November 24, 2020

Real Estate Fintech Transformation

Oleh Meleshko

The Change is Coming

Fintech has been a pervasive part of innovation in pretty much every single industry, delivering modern solutions to areas where they are needed most. And though it’s not the first choice for many, the real estate industry is also feeling the effects of fintech on it.

With new ideas and capabilities pouring in, the future of real estate is looking real bright. But there’s always a bit more underneath the surface so we’re going to look deep and see what upsides and downsides fintech brings to real estate.

“FinTech is not only an enabler but the driving engine” – Pierre Gramegna

A New Day for Real Estate

Crowdfunding is the next big craze for quite a lot of reasons. It makes high-end products more accessible, allows for sustainable creation of niche products and ideas, and acts as a platform for people to dip their toes into microinvesting. It’s especially groundbreaking since its tackling the historically restrictive fintech investment industry.

The same logic applies to the crowdfunding capabilities in real estate. Thanks to platforms like Sharestates and RealtyMogul, even those with pretty modest bank accounts can start microinvesting their money into apartment buildings and condos, slowly upping their share and getting a bit of profit. You can get into real estate investing with as little as $20 now, whereas 5 years ago you’d have to cough up a cool $200,000 at least.

While the lower barrier of entry might become an issue if no control is exerted over the investments, it’s reasonable to expect some form of regulation to make sure that people aren’t investing money into fraudulent projects. Running microinvesting apps in the current climate is an easy way to gain attention and drum up publicity to get your real estate business off the ground.

It’s also a bit easier to make fintech investment choices thanks to eREITs, which act similar to crowdfunding.Except that, instead of a random condo, you’re investing into a bundle of properties that have been vetted and approved. This way you’ll be paying a bit more but also receiving a kind of guarantee that you’re not throwing money away. The transparency is a big bonus for a market that’s been stuck in the past for a long time and supported some shady practices.

More importantly, it’s markedly easier to keep track of real estate properties now and manage them, though this has its roots in more than just fintech. And the easier management becomes, the more time you have to optimize your business and investments. Also, with more time on their hands, real estate owners can now provide better services to renters, one of the key sticking points for a long time.

“The future of financial services is bright” – Gregory Weber

More Money, Less Problems

One of the biggest issue that has yet to be remedied is the lack of unified standards for the real estate industry. Instead of spending hours on paperwork and doing everything by hand, it’d be smarter to invest in the creation of a one-stop solution. Much like Jira and its offshoots have revolutionized the management structure and Photoshop has made life easier for designers, there needs to be a tool that speeds up real estate dealings.

From automatic documentation to escrow standardization and loan approval, this would help streamline the work of real estate agents and the dealings of estate owners. And even the renters will benefit, since the landlords having lower expenses means that they won’t be shouldering as much of the cost.

Besides, setting some standards helps keep the industry dealings transparent and reduce fraud. It’s not the most pressing issue for the real estate investors, perhaps, but fraud is certainly something to tackle if the industry is to be brought up to modern standards.

Similarly, while it’s not the raison d’etre for fintech in real estate, the diversification of industry players is pretty important as well. If we build off of the preexisting progress, it’s possible that the investor pool won’t be filled with multi-millionaires and foreign moguls buying out estate in gentrified areas. With easier access to real estate investments, the market will have a chance to truly bloom.

Also, with more technology interwoven with real estate, we might finally see a unified marketplace for investors, landlords, and renters. This will make it easier to find the property you want and connect with its owner as well as rent out your own properties without resorting to outdated methods such as Craigslist. The creation of such a marketplace is one of the easier tasks for the future and, simultaneously, one of the most likely to revolutionize the industry.

“To be successful in real estate, you must always and consistently put your clients’ best interests first.” – Anthony Hitt

You Can’t Always Get What You Want

You can’t rely on fintech to be a miracle cure, of course.  For one, it’s not going to solve the issue of security deposits, which make the initial renting process kind of a hassle. There are some companies trying to solve this problem but it’s highly unlikely that landlords will get it on the movement. It’s not supremely beneficial to them and while the renters will clamor for it, the other party is not very likely to budge.

And although collective ownership of real estate properties is becoming a reality, fintech isn’t going to solve the problem of what comes next. So you’ve invested into an apartment building, along with 50 other people. What happens when you want to buy out the others? Doing so is tough even when you have 2 or 3 co-owners, so it makes sense that the more investors are on one property – the harder divvying it up will be.

“The best investment on earth is earth.” -Louis Glickman

A Contender Emerges

There are a few other improvements that haven’t been fully realized yet, at least on a wide scale, but we do expect them to take the market by storm in the near future. Namely, we’d put our money on:

  • blockchain;
  • artificial intelligence;
  • digital property evaluation.

The latter is particularly promising for renters as it aims to create a system on which apartments and houses are judged by professionals as well as the people living there. That way you can find out about any problems before you even go for a showing. This would include the general state of the neighborhood, the quality of the internet connection, the availability of shops and venues, and more.

“Landlords grow rich in their sleep without working, risking or economizing.” -John Stuart Mill

Pave the Way

We’ve covered all views of fintech’s influence on the real estate sector and, though we definitely found some flaws in their synergy, found a lot of promise in the duo. With new advancements coming in regularly, we might see substantial growth of the industry in the next few years, all thanks to fintech adoption. It’s high time that fintech experts jump on this train and develop solutions to change the course of the industry and improve its standing.

We’re tackling the issue and developing microinvesting apps to facilitate fintech investment. If you’re interested in entering the market or simply need some help moving up in the industry, contact Incode Group and our experts will help you out!

Whether you already have a fully fleshed out idea or just came up with a basic concept, come to Incode Group where your project will spring to life! We’ll start with a free consultation and see you through development to the full product being shipped and offer post-release support as needed. Come talk to us now and take a step into the future!

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