There’s a common sentiment among real estate professionals that as the real estate business becomes more institutionalized and efficient, there will be less quality buying opportunities (mispricings).
While the availability of high quality data and a move toward a national MLS will lead to more efficient pricing, there are endless opportunities for creative real estate professionals who think differently and take advantage of disruptions in the business. Here are just a few of the things that I’ve been thinking about lately:
Branded Single-Family Rentals
The emergence of networks like AirBnB created an alternative marketplace to hotels, however travelers still enjoy the hotel experience. There’s an opportunity to build platforms on top of AirBnB and create branded hotel-like experiences for the price of staying in a personal residence. Think free wifi, high-quality linens, concierge services, airport shuttles etc. Eventually we’ll see companies emerge as the ‘W Hotel’ or the ‘Holiday Inn’ of AirBnB rentals.
Crowdfunding Research/Ratings Group
Crowdfunding sites are proliferating, with seemingly a new platform launching each week. While only a few will achieve scale, there are opportunities for communities to be built on top of the crowdfunding space. There is a need for an independent third party rating agency to provide more transparent data on the platform, sponsors, and deal terms. Additionally, smart individuals/companies can create exclusive communities that offer a deal of the week and present it to their network of investors. I ultimately think crowdfunding platforms will be the technology for sponsors/developers to raise money online (instead of communities) while different vehicles will help investors make smart investment decisions.
Great Operators/Management Companies
Most young people I talk to just getting started in the business wants to work in acquisitions and use their creativity and relationships to discover good opportunities. However, as asset pricing becomes more efficient, good operations and the ability to execute a business plan become more important. Highly-selective operators and management companies that can create products intended for a niche end user will achieve out-sized returns.
Branded Investment Firms
Many investment firms spend little time thinking about their brand. However, as the capital raising process is moved online, brand-equity becomes extremely important. Most investors know little about the real estate business so they’re making investment decisions on the story behind the deal and the trust they have with the sponsor. It’s becoming increasingly important for real estate companies to develop a trusted brand that transcends the real estate business.
As the real estate business continues to evolve, mispricings become harder to find, but new opportunities will emerge. The reality is that many people have great ideas, it’s the ones that can execute upon them that are successful.