PropTech is a relative newcomer to the world of the “Tech” suffix; you may be more familiar with the more recognizable MarTech and FinTech terms. While this terminology may be trendy and buzz-worthy, what does it really mean to implement it in your real estate investing business? Maintaining your competitive edge and creating efficiencies in your growing portfolio requires the skillful use of technology. Implementing the wrong solution or the wrong technology that doesn’t add value can be a costly mistake. Understanding which technology can have the biggest impact on your bottom line is critical.
What is Proptech?
It’s a good idea to understand what PropTech means before you consider implementing it in your own business. PropTech (property technology) is a category of technology dedicated to the real estate sector. Specifically, PropTech helps real estate investors, landlords, property managers, agents, letting agents, investors, contractors and other individuals or businesses research, build and develop, buy or sell, lease and manage real estate.
FinTech functions (such as online rent collection/payments and accounting solutions) and MarTech functions (such as real estate marketing syndication functions and tools to create outbound communications) are often integrated into PropTech solutions. PropTech-specific tools can include online tenant screening, virtual rental property inspections, tenant insurance solutions, and real estate communication tools, such as landlord-tenant text messaging services.
An example of PropTech in action
To bring things back to basics, let’s look at a real-life example of PropTech. Traditionally, tenants paid rent to their landlords by check, usually by mail. This process requires several manual steps:
- Drafting of the check.
- Put it in an envelope.
- Include postage.
- Drop it in the post office box.
Then the owner waits a few days for it to arrive. There are so many inefficiencies here that it cringes in today’s automated “click of a button” landscape.
Implementing PropTech in this scenario is as simple as using a platform that allows tenants to pay their rent online. Finding a solution that allows tenants to sign up to pay rent via eCheck (ACH) or credit card can streamline this process exponentially. In fact, data shows that tenants who have this option more often pay their rent on time, sometimes even automating the payment each month so they don’t have to think about it at all, making it truly contactless. . According to our data at Rentec, landlords are increasingly looking to offer online rent payment solutions to tenants to meet demand.
Other PropTech tools that real estate investors can consider are:
- Selection of tenants, including automated delivery of credit reportsrental history, etc.
- Tenant portals for rent paymentsmaintenance requests, communications, etc.
- Marketing of vacant properties on a large number of websites with just one click.
- Virtual tours of available rental properties for both tenants and potential buyers.
- Modeling tools that can calculate your potential return on investment if you are looking to invest in a new property.
- Smart home technology (eg thermostats, locks and security systems) to help manage properties remotely (while also being a selling point for potential tenants).
Transforming real estate with PropTech
Like its other “Tech” counterparts, PropTech solutions create efficiencies, making the resources, tools, and systems you need cost effective and easy to access and use. From a tactical perspective, the right technology can streamline communications, add value to everyone who uses the solution, enable you to grow your business by simplifying tedious or manual processes, and ultimately make you save time and money.
To find out what kind of PropTech you might need in your real estate investment business, ask yourself a few simple questions:
- What are the main sticking points in my daily or monthly workflow? Is there any technology available that can alleviate these points?
- Does the PropTech solution I am considering address all of my concerns or just one part of the problem? Was it created with my current work in mind?
- What are the main strengths and weaknesses of the main members of my team? Can they work with technology to create efficiencies in my business?
- Is the technology working for all my stakeholders? For example, your partners, your staff, your tenants, your subcontractors and others?
- Will it free me to do what I do best? From managing my business to exploring growth opportunities and building relationships? The right PropTech solution can free you up to focus on high-value tasks.
Technology-based solutions really emerged during the pandemic as people searched for new ways of doing things in many sectors, including real estate. Before this happened, PropTech might have been considered useful and efficient, but now it is necessary and invaluable (not to mention expectations). It’s the new normal, and as real estate investors embrace new technologies, the efficiencies and cost benefits will outweigh the learning curve.
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Note by BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.