Thursday, October 13, 2016
Commercial real estate investing is a growing industry where personal relationships are pivotal—and these relationships are commonly built via face-to-face meetings and document-heavy correspondence. Sponsors and investors have typically exchanged information through low-tech and high-touch channels, without a great reliance upon technology.
As a result, the traditional commercial real estate investment process ends up being long and drawn-out, and because of regulatory restrictions, a sponsor’s network of investors has been limited to the people he or she already knows—friends, family members and business colleagues in particular.
Recently, however, some restrictions have been lifted, and momentum is building toward a tech-driven revolution that promises to provide a much-needed dose of modernization to commercial real estate investing.
Thanks to the JOBS Act, sponsors are now allowed to market investment opportunities more broadly through general solicitation of accredited investors. This means they can post properties online, thus opening up an immense new audience of potential partners. In fact, according to the SEC, more than 12 million U.S. households qualify as accredited investors.
With access to so many more potential investors, it only makes sense for real estate sponsors to embrace modern technology to reach these individuals, remain organized, boost efficiency and maximize this key opportunity.
As we’re beginning to see, tech is turning commercial real estate investing into a scalable, transparent industry of long-term relationships. Think along the lines of social media: investors can be “linked” with sponsors and monitor investment opportunities—all from the comfort of their smartphones or computers.
Everything is readily available at the click of a mouse. Relationships can be formed online in a matter of minutes, and information that used to take weeks to compile and digest can now be created and consumed within days.
A process like this has never really existed in private real estate investing, and countless investors and sponsors are beginning to reap big rewards from it.
These benefits include:
When it comes to investing in the stock market, you can click around the internet and get a pretty good idea of whether you’re making a smart decision. But when it comes to investing in properties, the only information that is readily available to the average person is much more generalized. Any deep analysis costs money to access, and even that information may not help you make an informed decision.
Tech-driven investment platforms, on the other hand, serve as easy-to-use news hubs for investors, making data, insights and trends highly accessible to all. Over time, sponsors can amass robust profiles of information that help build understanding around commercial real estate, boost transparency to unprecedented levels and empower investors to make smart decisions.
As a direct result of this demystification, we are seeing a drastic increase in tech-enabled commercial real estate investing. In fact, according to Massolution’s 2015CF Crowdfunding Industry Report, more than $2.5 billion was invested globally via online avenues in 2015, and that number is expected to grow to $3.5 billion this year.
Armed with the right technology, sponsors can now easily create and distribute digital information packets regarding each and every investment opportunity they’re offering. They can use templates and input in-depth information regarding a property’s history, location, tenants and surrounding market. Then, they can digitally send them to interested investors or make them publicly available via web-based platforms.
Beyond that, online platforms provide sponsors with better ways to tell their personal stories and explain their investment philosophies. They can clearly express their value proposition, highlight their trustworthiness and describe their approach to running a property.
Deeper details about both sponsors and buildings result in less risk and fewer surprises, as investors fully understand the past, present and future of the properties in which they are interested.
The latest investor relations technologies provide sponsors with the means to regularly report to their investors. Today’s investors demand ready access to information about their investments across every asset class; now, commercial real estate can meet these demands with efficient online reporting.
These technologies have created a new type of progress report—one that allows sponsors to provide on-demand information to investors from reporting templates that are updated on an as-needed basis when developments or changes occur.
It’s paramount for the commercial real estate industry to respond to the demands of up-and-coming investors—and the transparent, real-time nature of tech-enabled investment and reporting platforms is doing just that. In fact, one study cites that Millennials are 10 times more likely to use online investing platforms than baby boomers.
In a world that has evolved to meet modern investor expectations—where unlimited real-time information has become the norm—tech-driven investment platforms are ushering commercial real estate into the future.
Written by A.J. Chivetta - National Real Estate Investor