The Data is in the Drywall | Durable Value Ep 83
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Joe Muratore: Ryan, as we scale our business, one thing that has come up over and over again is how do you build conviction? How do you make decisions? How do you build the quality of your decisions? And this phrase, uh, has popped up, and we're gonna talk about it today, but the, the phrase is, "The data is in the drywall."
I l- I personally love this phrase because, uh, we are vertically integrated operators. We are boots on the ground. We are touching the data, and, uh, maybe you can elaborate on that or kick us off, but why is the data in the drywall?
Ryan Swehla: I, I totally agree. Uh, real estate is a physical thing. When I first got out of college, I worked at a financial firm, and we did trading, and it was on computer screens, and it was numbers, and it was millions of dollars trading around.
That felt a lot like The Matrix, just numbers on a screen. And what I love about real estate is it is physical. It is unique. Every piece of real estate is different, and with that, the data is in the drywall is this idea, in my mind, is this idea that the real estate, the physical real estate tells you things, and it tells you things that allow you to build conviction and decision-making around that physical piece of real estate.
But it also tells you things about the world, about, uh, about the broader world and implications for our broader investing.
Joe Muratore: Certainly we use, uh, bigger data sources, Yardi, Yardi Matrix, CoStar. I mean everything, every property we manage is in Yardi, so we see data that way too. What about, like, unit turns and maintenance tickets and vendor feedback?
Uh, when we're at the properties, it's, well, how long is it taking to turn units or w- where are rents? What are we getting today? What sort of concessions are we doing or not doing? What are our competitors doing? Um, but our very best decisions come from property level data, so our ability it, to, uh, aggregate that data and use it in our investing decisions to choose which decisions we or deals we buy next, uh, to understand which deals are doing great and why, and which deals are more challenged and why, uh, that influences which markets we go deeper in.
That influences which assets we buy more of.
Ryan Swehla: Having the vertical integration of our people, boots on the ground at the properties, is a huge difference or a huge competitive advantage because we're not relying on, uh, the data of a third-party manager who doesn't have the same motivations as us, doesn't have the same lens as us, doesn't have the same culture as, as we have.
Having our people on the ground who are aligned with the vision, who are aligned with the investment strategy allows us to develop a, a, a greater level of data aggregation through the investments that we make because of that vertical integration.
Joe Muratore: Another big point about this is that on the acquisitions front, the, the best data we can have is the local data.
We love hearing, uh, about trends up close first and quickly before it hits, you know, national news or industry publications or even CoStar data, the, uh, national data that we track. The point is when we hear about rent increases or changes in the local market, we hear that first and we hear it internally, and we hear it from a trusted viewpoint, our people in the market and our data.
A key idea here with the data in the drywall is that we're trying to make sense of signals and know how to make decisions It's one thing to see numbers and trends on a computer screen, but you have to apply your personal bias, your institutional filter, your shared experience to try to know how to take action on that data.
But when you talk to your local apartment manager and they say, "Dude, we had nine move-ins last week and rents were up 100 bucks." Mm-hmm. "And our unit turns were only $2,500," it's like, whoa, let's act on that. Or when you hear things are slow and we're not getting what we want, we had to increase concessions, uh, rents are not this or that, you know, let's pause, or our, our competitors, uh, are doing this.
The actual intel on the ground, the vertically integrated intelligence is so much more powerful, and when you can integrate the data we subscribe to and have a lot of experience with, with the real data that we're generating in real time, you can generate real conviction for underwriting. And when you can underwrite that strongly, you can put a, a fine, you know, a fine point on your underwriting, and you can offer with more conviction, and that leads to, to much better deals.
Ryan Swehla: You know, it's interesting, the, the intersection between data and drywall because we think of, as I mentioned earlier, real estate as physical, it's unique, it has its special attributes, uh, each piece of real estate. And so one could go down that road and say, "Well, therefore it's all unique, and nothing's the same, and, and, uh, you know, data doesn't apply very well because, uh, it's, it's all a unique circumstance."
The flip side of that is, uh, everything can be understa- understood through, uh, data models. There's really flaws in both of those, uh, because... And that's where, a- and you're alluding to it a little bit, is this blend between physical learned experience and what data is telling us. One of the things that, that we see as a company going forward is real estate is a slow adopter of technology in general.
It's a slow adopter of data, of anything that's, uh, technology oriented. One of the things that we've recognized as a company is the more that we can be a front runner on embracing that technology- Yeah ... and embracing the data, it allows us to simultaneously have this very Physical, real experience that brings decision making and action, and overlay that or add that into our data aggregation to, to ultimately make better decisions.
I
Joe Muratore: think of Daniel Kahneman's book, Thinking Fast and Slow, type one and type two thinking. And on the one hand, uh, we subscribe to AI around here. We, uh, we have AI models, and this is where the industry's going, is that local trends plus Yardi data, plus, uh, you know, all sorts of data. How are your HVAC units doing?
How many, uh, maintenance turns did you have? What's your... Uh, all that is moving into a spot where it can be aggregated into decision making. At the same time, we have 55 assets, or we've, we've sold 13, but this is a small enough number of assets that we can still benefit in an outsized way from boots on the ground edge that comes from touching the buildings, sitting with your property managers, understanding their real-time feedback.
The opportunity for us over this next decade is to, uh, train AI models, uh, so that we're able to hear, get the same level of intelligence that we're able to get with boots on the ground, uh, but also build that model. And then even as we build that better, cycle back to real boots on the ground data, looking for pieces of intelligence that you just can't quite get or that AI isn't quite organa- organized enough yet to deliver.
It's a both/and.
Ryan Swehla: Yeah. B- because the, that actionable data that we get from the property, it doesn't just d- drive decision making in the market or the sub-market, it helps us drive decision making across the entire portfolio. And so that ability to have our own proprietary data coming in truly is that data in the drywalls that how, how the buildings speak to us in a data-driven way.
Joe Muratore: Ultimately, this is about edge. We're in the edge business, and edge can be a relatively small amount, but to get to the, that level of data, the walls, the very walls themselves, that's where greatness lives, and that's where we keep pushing towards. Ultimately, this is all about edge. It's about better decisions.
It's about less downside and more safety. It's about seeing things that others don't see. We're a secondary markets company. We are, we are all about edge. We move away from competition towards blue oceans, towards free space, and data in the drywall is, gives us a additional edge. And I think as you see our company progress, you'll see more, uh, better systems, uh, more data from more places aggregating into great decision making and downside management, and that's why we win and why we're going to keep winning.
In this episode, we dive deep into the concept of "the data is in the drywall" and how hands-on, property-level insights drive better decision-making in real estate. Ryan and the team discuss the importance of vertical integration, boots-on-the-ground intelligence, and blending physical experience with data analytics to gain a competitive edge. Whether you’re an investor, operator, or just curious about real estate, this episode is packed with actionable insights!
Timestamps:
00:00 – Introduction: What does "the data is in the drywall" mean?
00:46 – Real estate vs. financial trading: The physical difference
01:19 – How property-level data informs conviction and decisions
01:42 – Using big data sources vs. on-the-ground insights
03:09 – Making sense of signals: Applying experience to data
03:51 – Real-world examples: Move-ins, rent increases, and concessions
04:11 – Integrating third-party data with internal intelligence
04:58 – The intersection of data and physical real estate
05:25 – The balance: Unique assets vs. data models
05:46 – Real estate’s slow adoption of technology and data
06:16 – Embracing technology for better decision-making
06:36 – AI, local trends, and the future of real estate data
06:55 – The advantage of a manageable portfolio and boots-on-the-ground
07:23 – Training AI models and the ongoing value of human intelligence
07:48 – How actionable data drives decisions across the portfolio
07:56 – The ultimate goal: Creating edge through data in the drywall
08:16 – Less downside, more safety, and seeing what others don’t
08:45 – Why edge matters and how Durable Value keeps winning