Stop Guessing Real Estate Deals: Using Predictive Analytics for Smarter Investing

Masoud Arouni (00:00)
The advice is try to look into all of the possibilities and all of the factors, all of the contributing factors in making something work. Do not look at the ideal situation. Always look into three different levels, the base, the middle, and the ideal one and compare them with each other before taking any decision.

Decisions should be based on the numbers and not on the feelings and on the sentiment. The sentiment might not give you the right, but the logic and the numbers gives you a best picture of reality.

Scott Bursey (02:16)
Welcome back to the Real Estate Pros podcast powered by Investor Fuel. I’m your host Scott Bursey And today we are strapping in for a high octane education on where the real estate industry is actually headed. Forget about gut feelings pros. Our guest is here to give you the data driven edge. We have Masoud Arouni the founder of real estate analytics, and he is bringing the ultimate fuel.

Masoud Arouni (02:24)
Thank you.

Scott Bursey (02:44)
the precision and software power required to find certainty in a volatile market. Get ready to upgrade your operating systems because this is going to be epic. Welcome to the show.

Masoud Arouni (02:56)
Thank you, Scott. Happy to be here. I’m honored to be on Investor Fuel podcast, and I’m looking forward to provide as much information and education as possible to the community and to podcasters here. Really, really honored. Thanks getting me into this, and thanks for having me in here.

Scott Bursey (03:18)
Masoud It is our pleasure. And for our listeners who may not be familiar, versed with your journey, please give us the front row seat. How did your career begin? And what is your main focus now?

Masoud Arouni (03:31)
Yeah, so I have been an investor here in Bay Area, California, 30 miles from San Francisco for the past eight years. And my background is software engineering, providing tools and applications for investors, for ⁓ insurance companies, as well as enterprise software companies, providing them with the tools that provide confidence in

in building their real estate portfolio and real estate investment, regardless of the nature of their real estate. Any sort of real estate that they have that they want to invest on or continue their investment on, they can use the tools and the means that I’m providing to them to go ahead with the deals with confidence.

Scott Bursey (04:24)
Masoud, that is awesome. Thank you for sharing that. And what really caught my attention about you was the way that you’ve been able to move beyond simple spreadsheets and pioneer truly predictive software that gives investors an unfair advantage, if you will, in the underwriting and portfolio management. It’s truly about turning raw data into high octane investment fuel.

Masoud Arouni (05:36)
Absolutely, Scott, absolutely. I couldn’t have nailed it better than you. Instead of using a spreadsheet and spending hours and hours and looking into the numbers and trying to get them to work, in the UI-based software that I provide, you have the ability as an investor to work with the numbers and sliders.

to look into your investment over the course of the time that you would like to spend and put your money in there. Say your 20 % down payment or the interest rate that you can get from the lender as well as the rate appreciation that you have on the rental property or the property itself to work with the sliders and get them to match your target.

your ⁓ end goal and looking into them together. And sometimes if the need be, you can have a comparison of the property investment. Put two properties side by side and look at them in a matter of 20 seconds, 30 seconds, rather than a few hours of work on the spreadsheet that at some point can make no sense and get you confused and overwhelmed. And you don’t really

get those numbers to really give you the holistic story of the projects.

Scott Bursey (07:09)
That’s a powerful start. Now let’s rev up the engines and get those RPMs accelerating. What is the single biggest data advantage your software gives users over traditional underwriting methods?

Masoud Arouni (07:22)
Yeah, the single best bullet or the silver bullet that I’m using is CCIM grade ⁓ formulas. Everything is CCIM based according to the nationwide institution that uses these formulas for IRRs, ROIs, cap rate, break even, and all of these numbers.

as far as the operational one is concerned and the exit ones are concerned. And looking into these numbers with the right silver bullet, which is a game changer across the industry, regardless of if the investment type that you work on is a residential or a commercial.

Scott Bursey (08:14)
Masoud, how much does speed play a factor in this?

Masoud Arouni (08:17)
Well, let’s look at the scenario of an investor from a financial institution, a really complicated one. They need to turn around something like 10, 15, 20 deals per day, and they don’t have time to look into this, you know, going into the spreadsheet from one to another. They need to have these reviewed in a matter of a couple of hours. 10, 20 different deals, look at them, categorize them.

and try to recommend them to the investors or get them ⁓ to the underwriting of the lenders, loan officers, so that the loan officers can approve them. So you got to make sure that you have enough speed and you can use this speed with the right pace when you look at these investments. You can’t, in today’s market, which is very, very volatile,

and very, very fragile at the same time. You don’t have so much time to spend on these on a spreadsheet. You need to get this visibility. You need to get this visibility with confidence. And that’s why you need a tool that brings clarity to your understanding, to your partners, to your LPs and NGPs, all of them at the same time.

Scott Bursey (10:18)
That’s right. It’s all about speed and precision. In this market, the pro who can underwrite a hundred deals faster than their competitor can underwrite 10 wins.

Masoud Arouni (10:30)
Correct.

Scott Bursey (10:30)
Let’s

shift gears just a little bit here. What is the most common operational friction point you see when real estate teams try to adopt new software?

Masoud Arouni (10:39)
Yeah, when they want to adopt the software, they have some hesitations in regards to where these formulas are all coming from. So in the modeling that I have developed, I have a user manual where in the user manual, all of the formulas are putting in with very simple examples.

And these simple examples clarifies each of their formulas, their origin, and how they’ve been used and applied inside the software. So that hesitation can be zeroed down, can be reset and taken ⁓ out of the scenarios, and the reality and the facts can be brought in.

Scott Bursey (11:26)
And what about training and culture? What kind of role does that play?

Masoud Arouni (11:30)
Trading and culture can have different nuances. You know, when you are used to using a spreadsheet and what you need to do, how you change the trend is by providing, you know, the same type of, you know, formulas as they use and put them side by side. Here is your spreadsheet.

And here is the UI-based calculation that I do. Get a verification of if you use this UI-based formulas, how do they verify and give you the same number when it comes to your spreadsheet? So it takes a little bit of time for this adoption. But once the adoption is, in fact, in place, then off you go. And you have the right speed on top of it.

Scott Bursey (12:24)
Thank you for breaking that down, Masoud. And very curious about this. What technology like AI or predictive modeling is the most overlooked opportunity for pro investors today?

Masoud Arouni (12:36)
The technology which is used are the ones that they need to have AI training in there. And here is the fact that within the financial and real estate industry, the models, the AI models that have been used are from the so-called grounded domains. What grounded domains mean is that

These are well-established formulas that are used out there. There is no need to train anything. There is no need to train the AI. Here, there is no need.

formulas that you do use. So AI has a role in grading things, but AI does not have a role in figuring out IRR or NOIs or cap rates or what have you.

Scott Bursey (13:30)
Fantastic point, Masoud. If I’m hearing you correctly, the true opportunity lies in using technology to predict future trends, not just analyze past performance. That’s a huge edge for our pros.

Masoud Arouni (13:43)
Yes, it is indeed. The past performance is ⁓ a good initial steps to look into the predictability of the markets going forward. If you compare a zip code on the East Coast and the one on the West Coast and compare them to each other, then you need to know what are the added values on either end. On one end, it might be the appreciation

of the rent and how the market has been doing for the past 10, 15 years. And on the other one, for the West Coast one, it might be the appreciation of the property itself, given the challenges that you might be seeing in the initial first few years of your investment.

Scott Bursey (15:13)
Masoud, you’re based in the West Coast. What markets, geographical markets are you operating in?

Masoud Arouni (15:19)
Yeah, I’m operating mostly from my side, from my investment here in Bay Area. However, I do model investment properties on the East Coast and ⁓ on the Southeast. So I am ⁓ pretty active in helping and educating investors on the East Coast as well.

Scott Bursey (15:43)
That’s awesome. And if somebody’s listening and they want to ⁓ learn more about your operation, what is the first thing that you would like them to know?

Masoud Arouni (15:52)
I would like them to know about, you know, where and how these formulas are extracted. And I would like to to really provide them a possibility of, you know, ⁓ getting connected with me. And then I can provide them with the ways and means of what sort of investment do they have in their mind? How do they want this to be?

projected going forward. And then I can bring them ⁓ a picture of the reality, a high level picture of the reality. And then it clears out everything for them going forward, how they would like to take it on, the challenges, so to speak.

Scott Bursey (16:39)
Speaking of reality, what do you feel is the biggest opportunity right now?

Masoud Arouni (16:44)
The biggest opportunity is that, you know, that ideal scenarios, they’re never going to come. If you wait for the best opportunities, not going to be out there. You know, any time is the best time. And if you wait for better days or better market situations, they’re not going to be out there at all. I mean, if you want to get into this industry,

You know, this time right now probably is the best time going forward. That’s my motto.

Scott Bursey (17:19)
That’s a good model. And what other advice can you give our listeners here today?

Masoud Arouni (17:26)
The advice is try to look into all of the possibilities and all of the factors, all of the contributing factors in making something work. Do not look at the ideal situation. Always look into three different levels, the base, the middle, and the ideal one and compare them with each other before taking any decision.

Decisions should be based on the numbers and not on the feelings and on the sentiment. The sentiment might not give you the right, but the logic and the numbers gives you a best picture of reality.

Scott Bursey (18:10)
Real data, not the instincts.

Masoud, this has been pure gold. Thank you for sharing your feel with us today.

That is wonderful, Masoud. And Masoud, thank you so much for joining us today.

And to our listeners, we appreciate each and every one of you. If you got value from today’s episode, please subscribe. We’ve got a lineup of exceptional guests, just like Masoud, who are making huge moves in the market. Until next time, keep your standards high and your vision clear. We’ll see you in the next episode, everyone.