Finding a house. Pricing repairs. Buying the house. Hiring contractors. Managing the project. Selling the house. Repeat.
Summed up like that, the work of a fix-and-flip investor doesn’t seem like a lot, but the minutia in each of those steps adds up quickly. And if you have multiple projects going at once, it can be even more stressful keeping everything on track.
Thankfully in this digital world, property technology can make investors’ lives much easier.
Why Real Estate Investors Should Use Proptech
No matter the size of the operation, many investors are solo entrepreneurs, meaning they wear nearly all (and sometimes all) of the hats. Unfortunately, that makes scaling difficult.
“At the end of the day, real estate investors are running their own company,” said Tony Hernandez, Stoa product manager. “They’re like a CEO. So as a CEO, there comes a point in time where you can’t do everything.”
It’s at that point in which the investor needs to lean into what they’re best at or what they enjoy the most and source out the rest.
“Proptech can allow these fix-and-flip CEOs to disperse some of these ancillary things that they would usually have to do on their own, but let the technology do it for them instead.”
Types of Proptech
In a previous article on proptech, we defined it as encompassing “all of the technology and platforms that both consumers and real estate professionals use to do everything from buying and selling properties to researching and marketing properties.”
That definition is purposely broad because there are so many different types of proptech out there. And rightfully so as there are myriad tasks with which investors could use some help. You’ll find proptech for all of the following (and more types of proptech are popping up every day):
- Real estate sourcing
- Real estate buying
- Traditional lending
- Hard-money lending
- Private lending
- Real estate crowdfunding
- Real estate appraisal
- Real estate inspection
- Scope of work creation
- Sourcing contractors
- Construction project management
- Materials ordering and inventory management
- Real estate selling
This list is not exhaustive, because some of these verticals are now combining forces to meld their individual data sets and technology into new products.
AI is also creating whole new possibilities with proptech. For example, FoxyAI “utilizes computer vision, artificial intelligence, machine learning and data science to convert everyday property photos into treasure troves of actionable data.” In non-technical terms, that means a real estate investor can upload photos of a property and get an initial appraisal, estimated scope of work, and location-based repair cost estimate.
If AI capabilities are applied elsewhere in proptech, who knows what we’ll see in even a year’s time?
Using Proptech to Increase Efficiency
While there are many different types of proptech, investors should focus on using just a few at first. This will help them more easily integrate these into their projects without it becoming overwhelming.
One of the first areas in which to use proptech is sourcing contractors.
“A fix-and-flip investor may think, ‘I want to expand my business, but I don’t wanna give away my business by bringing on a partner,’” Tony said. “As a small business owner, they’re at the point where they need to grow, but they can’t afford to bring on a partner because the partner will just take out too much of the gains. This is one way that they could actually leverage extending themselves.”
One such company that does this is BuildZoom. Originally created for and used by homeowners who wanted to do remodels, BuildZoom can now be used by fix-and-flip investors for entire renovation projects.
“We’ve seen projects with budgets upwards of $1 million seeking contractors on there,” Tony said.
“Even for seasoned investors who have bulk materials on hand, it’s worth exploring these proptech options."
Another area in which to utilize proptech early on is for materials. During COVID, and even in the time period immediately following the pandemic, home building and renovation materials became scarce due to high demand. Thus, some brick-and-mortar stores had — and sometimes still have — limited stock.
“Using a proptech company like BuildDirect, which has the materials in bulk, can allow fix-and-flip investors to get the materials they need even if their local shops are out or have a limited supply,” Tony explained. “Even for seasoned investors who have bulk materials on hand, it’s worth exploring these proptech options to source what you need.”
With contractors and materials at the ready, real estate investors who are looking to scale should also look into project management tools. At some point, it becomes impractical to go out to every job site. A project management app allows fix-and-flip investors to keep their finger on the pulse off each project without having to be present all the time.
“The one caveat to that is the assumption that your general contractors are also updating those applications,” Tony warned. “As long as you and they are on the same page, though, these tools will make your life much easier and allow you to scale.”
Data and Proptech
Real estate investors shouldn’t just rely on proptech as tools. They should also try to learn from the data that the proptech gives them.
“It’s just like any other type of business in which economies of scale come to play,” he said. “Data is a huge piece of that.”
To that end, pay attention to the data you’re getting from your proptech and combine it with the data you’re collecting yourself. For example, you could go to the courthouse to get information on foreclosures, then use FoxyAI to get appraisal estimates on those homes, as well as a scope of work and estimated renovation costs. Then compare that information to data on where homes are most likely to sell in your region. And now you have a list of homes that people are desperate to sell ranked by net gains and estimated turnover time.
“An investor may ask if they really need to invest in data,” Tony said. “Well, no. But if you want to scale — multiple projects or operations in multiple states — then you should definitely focus on data as part of your business model.”
