The past two years have been hectic for the real estate industry. Despite pandemic fears, home sales have surged, thanks to record-low mortgage rates, and burgeoning savings accounts.
But, as with all real estate booms, buyers have been faced with challenges. For even average properties, bidding wars have become commonplace. Moreover, with valuations soaring, profit margins have been shrinking. And as hedge and private equity funds enter the pool, pressure on smaller investors/buyers is only getting worse.
But not all is lost. The emergence of real estate tech tools has made it easier for smaller organizations to compete with big business. In this article, we’ll discuss five services that make the buying or selling process easier for investors.
Numbers define real estate success. In particular, capitalization rates, gross yield, and cash flow are just a few relevant metrics. But these days, attaining that success is getting easier for some and harder for others.
How? Over the past decade, technology-based real estate solutions have been emerging. Because of them, investors have analysed the market for undervalued homes, automated property management, and saved money on international money transfer.
Thanks to the capabilities of these services, users can scoop up deals before their competition has even had their breakfast. Owners can also use these programs to manage their business in a way that maximises profit and cash flow.
Consequently, technological laggards have been had a harder go of things lately. With the best deals flying off the market, they have been forced to acquire lower-value properties. In the long term, this will mean slower growth, and more effort and stress.
Because of this, real estate professionals must learn about and exploit the latest real estate software tools.
But that’s easier said than done. After all, there are dozens of online real estate tools out there. They can be exhausting to assess, never mind finding them. So, it helps to outsource this task to others (like us).
Below, we’ll discuss five online services helping real estate investors buy and sell with greater efficiency. Let’s get started.
Most banks are, by nature, conservative. At the start of the pandemic, banks, fearing another Great Recession-style debt crisis, pulled back on lending standards significantly. For example, back in April 2020, JPMorgan Chase required new mortgage applicants to have a credit score of 700 and have enough saved for a 20% down payment.
But, even during good times, obtaining a loan through these institutions was tough. For example, in Q3 2019, America’s big banks only approved 27.9% of applications, compared to 39.7% for credit unions and 56.5% for alternative lenders.
Entrepreneurs with a greater tolerance for risk should pay close attention to that last figure. Alternative lenders, who use sophisticated risk management algorithms, are far more likely to approve loan applications.
Better Mortgage (Better.com) is one of these firms. But, whilst they feature higher approval rates than the banks, that’s not their only advantage. For starters, they also decline to charge origination fees – an extra levy of 0.5% to 1% meant to cover “processing costs.” Furthermore, they boast quick turnaround times – unlike banks, which can take weeks to render a decision, Better Mortgage responds within minutes.
Now, Better.com isn’t perfect. At press time, they were available in only 43 states in America. And more importantly, they don’t offer government-backed home loans (e.g., VA loans). But, for most conventional mortgages, Better Mortgage is an excellent alternative to the banks.
Getting approved for a mortgage is only one aspect of the home buying process. After that, the buyer actually has to look for properties. Unfortunately, many mainstream real estate platforms (like Zillow) focus on the needs of consumers. But in recent years, better options have emerged for real estate investors.
Take Roofstock, for instance. They go further than just offering price and square footage data – in their listings, you’ll find the cap rate, the gross yield, and the current rental price. Real estate investors can save countless hours that they would otherwise spend on enquiries by knowing these statistics upfront.
But most interesting of all is Roofstock’s neighborhood rating. In a vacuum, a house might appear to be a good deal. But plunk it down in a crime-ridden neighborhood bereft of services, and it becomes considerably less appealing. This neighborhood rating takes the guesswork out of the equation, decreasing the risk of “sight unseen” purchases.
Unlike well-known metrics like gross yield, this measure is proprietary. So, until a competitor tries to copy this innovation, Roofstock is your best choice for buying single-family homes from afar.
To the uninitiated, real estate investing seems rather straightforward. But it isn’t as simple as buying properties, collecting rental income, and then selling high. If investors aren’t careful, they can walk directly into a hornet’s nest of legal issues.
Some homes have liens on them. Others have protective covenants that restrict certain re-developments. Note well: once an investor buys a property, they are responsible for any obligations that come with them.
For this reason, it’s vitally important that a buyer performs their due diligence. But often, this means hiring a lawyer, which eats up significant time and money (the process often takes weeks). Orbital Witness was founded to solve this irritating problem.
This startup has developed AI-bolstered software that combs through government records in seconds, not weeks. By finding “red flags,” this tool can save users significant time and money. At a minimum, it gives buyers peace of mind.
Ultimately, Orbital Witness hopes to develop a comprehensive risk score that factors everything from legal to climate change issues. But, in its current iteration, it’s serving UK property investors well. So, here’s hoping they go global.
Eventually, both parties in a real estate transaction will reach an agreement, and money will change hands. Legal considerations excluded, this is a relatively simple maneuver – the buyer sets up bank wires to transfer funds to the seller and other relevant parties. And, soon after, they take possession of their new home.
But what happens when the property in question is located overseas? In these situations, buyers face an unusual situation: converting their cash into the destination’s currency. To the inexperienced investor, though, international money transfer only appears to be an extra step in the process – and that’s where problems can arise.
By using their bank as their money transfer service, they’ll pay excessive fees and exchange rate margins. On average, banks charge a premium of 3.5% on the interbank rate (the rate banks/brokers use to trade with each other). So, if a British buyer had to send 200,000 EUR to complete a sale, here’s what would go down.
As of late August 2021, the GBP/EUR interbank rate was 1.1647. So, when we apply the average bank margin, that rate becomes 1.1240. Given this information, the buyer would need to send 177,936 GBP. So far, so good – but let’s check the difference by using the interbank rate. If the buyer were able to use that price, they’d only have to ship 171,719 GBP.
Now, 6,217 GBP is certainly an expensive service fee for a currency broker. Multiply that figure by several times and these losses can get enormous.
This is where Global Reach Group comes in. Since 2001, this money transfer service has specialized in large international money transfer transactions – many of them real estate deals. So, not only will buyers get rates closer to interbank (and saving them thousands in the process), they’ll also get tailored advice and access to tools like stop losses and the forward contract.
Lastly, this international money transfer firm is well-loved by its customer base. On many review sites, they rank best by client reviews – clearly, this currency broker invests in relationships.
Once an investor takes possession of a property, that isn’t the end of the story. Now, they’ll have to manage it – from collecting rent to making necessary repairs, the chores are endless. Even if an investor is organised, things can slip through the cracks quite easily.
Buildium minimises the chances of that happening. This cloud software solution is a digital dashboard that helps investors manage everything from lease approvals to repairs. As a result, the property owner (or the manager they designate) can stay on top of key tasks, all whilst saving valuable time.
The maxim “knowledge is power” has never been so relevant. In today’s economy, having an information advantage allows investors to make more intelligent decisions than their competition. Over time, this equates to larger profit margins and fewer hassles.
Some tools yield immediate results. For instance, when an investor does an international money transfer at a much better rate, they can save hundreds or even thousands in one go. If they start using a property management app, they may suddenly free up multiple lost hours per week.
Sometimes, though, the benefits aren’t apparent, but in reality, they make a big difference. By using a forward contract with their currency broker, for example, investors can protect themselves from catastrophic swings in currency rates.
The biggest risk is resisting these changes. Habit has a powerful hold on some people – by not trying out new tools and technologies, these investors risk being beaten by those with an undeniable edge.