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By Charles Sells
Real estate investors know that the real estate world is full of innovation. While many outsiders label the industry “stodgy” and slow to adapt to change, the reality is that real estate is full of imaginative and creative individuals dedicated to problem-solving both to the benefit of their own portfolios and to the benefit of every party in a real estate transaction. After all, no one knows better than a real estate investor that the “win-win-win” model is the key to investment success.
In 2022 as the rest of the world emerges from pandemic-induced lockdowns, real estate investors and real estate innovators are playing a bigger and more important role than ever in the health of the economy and in national well-being.
Not surprisingly, more people than ever are being drawn to real estate as an asset class as well as a place to live. Also not surprisingly, new technological, legal, and structural formats for investing in real estate are emerging as companies and investors strive to provide access to this valuable asset class to an increasingly avid and often unconventional investing population.
In 2022, as never before, the real estate industry is full of wild innovations. Here are three that smart investors will keep an eye on as the year progresses.
1. Crypto Real Estate
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Since the beginning of the blockchain, investors and entrepreneurs have been trying to figure out how to leverage the mania for cryptocurrency in a way that enables them to build bigger and better real estate projects. Many of the early attempts to release real estate-related “coin offerings” have suffered under the scrutiny of the SEC since they were essentially glorified syndications without any of the legal underpinnings, but more recent efforts have resulted in structures that, in some cases, purport to enable would-be landlords with as little as $50 to invest in a share of a specific rental property and then make decisions about the operations of that property via a series of polls conducted among dozens of similarly vested “landlords.”
Historically, it has been possible to participate in crowdfunded real estate projects at levels as low as $1,000, but driving the bar to entry as low as $50 has created a new type of landlord to go along with a new type of asset class.
Some analysts say that this new level of accessibility for investors is actually pricing would-be homeowners out of the market since large groups of investors with $50 each can easily put together a competitive bid via a platform that prices out an owner occupant. Others worry that these “1/50th” landlords will become absentee by virtue of their multifaceted nature and the potential for discussions about property and upkeep to stall if there is no supermajority reached in polling.
For investors who cannot invest in real estate via more traditional routes, these platforms could be a wonderful solution. However, if you can retain full ownership of a property and hire a good, local property management company to handle your assets, this is likely a case of “tried-and-true” works best.
2. Elaborate Remote Showings & VR
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Although the metaverse is not taking off quite as quickly as certain social media moguls might like, junior Millennials and Zoomers entering the housing market and looking to buy their first homes are demanding increasingly elaborate home showing options when it comes to remote viewings, 3D tours, and interactive floor plans for properties up for sale.
Given that these two populations will likely account for the formation of about 6.4 million new households in the next 2½ years or so, more and more single-family and multifamily investors are accepting the fact that the youngest generation of homebuyers is going to definitely favor the house with the best “gee-whiz” factor (no, they’re not going to call it that) when it comes to the showing as well as the actual amenities.
According to a study from Zillow, 59 percent of Millennials said they would buy a home online and sight-unseen (in person) and feel “at least somewhat confident” in their decision. 80 percent said they prefer viewing listings with 3D virtual tours and digital floor plans.
Zillow analysts noted that the respondents backed up their statements with actions; a home with a 3D home tour is 32 percent more likely to be “saved” than one without, and these homes also get 29 percent more views.
Fully one-third of Zoomers told analysts they would be comfortable buying a home online, and more than half said they would be at least somewhat confident making an offer without seeing the home in person.
All generations from Baby Boomers and the Silent Generation to Gen Z found the convenience aspect of new technology appealing; more than half of respondents 57 and older said they would prefer to unlock a home using their phone and tour it on their own, while younger generations were even more fond of this option. Gen X and Millennials favored it by more than three to one.
Real estate investors must embrace the emerging homebuying population’s preferences when it comes to showing homes. Otherwise, when the market inevitably cools, your promotional strategies may not beat the competition. However, be sure that whatever options you offer would-be buyers protect your property and privacy as well as the privacy of potential buyers.
3. Data Analysis & Machine Learning
It seems like every real estate firm that has ever used Excel to make a line graph now is boasting about their “machine learning” capabilities and how real estate investors should be using the company’s advanced “AI” to make decisions about markets.
Data has been the driver behind the best investors’ decisions and strategies since the beginning of private property ownership; today’s general consensus is that making that data and those decisions and strategies all part of one seamless, automated process is the best way to go because, well, technology.
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In most cases, you will find that technology is not generally as unique and groundbreaking as most companies would like you to think, and there is a great deal of value still to be found in simply reviewing all the information available about a market and potential acquisitions using your own learning.
Data analysis and predictive software are great, but do not get too carried away. If you are running a huge firm and need to deploy so much money that you cannot physically allocate enough time to make decisions about assets, then this stuff is invaluable. If you are personally supervising the creation and upkeep of a profitable real estate portfolio of your own, then this is probably overkill. Machine learning is great, but it is not infallible. Big companies have bottom lines that have room for “lemons” built in whereas individual investors often do not.
Innovation & Experience are the Best Combination
No matter what, the best investors rely on experience (their own or an advisors) as well as new technology when it comes to deploying capital. This combination will never be beat.
Charles Sells is the CEO of Platinum Investment Properties (PIP) Group, a boutique investment firm based in the southeast with more than 10 years’ experience in residential real estate. Learn more about emerging trends and the best markets at PIPGroup.com.