over time, in terms of future appreciation. However, a neighborhood with higher numbers of crimes reported, but when those crimes are related more to petty theft or criminal mischief, actually has no to very little effect on the growth of property values. People usually only care about the crime rate in a neighborhood when these crimes are violent, especially for the safety of families.
Using this now nuanced data, our algorithms are tuned to look for areas with lower violent crimes rather than purely lower crime rates. This creates more opportunities to look at more properties, and reduces the risk of a potential investor possibly missing out on a number of great investment opportunities.
Once you find a property you are interested in, simply click on the image of the property. That will take you to our custom property page.
Calculating ROI with Lofty AI
Once you are inside the custom property page, you can determine if the numbers add up via our ROI calculator (pictured below).
You can calculate the following ROI metrics automatically based on your preferences. These metrics will make it easy for you to compare the suggested properties by real, visible data. Some of the most important metrics that Lofty AI focuses on are Cash on cash return, cash flow, and cap rate.
The following sections explain these metrics in more detail, how to calculate them, and why they are important.