Real Estate

Platforms And AI Are Powering Real Estate Investing’s Digital 3.0 Shift

Stock markets are whipsawing. Bond yields, gyrating. Crypto? Bouncing around, to put it mildly.

The pandemic has sent any number of investments tumbling, soaring, then tumbling again. The world feels less than stable, and so do investors’ cash flows, dividend and account statements. It makes sense, then, that at least some individuals would seek stability.

At the intersection between FinTech and real estate investing, a number of new business models are emerging, bringing buyers and sellers together across online platforms.

In an interview with PYMNTS, Gary Beasley, CEO and co-founder of Roofstock, detailed how advanced technologies, such as artificial intelligence (AI), can help match investors and properties (tenants included) to help generate stable investment income.

As Beasley told PYMNTS, the online marketplace is one that can help deliver houses with, essentially, touchless delivery.

Beasley maintained that real estate’s attraction as an investment class has been “highlighted by the pandemic and ancillary effects of the pandemic like stock market volatility.” Investors want to put their money in sectors that are uncorrelated with the stock market. Real estate has “provided similar returns, with less volatility.”

Asked about broad supply and demand across the single family rental market, which is Roofstock’s focus, Beasley said that there is a bit more than four months’ supply on the market, with a slower pace of new listings coming online, but also, notably, fewer sellers are “pulling” their listings in the midst of the pandemic.

“The sellers who are in the market today are more committed to selling,” he said.

He noted, too, that the Roofstock platform is seeing pricing hold relatively steady. That’s in marked contrast to just a few months ago when, as Beasley described it, bids were coming in well below asking prices. In addition, the pandemic has created an environment in which sellers want to remain in their property even after the sales take place (rather than search for, tour, and then take a chance on new homes).

Additionally, as Roofstock has said, if investors buy properties that are vacant or the current tenants move out, the firm pays buyers as much as 75 percent of market rents for up to 12 months.

The current interest rate environment, with rates at historic lows, is giving investors/buyers greater purchasing power, noted Beasley. Rent growth may slow a bit to about 1 percent — where it had been a few percent in other (more positive) economic environments — yet it is still providing steady cash flow.

Against that backdrop, Beasley said the way real estate transactions have traditionally been done — with intermediaries, phone calls and paper-intense processes — have been anything but efficient.

“It’s slow, there’s a lack of transparency, and there’s been a very low level of customer satisfaction, generally, with the process,” said Beasley. “What we’ve done is turned the process on its head for our customers.”

He said that when investors go onto the Roofstock site, listings have been certified, the properties have been inspected and the titles have been reviewed. Roofstock, he told PYMNTS, has mapped out all the homes in America, and of those 90 million dwellings, roughly 16 million are rental homes. The platform rates neighborhoods according to a multi-star system, which helps investors gauge risk tied to the volatility of the market.

“We reverse the process of blindly making offers without knowing a lot about property, and due diligence is done upfront,” said Beasley.

That’s especially important when the buyer and seller can be in far-flung states at opposite ends of the country.

He added that the platform model also saves sellers money as commissions have to be paid and homes must typically be vacated before they can be listed, which means losing months of rent.

Looking Ahead

The touchless method of real estate transactions done online is likely to take root, as people continue to work from home and are not able to travel, said Beasley. There’s been demand for rentals as people move out of larger cities and look toward suburban or secondary suburban markets. For millennials, these markets also have attraction as an investment, as they are less expensive, and yields are higher.

In addition, although Roofstock’s audience has traditionally skewed younger, there’s also been more interest from older, relatively wealthier investors. Beasley said that there have been more international buyers on the site looking to gain access to the U.S. market.

“They have typically looked to invest their money, but they're a little bit spooked by the stock market and intrigued by buying properties,” he said. “It’s expanded our market.”

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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