The use of Fintech has transformed the financial services sector over the past two decades. But what potential does Fintech have in the real estate sector, and how can real estate investors use it to achieve greater returns?
The majority of fintech organizations producing in the real estate sector continue to grow at a rapid pace. Between 2008 and 2017, the number of real estates fintech startups increased from 246 to 1,372. During this time, cumulative investments in real estate fintech soared from $2.2 billion to $31.3 billion.
Real estate professionals have been eager to incorporate the technological innovations delivered by Fintech into their businesses. It's reflected by the adoption rate of Fintech in the real estate industry, which dramatically accelerated in 2019 according to the First American Real Estate Sentiment Index.
Real estate professionals use fintech tools, including real estate transaction services, online invoice generation, rental management, online marketplaces, and online real estate sales.
Profit Potential For Real Estate Investors
Property investors have also eagerly jumped into the world of Fintech. Some of the ways that Property investors now use fintech include:
Real Estate Crowdfunding
Real estate crowdfunding has become a popular option for many property investors since the GFC. It allows investors to obtain capital for their investments by raising small amounts of money from "crowdfunding."
It is particularly useful for successful investors who currently have difficulty accessing a bank loan or who prefer to avoid the paperwork associated with traditional loans. Crowdfunding for capital can also be much faster than obtaining a loan from a bank.
Real estate crowdfunding has been particularly popular with investors who operate in the fix-and-flip market. Several real estate crowdfunding startups cater to this market, including Fund That Flip and PeerStreet, which recently reached $2 billion in property lending.
Improving the Buying/Selling Process
Several fintech startups make the process of buying and selling easier for investors. For example, OpenDoor is a well-established real estate fintech company that gives investors competitive cash offers for their properties within 24 hours. Thus, it helps investors sell their properties very quickly, without the delays normally associated with selling real estate.
New York-based Knock operates similarly. The company buys properties outright with cash and helps the investor owner secure a new investment property at the same time—a useful option for investors seeking to rebalance their property portfolio or move into new areas.
Other fintech companies help investors purchase properties by sharing the expense of the initial downpayment. Fintech companies that offer this service include ZeroDown and Unison.
Many of the fintech companies working in the real estate sector are interested in improving the mortgage process. They seek to take over the role traditionally played by banks, providing more affordable and easier loans.
The leading fintech companies offering loans include Lenda, Morty, and Blend. Using a bank and interest rates are competitive, which makes them an attractive option for investors.
Buy To Let Investments
Investors are shown that buying now has more options thanks to fintech startups like Immo Investment Technologies. This UK-based company purchases homes on behalf of investors, which are then rented out.
The company buys properties where the vendors want to sell quickly, which helps them obtain a great price. They then refurbish the properties and rent them out. As a result, the investor doesn't have to manage their investment properties, as Immo Investment Technologies takes care of everything for them.
Real Estate Micro-investing
Fintech companies like Brick-X allow multiple investors to own investment properties collectively. The company purchases properties and then divides the property's cost into 10,000 "Bricks" sold to investors.
Investors can purchase as many bricks of each property as they like, allowing them to spread their financial risk across many properties. In addition, bricks can be sold at any time, making it simple for investors to cash in once they have made a profit.
Powerful Investment Property Calculation Tools
Real estate investors no longer need to complete complex spreadsheets to calculate the success of their investments. Instead, several fintech platforms make it simple to calculate acquisition costs, funding structures, investment income, and tax deductions for investment properties.
Most of these platforms also offer financial projections and calculate after-tax cash flow for your property portfolio. As a result, they are perfect for avid property investors as they save time and give valuable insight into the returns that are being achieved.
What The Future Holds
Real estate fintech services will only become more complex in the future. Nevertheless, they provide property investors with an opportunity to reduce costs, save time, and improve the performance of their investment portfolio. The key, as always, is to remain aware of technological innovations that are occurring within the industry and taking advantage of them whenever possible.
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