The New Rule of Real Estate: Location, Location, Innovation

The adage is “Location, location, location.” But soon, it may be time to update that old mantra to reflect the impending evolution in real estate: “location, location, innovation.”

The real estate market has an estimated value of $40 trillion, making it the largest asset class in the U.S. real estate is simply too large for the venture capital community to ignore. In total, Q3'16 saw 53 deals for $256 million, notching the 7th straight quarter with 50+ deals to real estate tech startups. Technology has already begun to foster the creation of new business models and sources of revenue in the real estate industry. AirBnB has transformed the rental and hospitality market in much the same way that Uber has impacted the transportation industry. Companies like WeWork have created co-working spaces that allow members to take advantage of a professional workspace that is far superior to a garage office. And Zillow, a pioneer in real estate technology, has broadened access to residential real estate sales and rental information.

However, until recently, we were still in what I would call the Real Estate 1.0 era. Real Estate 1.0 was mostly focused on leveraging technology to provide better access to real estate data. Companies like Zillow, Trulia and Loopnet enabled buyers and sellers to finally get real time access to data on residential and commercial properties – data that was once difficult to access or guarded by incumbents such as brokers and property managers. Unlike today where 90 percent of home buyers engage in online search during their buying experience, before the Real Estate 1.0 revolution, buyers and sellers relied on brokers and other gatekeepers to start their home search and access simple data such as number of bedrooms and bathrooms or total square footage.

Accordingly, these platforms revolutionized the way we interact with real estate but did little to change the way we transact with real estate. As such, the process of buying, selling, brokering and financing real estate changed little over the last 10 years and still remains in its infancy. However, we are now entering a very exciting phase in real estate and technology that I would call Real Estate 2.0 and it promises to permanently shift the way we transact with real estate in both the online and offline worlds.

Tomorrow: Real Estate 2.0

Real Estate 2.0 is about bringing not just data but the transaction process online. While a majority of buyers still use platforms like Zillow during the purchase process, nearly all of these buyers utilize brokers, title companies and escrow agents to complete their purchase. And this process is marked by high fees, mounds of paperwork and months of transaction time.

But this will be short lived as the Real Estate 2.0 revolution promises to permanently change the way we transact with real estate. We’re already seeing this new wave of realtech startups take shape. Companies like OpenDoor, for example, have helped thousands of homeowners sell their home in days (rather than months) without the need of engaging a broker or the hassle of a listing or showings. Dotloop, an online transaction management solution for real estate, is taking the often inefficient and historically offline transaction management process and shifting it online by bringing documents, e-signatures, storage and compliance into an easy-to-use platform. VTS and Hightower are transforming the leasing process for landlords and brokers by creating end-to-end leasing platforms that provide these stakeholders with leasing workflow and a beautiful user interface.

Real estate financing and investing are moving completely online as well as part of the transition to Real Estate 2.0. Previously, introductions to real estate investment opportunities might have required specially arranged meetings with attorneys, bankers or financial advisers – that is, if the person had these necessary connections at all. Just the same, commercial real estate tycoons and fix and flippers alike often struggled to put together the funds necessary to complete their projects. Platforms like RealtyShares, of which I am Founder and CEO, connect these two parties and allow them to complete a financing or investment from the comfort of their living rooms.

While it remains to be seen what the next evolutions in real estate are, I can’t help but think that the loop will be at least partially closed sometime in the not-to-distant future. I expect a joining of the data layer afforded by Zillow (and other Real Estate 1.0 companies) and tech-enabled transaction process offered by Real Estate 2.0 companies into one streamlined experience.