What Role Does FinTech Play in the Real Estate Sector?

Property FinTech is the process of making it easy for real estate investors to get rid of middlemen who aren’t needed in real estate deals. Using FinTech as well as commercial real estate software to evaluate and buy real estate could save money, make the process easier, and open up more investment opportunities.

What Does “PropTech” Mean?

The term “property technology” (sometimes spelled “property tech”) refers to a new generation of businesses that have sprung up in recent years with the goal of shaking up the real estate market with new ideas. The phrase could also be put into a subset of FinTech.

There are non-FinTech firms that fall into the PropTech category that tend to change how people search for houses, how they value properties that are for sale, and even how they manage their mortgages using something like a smartphone or similar device.

Some of those firms are companies like Redfin, Zoopla, and Purple Bricks which compete with traditional estate agents by offering different services at lower commission rates. Another good example is Airbnb, which is now worth more than most of the world’s most successful hotel companies.

Loans Processing

Forbes says that the lack of available capital is one of the most important problems that real estate investors must solve. FinTech is working to find a solution to it with PropTech loans.

When a FinTech company gives a loan to an individual or business whose main goal is to buy real estate, this is called “property technology lending.”

A number of facts and predictions by people who work in the industry show that PropTech financing is the future of mortgages. And Jamie Dimon, the CEO of J.P. Morgan, said, “Silicon Valley is coming.” This one sentence shows how technology is growing in all areas, including real estate.

Between 2014 and 2020, the total number of real estate technology agreements kept going up. In 2020 alone, there were 501 deals, which was the most ever. During this period, the average value of PropTech financing deals also went up, from $3 million in 2014 to over $20 million in 2020. 

Providing Real-Time Data

Real-time property data is collected and shown at the same time. With the help of blockchain technology, encryption, and other similar technologies, this new development lets real estate agents and investors keep track of what buyers are willing to pay based on real-time purchases.

Every transaction in the past is timestamped and can’t be changed, and this makes it much harder to change prices in the market.

On the other hand, one of the main problems with this strategy is that it gives real estate investors access to a lot of different data and price prediction sources. In a strange way, too much information could make it harder to track how much things cost.

But now, thanks to improvements in both machine learning and advanced analytics, data analysts in the FinTech industry can combine relevant data sources and evaluate a wide range of information sources.

For example, if you are a real estate investor looking for underused properties that could be built on, you might want to look at the Multiple Listing Service to find out about recent sales (MLS). On the other hand, these facts by themselves don’t tell us much about their potential. They shed light on what happened in the past.

Risk Management

In the real estate business, risk management is the process of finding, analyzing, and getting rid of risks that could affect a property’s projected value and estimated value. For a real estate venture to be successful, it’s important to keep the amount of risk low.

Most of the time, real estate investors face two types of risk.

  • Systemic risks are those that are caused by things like earthquakes, tsunamis, and other natural disasters. These types of risks could be very bad.
  • Non-systemic risks are those that are caused by human actions or policies, like those that governments put in place.

FinTech companies have developed software called Portfolio Risk Analysis to help them deal with risks that are not systemic. With the help of artificial intelligence, this kind of software gathers a lot of data, sorts it, mixes it up, analyses it, and comes up with useful insights.

Regarding investing in real estate, speed and efficiency are two of the most important things determining how successful an investor will be. Such an investor can also utilize services like houston real estate photography to complement that success.

Over the next ten years, it seems like there will be a growing need for real estate risk management solutions that are backed by FinTech. This claim is supported by the following facts:

  • Forty-five percent of wealthy investors who switched investment companies did so to take advantage of what FinTech had to offer.
  • Millennials see big data and artificial intelligence as reliable sources for investing advice, especially when it comes to real estate.