Real Wave Capital Uses Data and Analytics to Level Development Playing Field, Create Economically Integrated Neighborhoods

Real Wave Capital, Seattle, Atlanta

By Meghan Hall

The process of development and construction is packed with nuance, and more than ever companies are relying on analytics to make critical decisions. Seattle development firm Real Wave Capital was established by former data analyst Ofer Avnery in an effort to build proprietary software that can make the development of both single- and multi-family product more feasible. Real Wave hopes that its technology will ultimately contribute to more economically integrated neighborhoods, especially in high barrier to entry, urban markets. The Registry spoke with Ofer on the company’s goals and the impact it’s created thus far.

Ofer, please tell The Registry a little bit about yourself and your background. How did you move from a background in data analytics to developing tech for real estate?

I have been an entrepreneur in the computers and data analytics industry for more than 20 years. I previously owned a business-intelligence and software-development company in Israel, called Highview. We worked with top-tier companies and public-sector clients on transferring business intelligence and data into actionable insights. The process for real estate investment and development is actually very similar. So, after selling my startup in 2011, I decided to move to Seattle, with the goals of focusing on better work-life balance and leveraging my capital for future wealth and income. I originally worked at Microsoft, where I was in charge of the company’s internal business-intelligence strategy. After doing a few property flips on the side, I then went all-in on real estate, starting Real Wave Capital, which I believe fills a critical void in the Puget Sound marketplace.

What prompted the founding of Real Wave Capital? What pain points within the residential industry does the firm seek to solve?

Realizing that analyzing deals takes a long time, not to mention it requires dozens of discrete data sources, Real Wave Capital was founded with a clear mission: to allow rapid, accurate and high-quality spotting of great properties that would be easy and profitable to improve. Before we started this venture, this type of knowledge belonged only to expert analysts. Now, through Real Wave, every employee and partner at the company has access to this critical market data, helping us to identify and secure high-yield urban residential properties.

How can Real Wave Capital’s approach help Seattle become more “economically integrated”? What does it mean to be “economically integrated,” and what factors make it difficult for cities to achieve this status?

“Economically integrated,” in my mind, means that families with lower incomes can live together with their higher-income counterparts in the same neighborhood, on the same street or within the same building. Real Wave is a front-runner in allowing more people to live in centralized, urban neighborhoods by providing both MHA affordable housing and MFTE – which together allow up to 1/3 of the units to be offered below market rents. 

 When evaluating the viability of a project, what data points does Real Wave scrutinize most closely? Why are these factors important?

When I’m accessing a project’s potential, I tend to look at three key points of analysis. First, we want to make sure the property, and its structure, are sound, with no underlying risk factors such as environmental liabilities, lack of a clean title, etc. We want to limit exposure in these areas, of course. Secondly, I need to ensure the project is profitable, which requires us to look at its potential up to 10 years down the road, based on population, demographics, access to transportation, utilities, and more. For instance, we give a great deal of consideration to rent-growth potential in Tacoma vs. Seattle, as the costs for labor and materials are largely the same from market to market. Third, we pride ourselves on providing a wholly different residential product than what’s currently being offered in these communities. Single-family rentals aren’t very plentiful, but demand is high, for example, and that’s what we’re focused on delivering in all our investment markets. 

As a result of these processes, Real Wave Capital has realized “significant” returns when compared to other strategies. How much more upside is Real Wave Capital able to procure using these strategies when compared with traditional development methods?

We can usually get the land for cheaper, based on our proprietary data-analytics engine, and we believe Real Wave tends to have better, more valuable insights into future industry trends than most of our competitors. So, these advantages help us to generate better returns for our investors — around 5% extra into the bottom line, by our calculations. Additionally, as mentioned earlier, Real Wave is developing non-traditional product to our tenants — single-family rentals in and near the urban core. This specialized approach contributes to our ability to out-perform the greater commercial real estate market. 

 Does Real Wave Capital have any intention of expanding beyond the Puget Sound? If so, where?

While we originally had no immediate plans to expand, we have recently set up shop in Atlanta, for a variety of reasons. One of my long-time industry colleagues, whom I knew in Israel, moved to Atlanta several years ago, and we reconnected after many years of going our separate ways. He originally built a proprietary data-analytics software package for major retailers, so we have a common appreciation of the power of business intelligence. He, too, started flipping properties in Atlanta, before we began discussing how we could leverage his skills for Real Wave’s expansion in the Southeast. We’re currently training the software and the team to be fluent in the Georgia residential code, but we’re largely focused on investing in and developing properties in Fulton County, near downtown Atlanta. There’s tremendous demand there for single-family rentals, given the extreme growth Atlanta has enjoyed over the past couple of cycles. We believe Real Wave will be incredibly successful in any number of markets where there’s a void of real estate market intelligence. 

 Where do you see the national (and Puget Sound) real estate market going in the next 12-24 months? Why?

Overall, I believe that prices will keep going up in the next few years, largely because of greater demand for rentals among millennials and shrinking inventory due to fewer construction starts, uncertainty around Covid and spiking labor and materials prices.  These together will keep pushing prices up in the near term. Employment is strong, too, and I expect that trend to hold steady, particularly in the urban centers. The key will be what landlords do in reaction to rising costs – how much will rents have to increase to make projects pencil appropriately. And, how will inflation impact the lending community? We’ll keep an eye on all these dynamic market factors as we continue to build out our portfolio in Seattle and other regional markets. 

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