A decade ago, the idea of lights without switches, smart security systems, and controlling your home’s thermostat using a smartphone seemed like futuristic science fiction. However, smart home technology is advancing more and more every year and is now dominating the market. Could this tech affect your real estate investing career? Today’s real estate industry is highly competitive, and it’s more important than ever for property investors to keep up with the latest trends in order to be on top.
Smart home technology is, in fact, a trend that has had a huge impact on the housing market. Therefore, whether you’re looking to sell or buy real estate properties, it’s very important to understand how smart technologies will affect your investment. In this blog post, we’ll explain what smart homes are, how they affected real estate investing, and why investing in them is a smart investment decision. So, without further ado, let’s jump right in.
What Is a Smart Home?
A smart home is simply a real estate property that has been upgraded with tools, technologies, gadgets, and smart devices that are used for home automation. Different devices can be installed for different reasons. For example, there are gadgets for security, to improve convenience, energy conservation, etc. Almost any electrical device in your property can be turned into a smart device and be optimized for home automation. For example, you can program your coffee pot to brew coffee every morning at 7 am or use your smartphone to turn on/off the AC or the lights without having to move.
Home automation through smart home technology is very common these days. In fact, a large portion of residential properties in the US housing market have been or are being upgraded to facilitate the lives of residents. As for real estate investors, smart homes have become a game changer. Here’s how smart technologies can impact your real estate investing business:
1) Smart Home Technology Increases Home Values
The biggest impact smart home technology has on the real estate industry is increasing the value of investment properties. When determining the value of a home, property investors compare it with other similar ones in the same area (real estate comps). One key factor that affects a property’s value is the type of amenities and features it has. A smart home that’s equipped with technological gadgets will certainly have a higher value than a comparable home that isn’t. In fact, NAR’s managing director of the Center of Realtor Technology, Chad Curry, stated that smart homes increase around 5% in price.
As a result, real estate investors are seeing a great return on investment from embracing smart home technology. They can now buy homes for cheap, install new devices, and then sell the property for an attractive profit. You can say that this works as forced appreciation – taking part in increasing the value of an investment property rather than holding it for a long time and waiting for natural appreciation.
Moreover, this also presents benefits for owners of smart homes as rental properties. Since smart home technology increases the home’s value, landlords can charge tenants more for renting it – and they’ll be willing to pay! Thus, smart homes can generate higher rental income and be positive cash flowing rental properties.
2) Smart Home Technology Attracts More Tenants/Buyers
Smart homes are in-demand in the US housing market. According to a recent study, more than 80% of Americans either own or opt for homes equipped with smart technology over a comparable home that is not. In addition, more and more people see smart home technology as a selling point and are willing to pay for it – regardless of their price range. Some even believe that smart homes will become the new normal due to the high demand for them.
Not surprisingly, home automation is appealing to millennials entering the housing market. In fact, millennials are driving the real estate industry, so smart property investors would keep an eye on trends like where they are moving to and the type of properties they’re looking to live in. According to a smart home survey by HomeAdvisor, 77% of millennials have purchased homes with smart technologies in the last year alone. Therefore, if you want millennials to buy or rent your investment property, consider installing smart home gadgets to improve your chances of attracting them.
Moreover, smart home technology does not only have the ability to attract millennials. For instance, installing a smart security product in rental properties can be a great way to attract families or tenants who are single parents as they prioritize increased security in their homes. Likewise, homes with energy-saving technologies entice tenants or homebuyers who care about energy efficiency and the ecosystem.
3) Smart Home Technology Reduces Days on the Market
There is no formula to determine how long it’ll take a home to sell. Certain factors come into play on how many days an investment property stays on the market for sale like its location, condition, and listing price. However, 40% of real estate agents in the US housing market believe that upgraded smart homes sell very quickly compared to others, based on a Coldwell Banker Real Estate survey.
This doesn’t come as a surprise considering the high demand for smart home technology. As mentioned, more than 80% of Americans would buy an investment property just because it already has smart technologies installed. Thus, smart homes will often spend less time on the market and sell for a higher price! Savvy property investors, consequently, see these homes as great investment opportunities that will yield an attractive return on investment.
The Bottom Line
As you can see, home automation has changed the real estate investing industry. Adding smart technologies to your investment property can be very beneficial – whether you’re selling or renting it out. For sellers, it’s a great way to add value and sell investment properties faster and at a higher price. For landlords, installing smart home technology in rental properties allows them to gain high rental income and positive cash flow. Thus, if you haven’t jumped on the smart home technology bandwagon yet, don’t wait any longer!
If you’re looking to buy an investment property and turn it into a smart home, make sure to use our tools to find, analyze, and compare properties in your city and neighborhood of choice. To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
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