Investments in the Real Estate World
Last week I was on a panel at Real Estate Connect, Brad Inmans Conference. An insanely well run event that is the place to be if you are in the real estate world.
Morgan Brown was our moderator. The panel was Josh Guttman from Softbank, Brian Hirsch at Tribeca Ventures Partners, Amy Wu at IA Ventures and me. The panel lasted 15 minutes and what we talked about in that short about amount of time was impressive. Morgan can moderate any panel I am on anytime.
I heard from a few people after the panel sharing their businesses with me. I have written about real estate many times. Real estate is an industry that some would say is still incredibly conservative and not using the technology available to them. I am not so sure about that. What makes the real estate community unique is that this space comes down to something very simple, dollars. Most peoples biggest physical asset they own is a home. II is about supply, demand and desire. I know because I have been buying, selling and renovating for years.
My first investment in real estate was Curbed. The early adapters to that proved to be the start of an industry going through change. 10 years ago, in NYC, real estate agents put their listings in the NYTimes real estate section. Fast forward, they are all on line reading Curbed daily. Dottie Herman got it from day one and so did Brad Inman.
Fast forward I met the Nestio team at Techstars NY and became a mentor to the team. This was about three years ago. This is when I knew that the real estate market was moving into technology. Many naysayers said Nestio would not work that people had tried this before but the reality is that timing in life is everything. They began as a place for renters to find listings and categorize them. Overtime they evolved into giving landlords and agents the ability to manage their listings in real time, in one place. They are growing and definitely changing the way their clients manage their listings.
Sweeten came to me through a friend who had used the service and thought I should meet with the entrepreneur. I got it immediately. The difficulties of finding the right contractor for your project is not easy. Having a marketplace to match your needs with someone who has been approved makes total sense. Having maps that show what other transactions have taken place in your neighborhood is brilliant. Bringing on customer service to help both the client and contractor move the process through with less angst makes sense too. Huge fan. Yes an investment.
Architizer helps architects explore and collect information that currently resides in huge books that look like yellow pages. Certainly consumers can browse too. A business to business model with a little consumer tossed in on the side. They also put on an annual awards event that acknowledges the industries professionals in over sixty categories
I am also invested in Tactile Finance. Tactile Finance helps customers navigate complex financial products making it easier not only for the customers but the banks and mortgage brokers in regards to complete transparency. As we all know the mortgage industry has not been so transparent over the past few years. Being able to calculate everything through technology makes total sense. It is a win for real estate buyers.
The real estate industry is going to look very different ten years from now. There will always be places to be bought, places to sell, buildings to get built, renovations to take place, real estate portfolios that need to be managed yet the way all of this is done will be so much more efficient with collected data and more effective when it comes to cost and timing. What that means will certainly be interesting to watch.
One barrier to entry startups need to figure a way around is the MLS. Agents guard it judiciously.Commercial real estate is ripe to be disrupted. I invested in desktimeapp.com, and nextspace.us. Both are doing well.
“Commercial real estate is ripe to be disrupted.”Well in some communities commercial realtors hold the cards because they have the leads. They have the leads because they have signs out all over the place and when someone wants to rent they call the number on the sign and a broker then steers them to an available property that either they have or a realtor they work with has.There are people where you can get all this info now btw. Loopnet and costar. I’ve put properties on loopnet and I’ve shopped for properties on loopnet. The cost is nominal.One property I put on loopnet a broker contacted me with a buyer and I gladly paid him 3% because he had the buyer and that’s what I needed. He was a nigerian and his client was a nigerian doctor that he met at church. I would never had had the buyer without the realtor. Got my asking price.Not only that but I have something I’m trying to sell now and I told the guy (who is young) that works for the broker that I will give him a cash bonus if he gets my property rented. That’s on top of whatever he will make on the deal from his employer. He controls the buyers and I recognize the importance of that. I also recognize the importance of having the realtor push my property over someone else’s. In another thing I am trying to rent I found the woman who answers the phone at the condo association office and told her I would give her $500 if I rent the property from her lead. I also told the property manager I would give them $500 as well. As a result any time they get a call I get the lead right away. The other property owners simply wait for their realtor to bring them deals (which I do as well.)
At least in NYC, the rental marketplace is a mess both on the residential and commercial side.On the residential side sure there are listings but the process of renting is a nightmare, availability and cost aside. I personally think the concierge approach is a non starter.Commercial leases is still a person to person business and if you want to find a popup store, or create to-the-street windows for a juice chain you walk and knock on doors.
Sweeten seems like a good idea. I wonder how it will scale. It seems like the value to the contractors is obvious (leads) but also the fact that they stand a 33% chance of getting any jobs that are actually are awarded. In theory of course. But there doesn’t appear to be anything to prevent someone from posting a project, getting hooked up, wasting time with contractors only to choose not to do the work or use the ideas given with a non-sweeten contractor who bids less money. (So I’m wondering what their experience with this is has been out of curiosity.)Also I’m wondering what kind of contractors (who are always short on time if they are any good) are going to want to waste time bidding on something like this:http://sweeten.com/projects…People who just want ideas (and have no plan to actually do something for years if ever) are really not a good use of someone’s time at this level. Not to mention do they actually have the money. Estimating is a lot of work. I would think they should concentrate on a certain niche of things that are clearly defined and that can be stated in dollar terms so people don’t end up thinking they can get a kitchen renovated for $15,000. This should be front and center:”Sweeten is free for homeowners so post your project now!” (not at the bottom of the “how we work” page. When I was in a business that involved giving people estimates one of the first things you need to do is size up the person requesting the estimate, the work they wanted and decide if it was even worth the time to do an estimate. In other words qualify the leads. So I guess I’m wondering what sweeten does to qualify the leads.
Would be nice if there were a service that hooked people who are buying real estate up with individuals that can provide mortgages (not banks). That can make a decision based on deal particulars without tons of red tape. Or maybe some kind of private guarantee/insurance service that makes their money by vetting the recipients and assesses probability of default.For example I have a deal right now for a physician group that wants to buy an office condo and each physician is willing to sign personally for the mortgage. The amount of work that the bank or traditional mortgage broker will make them do could kill the deal. They don’t really differentiate between different levels of risk. I mean if you look at a small purchase and 4 signers at that income level and a property that secures it’s low risk and many private older retired investors would rather hold that and get 6% than have money in a money market.
I believe you will begin to see those types of start-ups company to your rescue.
Nice post. I started reading it thinking it was about investing in real estate. You’re actually talking about investing in startups that cater to the real estate market. These are very different things, albeit your experience makes you extremely qualified to judge the viability of these startups.Early investors in Amazon were not investing in book publishing, but any knowledge they had of that I industry surely helped.I don’t know, maybe I’m making a distinction without much of a difference?