Step aside retail investors, there is a new player in the real estate investing town – Big Data.
Prior to the tech bubble, it was difficult to find or gain access to information regarding real estate. Unless it was a full-time gig, you needed relationships to gain access to real estate investment opportunities. Even with that information alone, you still needed to drive the property to see if an investment made sense. Completing a comparative analysis of properties a-like was the most effective way for retail investors to make a decision. Post tech bubble; however, this process became rare.
During the post-tech bubble in the early 2000’s, revolutionary technologies, such as Google Maps, Redfin, Zillow, and Walk Score, appeared in the world. This became the first major step in shifting the way we invest in real estate. These technologies provided, nearly, instant gratification when seeking answers to questions involving real estate. Faster than ever before, retail investors were able to use this data to find properties and analyze markets. This allowed investors to confidently decide what property to invest in. This kind of data supercharged multiple facets of real estate investing. Yet, systemic issues involving paperwork, accessibility, and overall awareness were not clear. That was until September 2013, where the JOBs Act was revised and enacted. And so we got to learn about a new term – Real Estate Crowdfunding.
What is Real Estate Crowdfunding?
Real Estate Crowdfunding is the fusion of real estate investing and technology. Platforms provided solutions of streamlining paperwork, deal flow accessibility, payment processing, investment due diligence and awareness of products. All these solutions tie into the most important factor of all for real estate investing – Big Data. Online platforms found ways to use data in a way that drives opportunities exponentially. Retail Investors don’t need to have the relationships to find the deals anymore. They definitely don’t need to drive the property nor conduct due diligence, because the deal analysis package is online and they can access it 24/7. As a result, retail investors are quickly testing the waters to see if what they have heard about technology advances is true.
When you partner up with a crowdfunding platform, the search time for retail investors is now half. Instead, they spend their time deciding whether to trust the platform and they seek information on their track record and public credibility. On the other hand, some retail investors are slow adapting to new market trends. These investors still choose to drive properties and surrounding neighborhoods to conduct due diligence for an informed decision on the investment. By the time it would take for delayed market adapters to decide on whether to invest in a property, early adopters have already reserved the investment, signed paperwork, wired their money and received their first payment check. As a result, delayed market adapters are missing out on great opportunities.
It is a slow and steady process to get everyone comfortable with this new idea. Partnering with real estate crowdfunding platforms is a huge innovation. It will take a while until delayed market adapters begin to transition into today’s efficient and data-driven way. Big Data is not going way, it is here to stay.