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Is Ai a White or Black Knight? By Ashley Wilson

ai automation multifamily investing technology Aug 14, 2023

Take it for what it is worth, but over the past 10+ years I have been in real estate I have noticed one major flaw in this sector - the lack of technological advancement. From the way real estate transactions are conducted, to the construction of both residential and commercial properties, to the way in which real estate businesses, like multifamily, self-storage, etc. are operated, technology was lacking no matter where you looked. Historically the real estate industry has been able to get away with the lack of technological innovation because the market just absorbed the higher expense that these antiquated processes cost. Well, that is no longer the case today.

As the market is at its breaking point with residential real estate teetering on a major housing affordability crisis and commercial real estate being slammed with operational expenses - for example rising insurance rates and tax hikes, it appears that we are nearing or potentially already in a recession. While some may argue that a recession can have some dire consequences, recessions also create opportunity. Tim Ferris said it best when he said, “A recession is very bad for publicly traded companies, but it’s the best time for startups. When you have massive layoffs, there’s more competition for available jobs, which means that an entrepreneur can hire freelancers at a lower cost.” In previous recessions those lower costs meant lower wages, however, today it means something totally different.

Enter Ai. If there is one thing that could propel real estate through this recession, it is Ai. Before you dismiss this statement as a pie-in-the-sky thought, hear me out as I break down where I see Ai emerging victorious.

Residential Real Estate - Did you know prior to Covid, most banks would not accept an online notary as a valid means to have a document notarized? Even during Covid, when most banks started to accept online notaries, some refused to cave, delaying transactions for months while stay-at-home orders were in place. This is just one example in which real estate transactions are heavily burdened by human intervention.  Ai has the capability to help with many processes during buying and selling including document creation, modification, and review and it can happen almost instantaneously.  Think of how quickly a mortgage application or a contract modification could be done if even half the people in the process were replaced by Ai.

But the value of Ai in residential real estate can be seen long before a deal is under contract. Although we previously had access to systems that were able to perform mass mailings and cold calling to potential sellers, we now potentially have the availability for similar systems to interact with these potential leads without human intervention. This will prove to be very beneficial for anyone in the business of buying single-family homes as their acquisition cost will significantly decrease without the burden of wages. 

The impact of Ai becomes even stronger when looking at commercial real estate. As commercial real estate deals in typically the millions, whereas residential is typically sub-million, the benefits can be exponential. On the sourcing side, you still have the same benefits as you do in residential. The difference is found in the return of investment. Commercial real estate has a lower rate of conversion when it comes to acquiring a property, than in single family. With Ai being able to handle a very high volume, the acquisitions team in the commercial space will not be as robust in the future. This benefit will bleed into underwriting of these assets, as Ai has the capability to assist in underwriting as well. While there will be a shift in the investor side, the real hit will come on the lending side as fewer analysts will be needed to handle the lender’s influx of properties.

Transitioning to operations, Ai can handle marketing, leasing, rent collection, tenant surveys, and more! With the recent rise in inflation transitioning into massive salary hikes, this will be a well received benefit that investors will tap into quickly to offset historically high operational expenses. 

Last, but not least, as marketing and brand awareness is arguably the most important aspect of any business in today’s economy, Ai will be able to serve as the much needed support for creating captivating content that is “on brand” for any and every company. 

Ai, certainly, has the ability to have a dramatic impact on the real estate industry. The question that remains is whether or not Ai will emerge as a white or black knight. Some may argue its hero status as a white knight when it comes to pushing innovation for the overall greater good. For example, with the lower cost burden to all real estate businesses, will prices be able to come down and create better affordability? Conversely, will Ai emerge as a black knight and be villainized for creating more profits for the people at the top, while decreasing the amount of available jobs for the working class?  If history has taught us anything, even recent history with costs coming down in construction but prices still remaining relatively high, Ai might be the push that divides the haves and have nots passed the point of return!

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