Our world is rapidly changing with innovations and improvements to technology, and the real estate industry is no exception. Read on to find out how technology has changed the real estate world. In this article, I outline 3 major types of PropTech and their impact on real estate.
Kent Ritter is an experienced multifamily investor and entrepreneur empowering you to build real wealth through real estate syndication. Learn More.
What is PropTech?
PropTech specifically refers to technology that relates to or impacts the real estate industry or property market. The technologies have wide implications for both consumers and real estate professionals.
PropTech companies work to make all aspects of the real estate industry efficient and easier to access through technology. This includes property management, buy and sale transactions, property showings, and more.
Overall, PropTech targets pain points in the real estate industry – parts of real estate interactions that are difficult, expensive, inconvenient, or even unsafe but can be improved through technology. Below we explore three major sectors of the PropTech trend.
1. Big Data
Big data refers to one of the hottest and largest portions of the tech industry right now. Companies retain and analyze extremely large amounts of data in order to find patterns to predict consumer behavior. It is called “big” data because the volume of it is on an unprecedented scale. Simply storing is an industry all of itself.
Big data receives so much attention because of its potential. By learning and predicting human behaviors, anybody with an item or service to sell better learns their consumer needs and motivations, how to find them, and when to target them. This has major implications for how we attract and retain residents.
We expect that once harnessed, big data will change what we know about consumer demands and population shifts in any given market. This can help investors better hone in on a specific market, but it will also lead to more competition as this information becomes available by means other than local knowledge and research.
To some extent, real estate websites like Zillow began the data revolution in real estate by simply providing consumers with easy access to property listings. Big data can provide equally useful information in the opposite direction regarding renter behavior and market performance.
2. Virtual Reality and Artificial Intelligence
The specter of human workers being replaced by machines has been part of the cultural zeitgeist for decades. However, behavior changes from the pandemic may make some changes truly feasible.
The pandemic encouraged cross-country moves and a transition to virtual interactions, and technology can combine these two preferences through virtual reality and artificial intelligence.
Currently, real estate agents frequently create video walk-throughs of listings to provide a more complete picture before prospective buyers or renters take the time to visit a property in person. That experience can be expanded with a life-like experience that allows people to see themselves in the home.
Staging could similarly become a virtual experience for a fraction of the price of buying or renting items. Finally, artificial intelligence could provide customized tours and replace the need to coordinate schedules with a Realtor or leasing agent.
Initially, these features may seem more convenient for consumers than real estate professionals, but they can be tools to help professionals provide more efficient service with less physical risk to the professional. Ideally, PropTech solutions will also free up more time to take on additional clients or pursue additional investment opportunities.
3. Internet of Things
While the Internet is a web of information, the Internet of Things (IoT) refers to devices with sensors or other communication mechanisms that relay information over the internet or other communication networks. For example, smart home technology is part of the IoT.
The IoT has major implications for property management in particular. IoT can automate many preventative maintenance inspections, track the functionality of major appliances, and predict energy usage. Ultimately, the IoT may be able to replace in-person property inspections as a building would generate all the data automatically.
Additionally, landlords can expect tenants to show preference and demand for properties that feature IoT, and of course, sufficient Internet to support the devices. Smart locks, security systems, and home management are all increasingly popular amenities.
Takeaways for Investors
Property owners need to embrace PropTech to stay competitive. Through improved efficiencies, PropTech increases returns, giving investors the best returns on each property. As the use of PropTech becomes more pervasive, owners who resist PropTech may find themselves falling behind competing properties and investors.
Kent Ritter is an experienced multifamily investor and entrepreneur empowering you to build real wealth through real estate syndication. Learn More.
