Using FinTech to optimize real estate investments
Whether you are a real estate investor, entrepreneur, or just a financially savvy consumer, financial technology (fintech) has allowed great strides in optimizing real estate investments. Fintech involves using blockchain, big data, cloud computing or artificial intelligence to complete financial transactions. Most real estate technology (proptech) overlaps with fintech, allowing real estate agents and investors to manage their investments digitally.
Ways to use FinTech for real estate investing
The share of direct commercial real estate investment in the residential sector has more than doubled since 2007. By 2022, home purchases accounted for 28% of real estate investment transactions, making it a lucrative market. Whether you’re interested in investing or already own property, here’s how to make the most of fintech.
1. Crowdfunding platforms
One of fintech’s biggest influences on real investments has been the rise of crowdfunding platforms. These platforms allow individual investors to pool their resources and invest in real estate projects, providing reduced risk and more diversification. Crowdfunding also allows smaller investors to access real estate investments that would otherwise be out of reach.
2. Automated Underwriting
Fintech platforms can use machine learning and algorithms to analyze large data stores and provide a more accurate assessment of property values. This process allows for more efficient underwriting, reducing the time and costs associated with traditional real estate investing.
3. Smart contracts
Financial technology platforms can use smart contracts to automate the entire investment process, from deal sourcing to closing. Smart contracts, which are computer programs that automatically perform actions according to the terms of an agreement, reduce the need for intermediaries and streamline the investment process. They provide increased transparency, efficiency and security.
4. Real-time analysis
Real-time analytics and reporting allow investors to monitor their real estate investments and make more informed choices. Fintech platforms can provide real-time information on a wide range of factors, including property values, market trends and potential risks.
For example, single-family home prices have increased by 15.9% since January 2021, but investors can use fintech to keep a close eye on the housing market to decide when to buy and sell.
5. Digital currencies
Financial technology allows people to invest in real estate via digital currencies, reducing the need for traditional banking channels and providing greater security. Cryptocurrencies, such as Bitcoin and Ethereum, can reduce some of the risks associated with traditional banking channels.
6. Online property listings
Fintech platforms can change the way people search for properties. Companies like Zillow allow investors to review listings anywhere in the world, providing photos, videos and detailed descriptions for each property. They make the home buying process easier and more transparent for interested property investors.
7. Virtual tours
Traditional property showings can be expensive. Real estate agents must take the time to ensure that the property is clean, communicate with interested parties and show the property to several groups individually. When all is said and done, only one of those people will actually sign the papers for the home, meaning the other showings were essentially a waste of resources.
Fintech platforms are changing the way investors view real estate. Virtual tours can provide an immersive viewing experience from the comfort of your sofa, allowing everyone to save money on fuel, cleaning supplies and time off work. You can also realize you’re not interested in the home within the first few seconds, saving yourself the embarrassment of bailing out of a showing early.
8. Property management
Advances in financial technology, such as online banking, make it easier to manage properties. Landlords can collect rent from anywhere in the world at the touch of a button. They can also transfer funds to plumbers, maintenance workers and housekeepers through services such as Zelle or PayPal.
9. Blockchain
Blockchain is revolutionizing the way people invest in real estate. This distributed ledger provides increased data security, and you can use it to track property owners, reduce fraud and streamline the investment process.
The best real estate fintechs available
If you are looking for a financial technical service to help you invest in real estate – or manage your current investments – there are a wealth of resources available.
- Fiserv: This fintech service offers property management services to help speed up and automate payment collection. Particularly popular with commercial buyers, Fiserv also facilitates real estate lending by helping credit unions, banks and mortgage brokers underwrite loans.
- Open door: Opendoor allows interested parties to take virtual tours of properties. Notably, it also speeds up the home buying process by allowing sellers to offer their home to cash buyers, helping close the sale within two weeks. It is the perfect fintech if you want to sell a property quickly.
- Squad: Listed in Forbes magazine’s Fintech 50 four years in a row, Cadre allows individuals and companies to gain direct access to commercial real estate. It offers a wide range of services, including help with investment, process management and transactions. The company also allows investors to trade their interests on the secondary market.
- Divvy Homes: If you’re not ready for a mortgage but want to buy a home, Divvy lets you rent out while helping you save for a down payment. The company pays for the house in cash and covers closing costs, taxes, fees and insurance. In exchange, you make an initial payment of a percentage of the sale price.
- Generation home: This fintech company assesses how much home buyers can afford to buy without damaging their credit score. Generation Home’s main aim is to help homeowners start investing, so it does not support buy-to-let or interest-only mortgages.
- Roof covering: This fintech company offers to sell or buy properties with current residents, helping to maximize profits and provide a more stable source of income. Roofstock specializes in single-family home rentals and is one of the leading online marketplaces for property investors.
- Emoov: UK-based Emoov enables sellers and property investors to complete the buying process online. The fintech organization assigns users a single agent to help complete the sale. Today it is part of the larger parent company Mashroom.
- LendInvest: LendInvest focuses on commercial property rather than housing. It is a non-bank alternative mortgage lender based in the UK and specializes in helping investors and small to medium sized businesses.
- Your keys: Buying a new home or investing in real estate doesn’t have to be stressful. This fintech startup allows merchants and investors to quickly, consistently and transparently track the online purchase process in real time.
- Warranty: This German-based fintech offers rental insurance, allowing people to rent their home without paying a cash deposit upfront. For a low monthly fee, it pays landlords a deposit so people can move in earlier and with less financial risk.
- StackSource: StackSource provides commercial real estate inventors with the best options when it comes to debt and equity financing. After answering a few questions, you can immediately match with the optimal funding sources. The company has a team of advisors to help you approve the deal, so you can defer paying fees until the financing closes.
- Set point: Setpoint is building new infrastructure for asset-backed lending and property sales. It includes digital workflow tools that speed up document collection and verification, increase transaction throughput, reduce overhead costs and automate manual closing procedures.
- Crowdstreet: This Texas-based fintech allows real estate firms to connect with private equity investors. It gives investors more options when it comes to earning passive income, from industrial sites to multi-family housing. You can compare direct real estate investments and participate in crowdfunding projects to invest in large projects. Importantly, Crowdstreet allows you to make money without having to maintain the actual buildings you’ve invested in. It’s more like investing in the stock market than buying traditional real estate.
- Home pressure: When you need access to capital, Hometap offers a loan option that allows you to leverage your equity without taking on debt or selling your property. This fintech company gives you funds in exchange for a share in the home’s future value. It also gives you the option to settle anytime within the next decade, and there are no monthly payments or interest charges.
- Obligation: Security deposits can be steep, making them difficult for many tenants to pay. This fintech company provides landlords with a secure billing authorization that allows them to charge tenants for damages instead. It is a binding authorization and tenants cannot cancel it before the expiry date.
Obligo offers security to both landlords and tenants. Property owners can only withdraw a certain amount of money, and tenants can dispute unreasonable demands.
Make the most of FinTech
The traditional way of buying and selling property was long, tedious and – for many – inaccessible. Now virtually anyone can use fintech to help with any part of the real estate investment process, from the initial showing to closing a deal.
It offers investors new ways to analyze the market, obtain loans or collect rent from tenants, and is sure to shape the real estate landscape even more in the future.
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