The past few years have been all about the ways in which artificial intelligence (AI), big data, and machine learning are disrupting the old modes of conducting business. That’s why it comes as a surprise that a trillion-dollar industry such as real estate has not been disrupted in the same way and to the same extent as other major industries like finance, insurance, telecommunications, education, and health care.
This is not to say, however, that some tech-driven startups have not taken the first steps in this direction, paving the road for many others to follow. Here are the five technology-driven startup companies which have been leading the long overdue disruption of the traditional real estate industry:
Top five disputers to the real estate industry
Among all breath-taking developments which have revolutionized real estate in the past decade or so, crowdfunding deserves to be ranked as number one. And Fundrise has been a pioneer in this trend. Founded in 2010 in Washington, D.C., this real estate crowdfunding platform opened the doors to the exciting – and profitable – world of real estate investments to common people with no knowledge of real estate and very little money. Traditionally, real estate investing was a privilege reserved for those with thousands of dollars in savings as, even with a mortgage, an investor still needs to put down at least 20% percent of the property price. This is no longer the case after the launch of Fundrise.
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This revolutionary real estate investing platform allows common people to start investing in properties with as little as $500. This is something which even the biggest dreamers could not imagine a few years earlier. Creating the notion of electronic Real Estate Investment Trusts (eREITs), this fintech startup changed the face of the real estate industry once and for all by providing universal access to commercial real estate investing.
Another major technological breakthrough in the real estate industry was the introduction of blockchain, and Atlant was one of the leaders in this regard. This decentralized blockchain platform tackled two main challenges in the investment rental property industry. First of all, by using tokenized ownership, the London-based company allows even part-time investors to trade shares in individual real estate properties in a transparent and orderly market with price discovery.
This solves yet another challenge which real estate investors have been facing since the dawn of time – the illiquidity of property investments compared to stocks. Second, Atlant, which was founded in 2017, has optimized the global rental process with peer-to-peer (P2P) rentals. This strategy minimizes the fees for both lessors and renters in addition to reducing the possibility for forged ratings and reviews which exists even with such companies as Airbnb and Booking.com.
Real estate investing was disrupted not only in terms of trading with shares of commonly owned properties but also in terms of buying individual investment properties. Established in 2014 in Campbell, CA, Mashvisor turned a three-month research and analysis process into 15 minutes. Specifically, by plugging big data and predictive analytics into machine-learning algorithms, this startup helps investors in identifying the top-performing neighborhoods for investing in rental properties in any US city or town as well as in finding the most profitable property there based on different investment criteria such as property price, size, number of bedrooms and bathrooms, construction year, and preferred rental strategy (traditional rental or vacation rental). This online platform placed beginner and part-time real estate investors on equal footing with experienced, full-time investors and stripped the latter of their traditional competitive edge.
Technology has revolutionized the real estate industry not only with regards to investments but also concerning the home buying and home selling processes. The San Francisco-based startup Opendoor has been one of the forerunner iBuyers in the US housing marketplace. Founded in 2014, this tech company allows ordinary people to buy and sell their home in a matter of days, without ever contacting a real estate agent, setting up a single “For Sale” sign, staging for one open house, or visiting dozens of houses. Needless to say, this development has not only accelerated and facilitated the process of selling real estate properties but also pushed up the profit margin for sellers who no longer need to pay agent fees. After the success of Opendoor and the establishment of other so-called iBuyer companies, the traditionally dreaded real estate transactions will never be the same again.
In spite of the advancement of iBuyer startups in the last few years, the perception that AI and high-tech might replace real estate agents and brokers is erroneous. Real estate is a people’s business which sometimes depends entirely on the interaction between humans to move deals forward. Indeed, big data and machine learning have been used to effectivate the day-to-day tasks of agents. In 2013 Revaluate emerged as the first third-party AI validated supplier of leads for agents and lenders.
The Golden-based company employs machine learning and AI to analyze big data in order to identify the people who are most likely to move to a new location soon. In this way real estate agencies as well as mortgage institutions gain immediate access to qualified leads with zero efforts, something which they could not even imagine before the disruption of the real estate industry. The emergence of this new technology supported by big data and predictive analytics allows real estate agents and brokers to focus their efforts on the processes of lead nurturing, communication, and conversion down the sales funnel instead of spending all their time and energy on lead generation.
Changes to real estate industry: Conclusion
These five tech startups have been in the driving seat of the real estate industry disruption and revolution in the past decade. Their innovative approaches and solutions to the never-ending challenges of the real estate business have inspired many other entrepreneurs and thought leaders to follow suit and have paved the way for other companies to join in the long overdue disruption of the industry. What is to come next in 2020 in the revolutionizing of the real estate business is beyond our imagination, just as these five companies were unimaginable at the beginning of 2010.