How AI Will Transform the Real Estate Market
Although hardly recent, AI is a technological advancement that is transforming a variety of industries. Writers are using ChatGPT to brainstorm article ideas. Medical professionals are using AI to help diagnose patients at a faster rate. Self-driving cars are using AI to make the roads safer. In short, AI is growing in ways to impact society for the better.
In real estate, AI has the potential to revolutionize the way we look at properties, market their value, and manage them. Real estate investing in the past has relied heavily on human intervention; however, current AI trends suggest that real estate could flourish using AI. Although AI presents several benefits, there are also drawbacks to using AI in real estate.
How Is AI Used in Real Estate Investing?
Tools like ChatGPT provide an easy way for real estate agents, homeowners, and property owners to gather hundreds of data points at their fingertips. ChatGPT can be used to write articles, sift data, analyze comparable properties, navigate customer and client concerns, and assist with drafting and reviewing legal documents.
This is incredibly helpful for real estate agents and investors because it makes lengthy processes more streamlined. As a result, you can use your time more efficiently while relying on AI.
Marketing forecasting is a complicated part of real estate investment. According to real estate experts, the real estate cycle has four phases – recovery, expansion, hyper supply, and recession. However, timing and predicting these cycles is complicated, if not impossible.
Real estate investors often rely on their own experience and intuition to know whether to invest in a real estate market. This method comes with its own faults. Human predictions aren’t always tried and true, after all, since people can’t always consider all of the variables that can affect the real estate market. However, with AI tools, predicting market trends might become more formulaic. AI can analyze micro trends that predict the phase of the real estate cycle. As a result, investors can more accurately invest their money with fewer risks.
Property valuation can fluctuate based on the market, the house’s appearance, the neighborhood and area, and other minute details of the property. This can make the process of valuing property lengthy and inefficient.
AI tools can streamline this process with machine learning to better predict patterns. This gives AI the power to analyze historical sales data and the property’s characteristics to make accurate property valuations. Appraisers can take this AI-generated data and use it to simplify the process.
AI has often been praised for its ability to analyze vast amounts of data in just a few seconds. It can take a pool of data and identify patterns that might take the human eye hours to notice. By streamlining this process, AI can make it easier for investors to create strategies based on market trends and economic indicators.
In addition, AI tools use machine learning to adapt and change over time. This is essential for strategy development because it allows for constant change and learning. As the AI tool becomes more aware of old and emerging trends, it can continuously apply this data to give the best results.
Property management is a time-consuming part of property investment. On the one hand, if investors let their properties sit too long without the right maintenance, they will lose value and waste money. If property owners are too hasty with maintenance costs, on the other hand, they could end up spending more than is necessary on upkeep.
AI can make this challenge easier by analyzing and scheduling maintenance needs and optimizing repair costs. In addition, AI can watch and predict tenant turnover, which can help property managers accurately adjust rental rates throughout the year.
AI is a great tool for customer service because it can answer basic questions while providing personalized support. For example, you can use AI to chat with investors, customers, and clients when they first find your website. AI chatbots can then figure out the purpose of the client’s visit and direct them in the right direction.
In addition, you can use AI to create interactive investor portals that allow users to manage portfolios and personalized performance records and reports in one location.
A major part of investing in real estate includes assessing risks. Risks that real estate investors might face include market risk, asset risk, financial risk, inflation and systemic risk, and liquidity risk. To mitigate these risks, investors can use AI to analyze and identify which risks are most pressing and present solutions on how to lower the presence of risk in investments.
What Are the Risks of Investing With AI?
Although AI presents countless opportunities for real estate investments and property owners to grow, expand, and manage their properties, there are several risks to investing with AI.
First, cyberattacks pose an ever-present risk when dealing with AI-based trading algorithms. Investors may use AI software to handle large amounts of data and process sensitive information.
Those interested in disrupting AI-based trading algorithms may attempt to influence the AI’s processing power and change the outcome of the AI’s decisions. This could have massive negative impacts on the investments. However, you can protect yourself from cyberattacks by installing proper firewalls and keeping your systems up-to-date.
Using AI also poses several ethical concerns since AI is easy to abuse. It can be programmed to make unethical decisions and engage in manipulative trading practices. This type of AI abuse can cause investors to deal with significant losses.
Not only can unethical AI algorithms impact individual investors, but they can impact the market as a whole. For example, AI can be programmed to manipulate pump-and-dump schemes, which refers to a situation where false information creates a spike in certain stocks. Investors participating in the scheme will then sell the stock when it’s at its highest and let the stocks crash.
AI may also mirror the biases of its programmers and existing algorithms, which can impact how the AI software reports data in the real estate market. This occurs when the AI is trained using opinions and programs that reflect unintended biases. As a result, a biased AI could refuse to accept applications or turn down investments based on social inequities.
Investors and property owners should be wary of unethical AI while trading. They should regularly audit and look over the AI’s algorithm to ensure that the AI complies with ethical standards.
There may also be privacy concerns when working with AI programs. AI may be used to monitor tenants to better understand patterns and provide better help and services. Depending on how the property owner chooses to use AI to monitor the tenant’s movements, the tenant may feel uncomfortable with being monitored.
To ensure that tenants feel comfortable, property owners should be open and honest about where and how AI is being used to monitor the area.
Passive Investing With AI Risk-management
AI is still a fairly new addition to many areas of real estate. Some people may still be skeptical about the benefits that AI offers. In addition, AI poses new risks that property owners might not be willing to take. However, AI in real estate offers so many benefits that it doesn’t make sense to avoid it.
To get all of the benefits from AI without the risks, property owners should consider making investments through a real estate syndication. A real estate syndication is an investment partnership that can present new and exciting investment opportunities. To choose the right sponsor, property owners should begin by accessing the syndication’s property portfolio and their past track record.
By partnering with a real estate syndication, property owners can increase their investments and make better use of new real estate AI tools without worrying about the risks.