The real estate industry is undergoing a major technology transformation right now. PropTech is penetrating all aspects of real estate from landlord/tenant relations to how we take out loans, and some real estate entrepreneurs say the whole PropTech sphere is poised for take-off in 2019.
John Helm, of PropModo, says, venture capitalists have engaged in a PropTech feeding frenzy. He says, VCs have poured billions of dollars into the PropTech landscape with plans to invest billions more. He said in a Propmodo blog, “There is the right mixture of customer adoption, investor interest, and technological innovation to make the New Year truly special for real estate technology entrepreneurs, property owners, and residents.”
But what’s all the fuss about? According to Helm, there are four important PropTech trends that people in the real estate industry need to be watching. (1)
#1 The Rise of RentTech
One big trend that Helm expects to emerge as a hot PropTech category is RentTech. He says, residents as well as landlords and property managers will become more dependent on RentTech. It provides digital tools and automation which helps make the experience more efficient and enjoyable.
These tools can provide various levels of service starting with the search for a rental by applicants, and the screening of tenants by landlords. Tenants will be able to go online to find out what’s available, sign up for virtual self-tours, negotiate rental rates, and even sign a lease — all without meeting anyone at the site. And, landlords will be able to do the same.
Once they move in, tech will make it easier for tenants and property managers to communicate with a smartphone app. Tenants will also be able to request services like dog walking, apartment cleaning, and/or maintenance. Helm says it will help “remove friction” from the relationship between tenants and property managers.
#2 Apartments Will Get Smarter
Combine that with smart locks and other smart devices inside the apartment, and you peel away another layer of inconvenience for renters. For example, tenants will be able to grant access to service providers remotely and monitor the times they come and go. Property owners will also benefit with more efficiency, and lower operating costs. That will also help increase the adoption rate of PropTech.
And, he expects a big increase in that adoption rate over the next year. He says, smart apartments will become more common with devices like smart locks, wifi thermostats, moisture sensors, and energy use monitors. In some cases, they could also help landlords comply with local ordinances, such as heat and hot water requirements in New York City.
Those rules are in effect through winter, from October 1st to May 31st. According to the Metropolitan Council on Housing, landlords must keep the inside temperature at 68 during the day if the outside temperature falls below 55 degrees. At night, the temperatures must be at least 62 degrees no matter what it is outside. Hot water must also be available 24-7 all year long at a temperature of 120 degrees. Smart tech would certainly make it easier to comply with that complicated set of rules. (2)
#3 Growing Pains for PropTech Investors
This enormous operational shift won’t take place without growing pains for PropTech investors. Helm says, PropTech is a hot category that’s attracting a lot of attention from venture capitalists, but some have a limited understanding of the real estate industry. That’s apparently causing misperceptions about how quickly the investment might grow, because the real estate ecosystem doesn’t operate in the same way as other industries.
He says, “Sales cycles, particularly in RentTech, are much longer than in consumer industries as property owners have long pilot/deployment timelines.” He says, it’s important for PropTech entrepreneurs to work with the right people to support a smooth expansion of their businesses. He says, “A good investment partner will not only be able to provide capital but will also help entrepreneurs through these unique sales cycles.”
#4 Market Correction & PropTech
Last but not least, Helms believes we will see a market correction in the near future after such a long and vibrant housing recovery. But, he says, the correction will be good for RentTech because rental property owners will be able to make use of it to become more efficient, especially if they are trying to offset any losses.
With the use of PropTech, they will be able to lower their operating. He expects PropTech to gain traction anyway, without a downturn, but he says a market correction will increase the need for operational efficiencies, and PropTech tools.
Venture Capitalists Love PropTech
PropTech is big business right now. Helm was among five venture capitalists interviewed for a Forbes article on PropTech. The author says investors are only beginning to understand the “disruptive potential” of this new technology sector. (3)
But, she says that all five described 2018 as a banner year for PropTech — both in terms of investment dollars and milestones reached. They say 2018 was even better than than the $12 billion invested in 2017. And now they expect 2019 to be even better.
(3) Forbes Article