Sivan Blasenheim, Bricks Founding Partner
How Technology Can Help Real Estate Investment Sector
The US residential real estate investment market is dynamic and competitive. According to a report, the median sales price of a house was $299,400 in September 2019, with over 700,000 houses sold this year alone.
More and more millennials are investing in real estate as they believe it is a much better channel of investment in comparison to other investment sectors in the US market.
If you are a real estate investor without a proper understanding of the factors mentioned above, then real estate investment becomes formidable. Therefore, it is critical for real estate investors to make a timely and well-informed decision.
Traditionally, real estate investment decisions relied on experience, creativity, and good judgment. Investors relied on naïve risk assessments such as debt coverage, breakeven points, and default ratio. Additionally, they relied on local human experts and their opinions, as it was a gut decision at the end of the day. The good news is, technology is at the frontline today, facilitating both novice and expert real estate investors to maximize their investment.
Technology and Real estate investment Sector: a Discussion
Like other sectors, real estate investment is adapting to technology. Both consumers and markets are moving towards online platforms for business. Investing in real estate is easier than ever with technology, as you can investigate, access the information, and invest from the comfort of your home. Market giants saw the potential technology has to offer and adapted earlier. However, more and more individual investors are relying on tech tools for financial gains today.
Before we get into the details of how tech is reshaping the real estate investment landscape, let’s have a quick look at the current process of investment.
The Current Search Process
Our on-the-go lifestyle and trends are making these processes obsolete and less advantageous. The current process involves various approaches, depending on real investors’ needs.
Nowadays, many people rely on online search when it comes to making important financial decisions; real estate investment is no exception. Search is the first step to real estate investors. Andrew Keene mentions in his book that over 90 percent of investors look online before approaching a realtor. This way, they can efficiently identify promising investment opportunities and evaluate potential returns.
Real Estate Agents
These agents assist with buying and selling of residential, commercial, and industrial real estate. Although you will unlikely find an agent with expertise in all. The industry relies on real estate agents specialized in a specific area.
Traditionally, a real estate agent played a significant and critical role in the deal-making right from the beginning of the process. However, this came at a price of limited exposure to the market because an agent’s expertise is in the local market where he works and knows the local market culture and trends.
Therefore, this limits the investors to one market and prevents them from operating in other markets. An investor had to rely solely on human expert opinion, which could be wrong sometimes. Plus, there was limited access to information, and chances of human errors causing financial damage to the investors.
However, technology has changed this trend and streamlined the investment process for accuracy and efficacy.
Challenges with Existing Search Process
In the last decade, technology started to change the way real estate investors’ worked. The market saw the rise of websites such as Redfin and Zillow, and they were the game-changers. They were the first to combine technology and the real estate sector.
However, they barely explored the tip of the iceberg and did not improve with time. They only gave information for the traditional searching process, which did no good for the investors.
The current real estate searching process has become less effective as the competition increases. Some of these challenges are:
● Investors require a lot of knowledge to get into the real estate investment sector.
● Acquiring market intelligence and insight is the biggest challenge. It also restricts investors’ ability to follow too many markets simultaneously.
Analyzing and evaluating transactions is a very complex thing
It is difficult to weed out bad deals from good ones. Investors must explore multiple markets. Exposure to more markets means more investment opportunities.
As technology progresses and people turn towards the internet for their needs, it becomes inevitable for the real estate investors to evolve and adapt to the new trends in the market. Only then will it be able to stay competitive and provide value-added opportunities to the investors.
How Technology Can Help Real Estate Investors
Tech development has come up with some excellent solutions to help real estate investors.
Data Collection and Customized recommendations
Big data is one of the most popular and fastest-growing trends in real estate investment. As its name suggests, “Big Data” is a collection of huge volumes of data. It helps in the evaluation of the market with predictive analytics and makes intelligent recommendations to investors.
There is a massive collection of data available in the present time. According to DOMO, the world is creating over 2.5 quintillion bytes of data per day. Real estate investors never had this kind of access to information ever before. The combination of computing, technology, and data get the investors closer to decoding the DNA of real estate investment.
For example, instead of searching for the properties depending on their location and someone recommended agent broker, investors can use platforms relying on data and analytics to their advantage. All this information gives them insight into what the market trends are, and which assets are worthy of their investment.
Machine Learning and Artificial Intelligence
Thanks to Artificial Intelligence (AI) methodologies, real estate professionals can gain extensive knowledge about the ROI and risk involved of all their investors individually. Here are some of the promising aspects of this technology that are helping the Real Estate Investment Industry evolve.
● Finding the investment value of a Property
● Predict the real-time demand in the market, based on the location and listing features.
● Predicts the accurate pricing of property by location, capacity/space, age of the structure, energy efficiency, and quality of life in the locale.
It can consider variables, such as commute timing and mode of transports in the area.
Machine learning carries out an analysis of past interactions and deals pertaining to any property. It helps the investors understand the parameters for matching offers.
The features and advantages of AI are far more extensive. They include predicting long term value (LTV), classifying investors’ needs, automation of the commercial mortgage underwriting process, generating real estate listing bios, commercial property segmentation, and much more.
Although technology helped many platforms to enter the REIT sector, most were targeting to help agents, renters, and homeowners. You could hardly find an online platform that was catering to the needs of real estate investors. This void gave an opportunity to technological platforms, to step in and assist the investors. Those platforms operate on a core purpose, which is to make the real estate sector more intuitive and more accessible for the investors. Those platforms make it easier for investors to search for potential properties according to their preferences.
It is All about Smart Investment
While real estate itself stays a physical affair, the transactional aspect is heading for digitalization. The technological advancement in the real estate investment sector will continue to favor those who adapt. Therefore, it is high time to get on board.
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