Forget those ads you see on YouTube or TikTok with some tech bro promoting a shady new platform or program to “corner the real estate market.” Suppress the gag reflex and stay with me.
Online scammers aside, have you noticed how a handful of technological advancements have transformed the real estate investing landscape? It happened gradually, with one small innovation at a time empowering real estate investors with new opportunities and greater convenience. Many of us barely noticed the profound transformation happening in real time.
Take a moment to consider the innovative technologies reshaping the real estate industry and revolutionizing the way investors approach buying, owning, and selling properties.
1. Real Estate Crowdfunding Platforms
Real estate crowdfunding originated in 2012 after the JOBS act made it possible for private companies and investment projects to raise money from the public. Fundrise became the first real estate crowdfunding platform, and other digital platforms that facilitate crowdfunding investments have proliferated ever since, making real estate crowdfunding a billion-dollar industry today.
These platforms enable individual investors to pool their resources to collectively invest in real estate projects or real estate loans, thereby giving them access to opportunities once limited to institutional investors or high-net-worth accredited investors. Investing in residential or commercial real estate with low investment minimums has never been easier or more accessible, thanks to crowdfunding.
Real estate crowdfunding comes in different flavors. Some, such as Arrived and Ark7, let you buy fractional ownership in rental properties. Others like Groundfloor and Concreit let you invest small amounts toward property-secured loans. Either way, crowdfunding gives individual investors a way to invest in real estate without having to maintain any tenants or properties themselves.
2. Tech-Driven Real Estate Investment Clubs
You need a lot of cash to invest in multimillion-dollar multifamily properties. Or do you?
Real estate investment clubs, in which a group of individual members make an investment together, have been around for a while. Investors in a club can pool their funds and collectively own a share of an investment property, sharing both risks and returns. This model removes one of the main barriers to entry and opens up investment opportunities that were once out of reach for individual investors.
Newer, tech-driven real estate investment clubs offer fractional ownership in private equity real estate syndications. Clubs like SparkRental’s Co-Investing Club scour the marketplace to find and vet investable deals, then invite members to join. Participants in each deal become partial owners of an investment LLC with voting rights and a share of the proceeds from the property.
All using tech platforms that let you view joint banking history in real time, transfer funds securely, access the joint LLC legal documents, and vote on decisions.
These clubs provide an avenue for individual investors to access high-value properties like apartment complexes, self-storage facilities, and industrial parks without having to commit hundreds of thousands of dollars to each deal. And they can help members to invest in diverse properties, including different types of properties in different geographic locations they may not otherwise consider.
3. Tokenized Fractional Real Estate Ownership on the Blockchain
No article about disruptive technology would be complete without tossing in the word “blockchain,” right? But in the real estate space, the blockchain really does open up unique investing possibilities never before possible.
By leveraging the blockchain’s decentralized and immutable nature, investors can confidently purchase digital tokens representing fractional ownership in real estate assets, much like shares of a stock. Because the “shares” exist on the blockchain, your ownership of them cannot be questioned or revoked.
Tokenized fractional ownership shares offer real estate investors a new level of liquidity and accessibility. Investors can buy, sell, and/or trade fractional shares of real estate assets on specialized platforms like Lofty, Propy, BrickBlock, and Harbor.
If you’re a bit gun-shy about investing in blockchain-based assets, however, these new and rapidly evolving marketplaces may not suit your risk profile. We’ve all heard enough stories about bogus assets in the cryptocurrency and NFT space to give us pause. You must conduct thorough due diligence before engaging with any specific platform to ensure regulatory compliance and assess the suitability of its investment opportunities. As with all things blockchain, buyer beware.
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4. Algorithm-Based Rent Default Insurance
What’s the greatest concern keeping landlords up at night?
Tenants defaulting on their rent — and having to chase them down for payments, file for eviction, clean out their abandoned junk, advertise the unit again, screen tenants all over again, yada yada yada.
Fortunately, you can now scratch that worry off your list. Several companies today offer rent default insurance, priced based on complex algorithms that predict the tenant’s likelihood of default. Check out Steady and The Guarantors as prime examples.
Some don’t even cost you any money. The Guarantors charges the renter directly, and they pay for it because the policy also covers any damage they might cause to the property, so the policy takes the place of a security deposit. Win-win.
5. Online Marketplaces for Turnkey Rental Properties
If you prefer a tried-and-true real estate investment, rental properties fit the bill. But becoming a landlord comes with its own set of headaches: you have to find suitable properties to buy, fix them up, and find tenants to occupy them.
Enter turnkey rental properties — homes or apartment buildings an investor can purchase and immediately rent out as-is.
Technology makes it easier than ever to vet, buy, and sell turnkey rental properties sight unseen. Online real estate companies like Roofstock connect investors with pre-vetted, fully renovated rental properties ready for immediate occupancy.
Through these marketplaces, prospective landlords can browse a variety of properties, access detailed financial and operational information, and make informed investment decisions. Some properties even come with tenants already occupying them and paying the rent every month (although make sure you screen them as if they’re new!).
Many of these platforms also offer property management services, so you can choose to focus more on being a real estate investor and less on unclogging toilets in the middle of the night.
6. 3D Virtual Property Tours
Uneasy with the idea of buying investment properties sight-unseen? Technology has a solution to make that part easier, too.
The pandemic forced the real estate marketplace to rely heavily on virtual tours, either with prerecorded walkthroughs or tours with a Realtor using Zoom. Even since then, new technology has revolutionized the way prospective buyers can view and experience properties for sale from anywhere in the world.
Advanced 3D scanning technology and virtual reality (VR) capabilities allow real estate professionals to create 3D virtual property tours. These interactive, self-guided tours provide an engaging and informative experience that goes well beyond traditional static images or videos.
With 3D virtual tours, potential buyers can navigate through a 3D model of the property at their own pace, virtually stepping into and exploring each room. They can rotate their viewpoint, zoom in on details, and even measure dimensions, giving them a comprehensive understanding of the property’s layout and features.
It offers a nice confidence boost when buying properties you’ve never physically seen.
Sellers and real estate agents who provide immersive 3D virtual tours of properties can expect more engagement with their listing and higher quality leads. Sharing a virtual tour across multiple platforms — including social media and listing portals — amplifies the property’s exposure to a broader audience.
7. Big Data and Artificial Intelligence
Big data paired with AI to help parse it makes a pretty unstoppable combo. Real estate investors will benefit from it, too, in ways we’re only beginning to understand.
Take pricing a property for example. When buying or selling a property, AI-powered algorithms can analyze the property characteristics, recent sales data, comparable listings, and market trends, to provide more precise property valuations. This data helps investors determine a fair price to pay for a property and can serve them in price negotiations during the buying or selling process.
Big data and AI can also streamline the deal sourcing process for real estate investors. Artificial intelligence algorithms can sift vast amounts of data from various sources, including listings, public records, social media, and news articles, to identify potential investment opportunities. This saves investors time and effort by providing them with a curated list of markets and properties that meet their investment criteria.
Perhaps worryingly, you could even use AI to find distressed sellers.
Investing in real estate inherently involves some risks, but big data and AI can help investors assess and mitigate these risks more effectively. By analyzing vast stores of historical data, such as property performance, market volatility, economic indicators, and even natural disaster patterns, AI algorithms can generate risk profiles and probability models that investors can use to make more informed decisions and take appropriate risk management measures.
Get the feeling that we’re only scratching the surface? Yeah, me too.
8. AI-Enhanced Predictive Analytics
How would you invest in real estate if you could predict the future?
Get used to asking yourself that question. Investors armed with AI-enhanced market analysis tools have begun using predictive analytics to try to predict future trends, identify markets with potential for growth, and anticipate market shifts.
Training AI on market data like historical sales, rental rates, demographics, and economic indicators can make a real estate investor look like they have superhuman predictive powers.
Predictive analytics uses AI algorithms to forecast future trends and outcomes. Real estate investors can leverage predictive analytics to anticipate market shifts, identify emerging neighborhoods, and understand the potential rental demand or property appreciation in a given area.
Sure, experienced real estate investors can sometimes intuit many of these patterns, but AI promises to make this skill widely available. AI algorithms can show investors unseen trends, help them understand supply-and-demand dynamics in a given market, and assess the potential profitability of a particular location or property type.
These insights enable investors to make data-driven decisions about which markets to target and which areas show the most potential for growth. This allows investors to make proactive investment decisions, such as buying properties in up-and-coming areas or selling at an opportune time before a market shift.
Real estate technology tools built from this data could even inform real estate development decisions. AI-driven predictive models could inform real estate developers where to expect to find potential customers in the future.
There are a few predictive analytics companies out there already, such as Smartzip, AirDNA, and Likely.AI, offering real estate investors a peek behind the curtain. Expect these to proliferate as the technology continues to improve and becomes widely adopted.
Technology disrupting real estate sounds scary, but it introduces savvy investors to a host of empowering and exciting new opportunities in the real estate industry.
You might see real estate technology referred to as “property technology” or “PropTech.” No matter what you call them, these changes in real estate technology trends will only accelerate from here. New real estate tech companies come online all the time, using the latest and greatest modern technologies to gain an edge in the competitive real estate business.
Eventually, I expect even local governments to use blockchain technology to track deeds and ownership history. That will make title searches nearly instantaneous and reduce closing costs. But the government is always the last to adopt technology, unless it’s used to spy or blow things up.
By embracing technology in real estate, real estate investors can diversify their portfolios, explore previously inaccessible assets, and enjoy greater transparency, convenience, and liquidity. As tech in real estate continues to evolve, investors should stay informed and adapt to these disruptive technologies to thrive in an increasingly dynamic market.♦
How do you see technology disrupting real estate? What do you see as the most promising tech in real estate these days?