Many real estate investors use Zillow rental data to inform their decisions. But is it the best application out there? Let us find out.
Zillow is one of the most popular rental tools on the market today, with millions of active users. Just last year, 234 million users visited the site.
Table of Contents
- What Is Zillow Rental Data?
- Pros and Cons of Using Zillow Rental Data for Analysis
- 4 Zillow Rental Data Alternatives for Investors to Use
- What’s the Best Zillow Rental Data Alternative?
It’s mostly due to the fact that Zillow is a very useful platform for connecting landlords and tenants. But because it’s very tenant-centric, the rental data Zillow provides reflects such a fact.
For investors who are looking to purchase properties to use as short term or long term rentals, it may not be enough to make a balanced decision.
In this guide, we’ll take a look at what Zillow rental data is, what are its benefits and drawbacks, and what services you can use to supplement the real estate data Zillow provides. Join us to also learn more about Zillow rental data alternatives, including Mashvisor.
What Is Zillow Rental Data?
Zillow rental data is a weighted algorithm that can estimate home values in a given region and rent prices, as well as predict a rise or fall in home prices with a varying degree of certainty. It also provides statistical data based on listings placed on the platform. The data includes the number of new listings, sale prices and price cuts, average days to sale, etc.
Zillow Observed Rent Index (ZORI)
Investors will mostly be using Zillow Observed Rent Index (ZORI) and Zillow Home Value Index (ZHVI). ZORI is a monthly rent report that can be filtered by zip code, county, city, or state. The report presents a mean of the typical rent pricing that falls within the 35% to 65% percentile. It’s weighted by the type of home and its construction date, so the price reflects the market average.
ZORI is a monthly statistic that makes it handy for understanding market dynamics and making projections.
Zillow Home Value Index (ZHVI)
ZHVI is an index of housing prices in any given area that’s based on a weighted average of Zestimates for a select group of homes. It’s a handy way to check pricing dynamics in the neighborhood where you want to purchase an investment home.
The accuracy of the index, however, heavily depends on the accuracy of Zillow market data, which as Zillow itself states, can vary quite a bit. In some areas, Zestimate can land within 15%-20% of the actual home price. But as far as estimates go, it’s a good way to do a rough calculation of cash on cash return.
Zillow calculates a forecast of home values based on ZHVI for each month, quarter, and year. The other statistical data that is freely available on Zillow includes:
- For-Sale Inventory
- New Listings
- Newly Pending Listings
- Days to Pending
- Median List Price
- Median Sale Price
- Sale-to-List Ratio (mean/median)
- Percent of Sales under/over List
- Days to Close (mean/median)
- Sales Count
- Share of Listings With a Price Cut
- Price Cuts
With the above metrics and a bit of Excel knowledge, you can run estimates on how likely you are to get a discount when bargaining for a home and how fast homes are being bought.
Pros and Cons of Using Zillow Rental Data for Analysis
Zillow may be the most commonly available source of rental data out there, and granted, it does work with millions of homes to calculate its pricing indexes. But it’s not perfect. Using Zillow as your rental data provider comes with both benefits and drawbacks.
Let’s take a quick look at both sides of the coin.
Pros of Using Zillow Rental Data
The biggest benefit of using Zillow rental data is that it’s a very fast way to get access to a pretty decent pool of data. Despite its flaws, Zestimate is not terribly inaccurate and can be used to get a rough idea of what home and rent prices are in any given zip code.
In addition, the dataset Zillow provides is historical. You’re not only getting one estimate for the current pricing, you can see all monthly estimates since the tool started gathering rental data.
It lets you build a model and see which neighborhoods demonstrate greater home appreciation rates, assess the rent dynamics, or understand how many homes are being sold in the area. They are all important factors that can influence an investor’s decision on where to invest.
The best thing about Zillow’s rental data suite is that it’s free to use for absolutely everyone. Even if you’re not a registered user of the platform, you can download a data set from the Zillow website. Then, you can run it in Excel to analyze it or just browse manually to find a place with the pricing that you’re looking for.
Cons of Using Zillow Rental Data
Zillow’s rental data estimates heavily rely on its proprietary home valuation tool, Zestimate. However, the tool isn’t perfect and can’t be used reliably as a measure of the home price. According to Zillow, the median error ranges from 3% to 9%.
For off-market properties, less than 50% of Zestimates are within 5% of the sale price, with most estimates landing 20% off or more.
It makes the figures you see in ZHVI a bit unreliable as they’re based on Zestimates. Zillow does put a lot of effort into making the index as accurate as possible by weighing the data to prevent poor data and outliers from influencing the final results.
What weighing algorithms can’t change is the set of data Zillow works with. It doesn’t provide all the rental data necessary to make informed decisions. For instance, Zillow doesn’t gather walkability scores or pricing for short term rentals.
Another drawback of using Zillow for property data is that its indexes don’t go that deep. The platform lacks data analytics tools and doesn’t provide vital metrics like estimated cash on cash return, cap rate, etc.
If you want to calculate the said metrics on your own, you’ll need to run Zillow data through Excel templates. It’s still possible when it comes to long term rentals, but it requires you to either develop a data analytics solution on your own or purchase a subscription to a third-party one.
4 Zillow Rental Data Alternatives for Investors to Use
Zillow is far from the only company on the market that offers rental data. Let’s take a look at four competitors that can be used instead of Zillow or as a way to complement its dataset.
1. Trulia
Trulia is a part of the Zillow Group, so it uses pretty much the same data as Zillow for home pricing and rental data. However, there are some data points on Trulia that can be useful to an investor.
Trulia is different in how it approaches data. One of the most important pieces of data that you can find on the platform is reviews from the locals.
The platform features reviews from locals on such matters as school district quality, walkability, and the number of restaurants and businesses within walking distance. You can also find reviews on the overall look of the neighborhood and many other things.
Though the reviews are subjective, they can serve to understand how well-kept a neighborhood is. It’s important for the tenants who are looking for a nice place to stay, but it’s even more important for investors. Checking with Trulia rental data ensures you buy a rental property in a place that looks nice and that tenants will like.
Access to Trulia API is free, but just like Zillow, it lacks data analytics tools, and you’re stuck with Excel or any other data analytics tool you use.
2. Zumper
Zumper is a primarily tenant-oriented platform, and it gathers data on national rent. Its dataset can be incredibly useful for investors, too, as it provides lots of data on rent. It can be used to estimate your potential monthly rent payments and calculate the cash on cash return based on them.
Zumper creates a monthly rent price index based on millions of active listings. The data serves as a basis for the rent change report, which shows month-over-month and year-over-year price changes.
It then highlights the largest falls and rises in rent prices, prompting investors to understand what areas are the most lucrative for investment.
The downsides are that the data set is limited by rental pricing only and that Zumper doesn’t provide data analytics tools. Essentially, it’s a free data set like the ones Zillow or Trulia provide, and you need to analyze it yourself.
It can be a good way to quickly check year-over-year rent growth rates to estimate what the future returns are going to be.
3. Redfin
Redfin is a source of much more complex real estate housing market data. It gathers housing data on millions of properties from the MLS and other third-party services and compiles dozens of data points.
The main data points include median home values and rent sorted by most prominent metro areas, as well as median mortgage estimates. They allow investors to see the difference between a rent payment in any given metro and an average rent with a 20% down payment.
What’s even more important for investors and unique to Redfin is data that shows housing supply and demand. Redfin gathers data on the number of homes listed and the number of homes sold and calculates the sale-to-list ratio along with dozens of other statistics.
Such types of data let investors understand how good are their chances of purchasing a property and how big the demand is for any given metropolitan area.
Another statistic provided by Redfin that helps you make an informed decision is the state migration rate. It shows what states lose population and what states are popular with people moving within the US. It’s a quick way to understand what states are going to see more rent demand and potentially direct your attention to those states.
Redfin data is free to download, but as with the datasets above, you’ll need to analyze it on your own.
4. Mashvisor
Mashvisor is a well-rounded tool for a real estate investor. It provides plenty of rental data and the means to analyze it. It serves as a platform where investors can discover and purchase rental properties.
Mashvisor’s home pricing and long term rental pricing data come from the most prominent platforms as well as the MLS. It analyzes millions of data points to create a pricing index that shows average pricing across the US that can be filtered by state, city, or county.
Unlike all the data sources above, Mashvisor also provides data on short term rentals like Airbnb occupancy data and average rental income on the platform. All the data comes directly from Airbnb and is as reliable as it gets.
It gives an investor an opportunity to compare income from long term rentals and short term rentals to decide whether they want to venture into an Airbnb investment.
Mashvisor goes a step further than most rental data sources and provides rental comps for all neighborhoods in the US. It automatically estimates key metrics like cash on cash return, cap rate, and rental income. The best part is that it doesn’t require the investor to deal with data analytics that much.
All the data for both long term and short term rentals are presented for every home listed for sale. It’s fully integrated with the listing platform and lets users find homes worth investing in faster. They can even apply a heatmap filter to the map when browsing to see areas with high rental income.
Mashvisor’s Real Estate Investment Calculator
If a quick estimate is not enough for you, Mashvisor provides a solution for calculating rental profitability. Its proprietary real estate investment calculator can work with a combination of data points. You can use market data provided by Mashvisor, like house price and rental income, and data provided by you, like mortgage rate and renovation cost.
The calculator returns all sorts of statistics like cash flow or cash on cash return that can be used to estimate whether the house you’re looking at is the best investment property.
Since it’s such a complex data analytics tool for real estate investors, it’s not free. The pricing starts at $17.99 per month when billed annually.
If you’re interested in whether Mashvisor’s worth it, claim your 7-day free trial to test the waters.
Investors can use Mashvisor as a well-rounded solution for their real estate investing needs.
What’s the Best Zillow Rental Data Alternative?
So, Zillow provides a pretty good data set to do rough estimates and run calculations on your own. What can its competitors offer?
Trulia is also a part of Zillow, but it provides more in-depth data on the overall quality of the neighborhood that includes school ratings and even a rating on how well-kept the lawns are. It’s an important piece of data for investors.
Zumper provides more insight into how rental pricing is formed, with stats on where rents fall and rise month over month and year over year.
Redfin is a wealth of knowledge on market supply and demand. It can be used to see what areas in the US are particularly in demand with both investors and tenants. It gives you a prompt on where the hot markets are.
Mashvisor is a more well-rounded solution that provides unique datasets like short term rental data and a platform for finding properties for sale. Most importantly, it gives you the tools to assess the profitability of your rentals.
Want to know how Mashvisor works? Schedule a demo today and a product specialist will walk you through every aspect of the platform.