By Eve Picker
In order to keep a-pace with the quickly changing world, the real estate development industry needs to change. One way is to focus on strategies for business model innovation. Let’s take a look at a few forward-thinking real estate development and investment firms that are leveraging technology and modern business strategies to create sustainable development projects.
Machine learning
Some early-stage companies are using machine learning to identify optimal opportunities to build housing. CityBldr, for example, have positioned themselves as the first “Smart Brokerage.” They use AI and machine learning to determine the market value of a property. And they connect those property owners with buyers willing to pay the market price. This is a win for the property owner who may not have known the value of their property. At the same time, they are providing previously unrecognized (and unavailable) property opportunities to developers. Property owners can see if a builder or developer would pay more for their property in thirty seconds by visiting CityBldr.
CityBldr’s solution could help to build more by-right housing which conforms to local zoning codes. By aggregating potential development parcels and providing developers with access to their advanced software tools that model potential development, they are impacting both the supply and the demand side. The supply side is represented by current landowners, who hold rights to any potential project on the site. The demand side is represented by developers or other stakeholders who are intent on revitalizing a given neighborhood or geographic area.
Analytics systems like those offered by CityBldr and other similar data companies have the potential to take the guesswork out of development and facilitate projects that would be otherwise overlooked due to financial constraints and the time cost of negotiating with landowners.
Unlocking credit opportunities
Many hopeful homeowners are locked out of traditional home financing solutions. Credit problems, bankruptcies, alternative income streams, and lack of credit history all prevent many people from buying a house. This is especially true for low-income Americans and those with little history of homeownership in their family. In the mortgage lending arena, renters that have troubled credit histories are known as no-file or thin-file. These individuals, like many others, experience issues related to cash flow. This is where payday and short-term lenders come into play- these lenders often prey on lower-income or cash insolvent individuals with high-interest rate loans with terrible terms. And so the cycle of credit and other financial problems begins.
Many companies and nonprofits are working to serve these consumers with housing-related credit, offering opportunity without the onerous loan terms. They act as go-betweens for landlords and renters – the renter pays the company directly, and the company pays the landlord. They can provide bridge financing when times are tough, thus ensuring people stay in their homes. Landlords work with these companies due to the guarantee of rent coming in on time, every month, regardless of the financial circumstances of tenants.
In many ways, the housing and rental credit industries are among those most in need of disruption. Increasing access to mortgage loans and other housing-related finance will reduce housing insecurity, while also providing the industry with much needed growth from customers they would traditionally not be able to serve. This means more transactions, more filled properties with rent-paying tenants, and an overall boost to the real estate industry and the companies that work with real estate professionals.
When we think about business technology, we’ve been programmed to think about gleaming data centers, mobile apps, and other common examples of tech-driven solutions. But new business and development models are also a form of technology. They can disrupt and improve the industry just as much as (if not more than) any technical solution. Companies and investors who embrace these new methods will find that they’ve provided more housing, to more people, while improving their overall profitability at the same time. It’s a win-win for everyone.
Image by Gino Crescoli from Pixabay