How to invest better using Artificial Intelligence (and what’s got Elon Musk worried).
You've probably heard of artificial intelligence by now?
It's the technology Elon Musk and other visionaries are very worried about. It’s the technology that powers driverless cars and that creepy Facebook feature that automatically tags your friends when you upload photo’s.
In fact, recent studies show AI can now recognise photos with 96% accuracy compared to us mere mortals at only 95%. And it’s only the beginning.
AI can also guide property investors into the right location depending on their unique requirements right down to budget and whether they are 'developing to sell' or buying for capital growth while enjoying positive cash flow.
And “Property AI" is here now, and has been for while.
But what is AI and why are people talking about it now, and what will it mean for you as a property investor? Is it something to be excited about or is it something to worry about?
What is AI?
AI are computer programs that try to replicate how our brains work. What separates AI from most other technologies like data scoring systems (remember the old "DSR Score") previously is it’s ability to learn from experience based on logic combined with almost unlimited data to feed into this feedback loop.
In property investing, our BoomScore is fine-tuned using neural network that replicate the brains ability to look for indicators in property data to determine what is predictive of capital growth.
The sheer volumes of data our AI processes makes it much smarter than any of the most accomplished property market experts .... and... it learns faster. Much faster.
We recently fed over 5 years of our DSR BoomScore™ property data into our ‘back propagation' neural network to compare the correlations between a suburbs BoomScore and capital growth. It examined over 10 million variations of the eight supply and demand data indicators grabbed from over nine online sources:
- Auction clearance rates
- Vendor discounting
- Online search interest
- Proportion of rents
- Vacancy rate
- Rental yields
- Stock on market percent
- Days on market
This training process takes a huge amount of computer processing to fine tune. One of the early simulations (see image below) was run on a computer with 24 cores with 256 GB ram.
For the non-tech people: that’s a LOT of processing power and certainly vastly superior to the analysis an experienced market analyst could do in a thousand lifetimes…unless they too are using custom AI.
AI systems have to be trained, which is a process of adjusting these checkpoints in the various property stats to achieve better results.
Why are people talking about "Property AI”?
Traditionally property investors have relied on what they read in property magazines or the biased opinion of others to help them decide where to invest and what property type to buy.
But if you ask the person making a recommendation often the advice is based on ‘estate agent speak’ or with a discernible commission motivation. This is, of course, a generalisation but even the most well intended and informed advisor cannot process the vast property data that grows online exponentially every day.
Investors searching Google or the property portals find it very difficult to compare data or apply meaning to the data.
How will AI help you invest better?
Here’s a small example: using one of the eight stats above, is Suburb A with a 60% auction clearance rate a better investment option than Suburb B that only had one auction compared to Suburb Bs 20 auctions?
A 100% ACR implies Suburb B is in high demand and therefore prices could creep upwards. Not so?
Not really. AI is able to process and compare all eight property stats above and consider how much data is behind each stat to give it a level of confidence. It can so this for every suburb in Australia and consider each in the context of property type.
Our AI technology looks at all 8 stats in combination and tells the investor:
”hey, this suburb actually scores very badly on all the supporting stats and this was the only auction. Why bother looking here. Here are 10 suburbs that better match your budget and strategy”.
This process helps provide a much bigger and more accurate picture of a suburbs investment potential without any experience or skill required by the investor.Soon AI will extend this to property selection and not just choosing a suitable location that matches your unique objectives.
Do you have as little as $20,000 that you wish to “put to work” and make significant property development type returns in a highly risk mitigated structure?
Find out about our latest offer by Joining our Priority Waiting List here.
Where clients would once be happy to filter a list of properties by area or price, they now want to be able to add in deeper layers such as the likelihood of a high return on investment. Artificial intelligence and specifically our BoomScore AI data can build these layers into the results of searches before a customer even thinks to ask them.
SPOILER ALEART: This is on the cards for our new Boomtown app in the development pipeline.
Soon novice property buyers or sellers will require far less human assistance and can expect to make far smarter investment decisions at a much lower transaction cost.
What does is mean for investors?
A practical result of this software is the removal of hours of manual manual research…combing through data sources and trying to make sense of it. But more importantly our investors have reported a greater reliance on their own ability as their confidence grows using tools like Boomtown.
So many others: Remember, AI will probably be a part of every company eventually.
Why is Elon Musk worried?
Tech visionaries such as Elon Musk are very worried about AI going rogue. He thinks AI has the potential to build on itself and create even smarter AI independently of humans thereby making us redundant and "slaves to the machines".
He says this is one of his main reasons for building Space X for interplanetary exploration to Mars. Basically making Mars a bolt-hole for humans in case we need to escape AI.
The problem with this, according to Demis Hassabis, the creator of Deep Mind, is AI would simply follow us to Mars.
One thing is for sure. AI is exciting, sometimes scary, but ultimately, AI is here to stay.
We are just starting to see the implications of the technology both here at Hotspotcentral and in a much wider world.
By the way, we use our own AI thinking when selecting a property development to sponsor on behalf of our panel of pre-selected developers.
I urge anyone with some "lazy equity" to invest to Register your interest here to receive an early look at the details of our next investment.