Traditional methods of investing are slowly giving way to new technologies, which are now shaping the future of real estate investing.
If there’s anything that our parents and grandparents will always be right about, real estate investment will, and always be, a promising investment compared to other forms of investment portfolios.
The COVID-19 years saw the demand and attractiveness of real estate assets fall—from commercial and office spaces closing down or operating at limited times. Hotels and other leisure real estate properties experienced the lowest demand in years. Here comes post-pandemic times, and real estate properties are coming back in full swing.
With the worst of times behind us and the real estate industry slowly getting back on track, the real question lies—what is the future of the real estate investing industry, and is it still a viable investment in 2023 and beyond?
What Makes Real Estate Investing an Attractive Investment?
Real estate investing is a method of investment wherein one buys a property or multiple properties to generate income, either through rental income or property appreciation, rather than using it as a personal residence.
Investing in real estate is an attractive investment, depending on the type of real estate or investment you’re planning to make, as follows:
Residential Real Estate
A residential real estate investment can be considered one of the safest and the most beginner-friendly real estate investments that provide a handsome and steady flow of rental income.
It can be done by renting out either condos, single-family homes, apartment units, and the like or reselling residential homes or apartment units at a price higher than your acquisition cost.
Commercial Real Estate
Similar to residential real estate investments, commercial real estate generate income through short-term or long-term leases or property appreciation. Commercial real estate, however, offers a better chance of giving you more returns, depending on the viability and attractiveness of the location of the property.
Investing in raw land is a rather risky investment, especially for beginner investors. You would need to assess the specific category and use of the raw land, as well as the legalities and constraints that come with it. At times, land at a less-than-ideal location would have lower chances of getting sold at a premium—or getting sold at all.
Most beginner real estate investors (and even seasoned ones) can start with REITs or real estate investment trusts to eliminate the risks and difficulties of personally managing real estate assets. Investors who turn to REITs generate income through a portfolio of real estate investments managed by REITs.
Emerging Trends in Real Estate Investing in 2023
With the real estate industry seeing a decline in recent years due to the pandemic, it still is gaining back its momentum. It comes as a result of emerging trends positively affecting market prices and the way real estate investors do business.
Blockchain and Fractional Ownership
The tedious process of papers, printouts, signatures, and documents—back and forth—is a staple for seasoned real estate investors. Gen Z and Millennials, however, are astounded by this, especially with NFTs becoming highly popular in recent years.
While not yet mainstream, real estate investment using blockchain platforms and NFTs will help real estate investors make transactions online and in real-time, without all the lengthy paperwork, by tokenizing the value of real estate.
The tokenization of real estate values also makes it easier for investors to own just a fraction of a property instead of a whole, thereby also reducing costs and risks associated with it.
Tom Nolan, founder of All Star Home, emphasizes:
“The concept may sound like REITs in that it allows you to fractional ownership. However, tokenized real estate allows you investments over individual properties whereas you invest in a REIT company’s portfolio of investments.”
Property Technology (PropTech)
When it comes to technological advancements, the real estate industry has been keeping up in the form of PropTech or Property Technology. According to a survey by the Institute of Real Estate Management, repetitive tasks are the biggest hurdles in real estate management, which can easily be addressed by PropTech.
PropTech weaves together real estate and technology and software through AI to make real estate transactions more efficient. Through PropTech, real estate managers can easily list available properties while consumers can easily browse properties without unnecessary costs and time constraints.
Compared to consumers, sellers reap the most benefits with PropTech—from the automation of processes, rent collection, communication with staff and tenants, staffing, and data collection.
Linda Shaffer, Chief People Operations Officer at Checkr, remarks:
“It may seem insignificant, but the impact of small, repetitive tasks in everyday operations greatly impacts efficiency. When companies can gear time spent on repetitive tasks towards more value-adding activities, that’s where we see how much AI and technology have towards business processes.”
Rise in Rent Prices
According to a market assessment by the Federal Reserve Bank of Dallas, rent inflation is expected to increase to 8.4% in May 2023 from 5.8% in June 2022. In comparison, rental price gains hovered around 4% to 5% during the peak of the COVID-19 pandemic.
More people are renting than buying houses despite the increasing rent prices, basically because renting is still the cheaper option. The popularization of working from home and digital nomadism is also greatly affecting consumers’ choices.
Anthony Martin, founder and CEO of Choice Mutual, says:
“The increase in demand for rental properties, whether residential or commercial, despite the increase in rent prices, is working in the favor of homeowners or real estate investors. This gives consumers lesser room to negotiate rent prices and owners can be selective about who they choose to rent the property out.”
When it comes to real estate investing, investors need to look beyond homes and commercial buildings and consider parking spaces as a viable form of real estate investment. increased car purchases are boosting the need for more car parking spaces, especially in commercial areas.
In a piece by Reuters, General Motors Co. Chief Executive Mary Barra expects 15 million units of new cars and light truck sales in 2023, rebounding from 13.7 million in 2022. These are massive numbers, and as purchasing power continues to bounce back post-pandemic, car purchases year by year are not slowing down any time soon.
Beyond a parking space investment, real estate investors should consider smart parking strategies—a car park monitoring system that allows consumers to detect parking availability through AI and the internet. They can generate more income and improve the car parking experience among the public.
According to Tom Golubovich, Head of Marketing & Media Relations at Ninja Transfers:
“People spend at least 20 to 30 minutes just looking for parking spaces, especially in congested commercial areas. The integration of a smart parking system into a car parking investment is a great investment that real estate investors should consider getting into that doesn’t get as costly as buying a house or a commercial building.”
Scrap personal house tours—with the help of IoT and AI, the possibility of doing a house tour without going to a physical location is now possible with the help of virtual reality (VR).
Property owners that provide VR or augmented reality property tours help convince undecided renters and buyers to take a glimpse with a realistic view of any property of their liking. The advanced viewing technology allows them to see the properties from many different perspectives with just a single click. In 2023, we are expecting more real estate investors to dive into virtual reality or 3D home walkthroughs to provide better experiences for their customers.
Coty Perry, CMO at Anglers, shares:
“Virtual reality has existed for years, from tourist experiences to gaming. But as much as virtual reality gives consumers a more premium and efficient experience, it also generates higher sales prices as the number of offers increases, especially for occupied homes that are not available for physical viewing.”
The Future of Real Estate Investing: What Does It Look Like?
As with all things, technology will slowly but surely take over how real estate investment operates and generates income. Expect to hear more about blockchains and NFTs, fractional ownerships, property technology, and virtual reality rendering. We can’t deny the future of real estate investing is almost already upon us.
Whether you’re on your first real estate investment or already a seasoned investor, it is important to carefully study the industry before jumping into it. Real estate investment is a costly game to play. As much as it is as profitable as everybody makes it sounds, any investment isn’t for the faint-hearted and risk-averse—especially real estate.