The real estate industry isn’t exactly known for being receptive to new technology. Many in the industry view technology as unnecessary, as countless people have built real estate empires and made untold millions from hammering the phones. Today, though, it’s getting harder and harder to compete in real estate without technology. In particular, there are three distinct advantages of technology that should have real estate professionals more open to adopting new developments.
Technology can help you conduct more business.
Whatever your role within the real estate industry, everyone can agree that you need to do more deals to make more money. If you’re an investor, you need to underwrite and bid on more investment opportunities. If you’re a broker, you need to convince more people to list their properties. If you’re an appraiser, you need to complete more appraisals — and so on.
My firm has found that the average real estate analyst takes several hours to initially underwrite a property and understand its surrounding market. This means looking at nearby properties and identifying rent comps, analyzing rent growth and demographic trends in the market, quantifying any value-add potential (whether through physical or operational improvements) and distilling everything into a concise summary to discuss with management.
People have limits, though. Just as you’d hire more people to increase volume, technology can be “hired” to improve deal flow. While CRM systems have had better adoption in the market helping real estate professionals track customer conversations, analytical tools have yet to really be adopted. Many analytical tools can be employed to help your analysts leverage data more effectively — reducing those hours of analysis time to only a few minutes in some instances. Other tools can help you dynamically visualize the results of your analysis and achieve insights more quickly.
Technology can help you conduct better deals.
When it comes to determining the market value of investment properties, appraisers are among the most trusted voices. However, even appraisers aren’t perfect. A 2011 study on appraisal accuracy found that commercial appraisals are typically up to 12% above or below the subsequent transaction price.
To address this same issue in home sales, many automated valuation platforms have applied data science and machine learning to come up with automated single-family home valuations. This technology has been around in single-family for a while, but it’s now starting to be applied more and more in commercial real estate too. Our product uses a similar approach to provide automated underwriting tools for multifamily — but there are plenty of other valuable tools to help you better analyze individual parts of deals.
As we all know, money is made in real estate when you buy a property. Today, technology today can help you make smarter acquisitions and improve returns.
Technology can help you resolve disagreements.
Have you ever seen asset management and acquisitions teams disagree on the feasibility of rent projections? Have you ever seen a broker and an owner disagree on rent comps? Of course, if you’re in real estate, the answer to both questions is yes. It’s bad for both clients and brokers when a deal is taken to market at the wrong price, and it’s bad for any company to have internal tensions. And no one likes to admit they’re wrong.
I think the most useful application of real estate technology is to be “the bad guy” or the tie-breaker to help resolve disagreements. It’s very common to point to third-party surveys and reports to justify assumptions, but it will likely become more and more common to do the same with new technology products.
From increased efficiency to increased accuracy to making the best investment decisions, today’s real estate technologies are here to help. Real estate professionals should be more open to technology — it’s an essential piece of the business today.