Disrupting the Rental Industry
Most Popular Reply
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
5yI see five trends:
1. Cameras are going to become still cheaper and more capable. In 10 years I suspect there isn't going to be such a thing as a multifamily rental property bigger than a duplex that doesn't have a camera system. The decrease in local street crime where cameras are means that true D-class areas are going to get smaller and marginal C-class areas are going to get larger.
2. Autonomous driving vehicles are going to essentially kill the need for garages and greatly expand taxi service and rideshare offerings. This will further redraw the C/D map in urban areas. At the same time, autonomous driving vehicles will also make longer commutes more comfortable. A 1-2 hour commute isn't going to be such a hassle if you can sleep, do your email, and study effectively while driving.
3. I have been working from home for 11 years now in my W-2. Although the pandemic increased the number of jobs that can be done remotely, there really is a natural limit to how many office jobs can be turned into work-from-home opportunities. I don't see radical change coming on that front.
4. In our new age of the greatly increased power of the automated background check and ever-growing computerized databases, owning and operating rental properties has become much safer than it used to be. This has led to a huge influx of people buying rental properties as investments, especially large business concerns doing it as a form of alternative investment. This will continue.
5. Landlords have never been more hated. By and large, the influx mentioned in (4) above is the main reason for this. The political backlash has begun and will continue to develop. More restrictions on evictions, collections, more county and municipal inspections, more moratoriums are on the way. In some places, these are very obviously going to backfire and either rent will be untouchable or landlords will simply sell and get out en masse, creating acute housing crises in the affected areas. That's when the trend will quietly reverse, as politicians realize they can't continue to effectively use and abuse the poor for political gain without keeping landlording profitable and keeping the rent down by creating landlord-favorable policies.
---------------------------
One major thing that could disrupt or take advantage of these trends is cheap modular multifamily construction to replace our ever-decaying residential construction housing stock. This could be achieved through onsite 3-D printing of components, drone labor to assemble the multifamily building, major NGO investment in these technologies. I don't see this happening in 10 years. Maybe 20-30.
I don't see much else, @Steve K.
47 Replies
- Rental Property Investor · Massachusetts and Maine · Member since 2020 · 18 posts · 18 votes5y
It seems the government may be a big disruptor. It could change the way properties are financed, leased, renovated and more. You can expect a proliferation of rent control, increase in section 8 type assistance, longer evictions or even permanent landlord non-renewal moratoriums. (They already have this in EU. My parents had a renter that was paying 50 cents a month (!), but they were not allowed to set a market rent, nor terminate for 20+ years. This is despite the house being owner occupied. The house and renter were inherited. The only way my parents were able to recover that part of their house was when the renter finally passed away.)
- 5yTim DelaneyPro MemberBuffalo, NY · Member since 2018 · 790 posts · 530 votes
@Ryan Olsen that will be interesting to watch - hopefully it goes well and spreads fast!
- Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes5y
@Steve K.
I think solar power has the potential to disrupt certain aspects of real estate and investing. I’m no expert but it seems like the technology needs to improve and get cheaper. Government already subsidizes it.
Amenity for seller/buyer
Cost savings for large projects
Commercial and residential
Environmental/ethical aspect
In general I see movement towards electric and alternative energies and away from gas/oil. So maybe geothermal heat also becomes more widespread.
- Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes5y
Prefab housing is going to make housing more affordable, and land in good areas will be more valuable because of the optionality to build anything *for much cheaper than construction* on it. I think buying older houses on good land is going to pay off.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Max T. I agree. Denver recently passed a mandate that all new construction will need to be completely electric in the next few years (no more natural gas). The technology that will make this possible will be solar, high efficiency heat pumps, geothermal, batteries, and off-site generation from wind (as well as conventional/existing power plants using non-renewables that won’t be completely phased out until energy storage technology improves).
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve K.:
Originally posted by @Alex S.:
Rich Barton applied that concept when he built Zillow. His end goal is to move house buying completely online and make it more reflective of the e-commerce environment we know and love.
Regulation represents the biggest obstacle in the path of modernization of the real estate industry. We'll get there though and I'm glad to be along for the ride!
Good point. Rich Barton also founded Expedia, which disrupted travel agencies. With Zillow Group buying up Trulia, Dotloop, Showing Time, etc. and recently becoming a Real Estate Company by getting licensed in all 50 states and joining the National Association of Realtors, it's obvious that they're trying to control as much data as possible, gain market share and potentially become the Expedia of real estate.
However, the human element is much more important to real estate than it is to travel IMO. The sales cycle is much more complicated than booking a flight or a hotel. It's 100% a relationship business with lots of human interaction and negotiating.
15 years in, Zestimates are still mostly junk because the algorithm can't see inside properties to be able to compare them to similar properties, or know neighborhoods house by house like an experienced local professional agent can. While Zillow will continue to change the industry through creating online tools to modernize/digitize the process of buying and selling property, I don't think this will ultimately disrupt RE on the same level that Expedia did to travel. Home buyers and sellers will probably still want agents to help them make decisions, negotiate, share expertise, lend their shoulder to cry on, or help navigate a lengthy contract process on the biggest purchase most of them will ever make. Real estate is much too technical, and the human element is too critical for it to be reduced to an app or an online shopping cart with a checkout feature, IMHO. I see real estate being more like law, psychiatry or medicine, where humanoid professionals will still have a role for the foreseeable future.
I agree way to many moving parts and its a foreign language to most.. Title, Escrow, Mortgage functions, Inspections, Disclosures etc etc there are a ton of laws relating to how we do real estate that must be adhered to ( of course wholesalers dont give a rip about that LOL). And each state has there own methods of closings IE Escrow companies or Attorney closings states. You have the title examination process that very few buyers will understand if they are not in real estate . Hand a preliminary title report or a title commitment to someone with no back ground in real estate and see what you get . I mean there are still tons of agents who cant really understand a title report.. they just rely SOLELY on the closing companies or closing attorneys to lead them through it.
So most everyone understands that renting a car buying and airline ticket or booking a hotel is simply not complicated and common knowledge real estate under the hood is anything but..
Then you have buyers and sellers trying to negotiate directly way to MUSH emotion and drama. Make a seller and offer and they are offended :) thats were you need and agent to keep everyone grounded and not get frustrated or upset and blow deals up.. My Wife is an Expert at this I watch and listen to hear and I know many of these transactions I could never hold together as I would be frustrated especially with her first time buyers.
Disruption is happening though just Look what Tesla has done to the Traditional DEALER model.. blown it out of the water.. you can order a Tesla on your phone in less than 5 minutes or your home computer . Then you get an email when to show up to pick it up or its delivered to your driveway.. you do have to do your own financing but most can do that or simply pay cash the day you get it.. But no up sell no 8 hours at the dealer No being handed over to the closer or the finance guy to sell you True Coat.. No Dickering price is the price.. But most folks understand how car sales work.. Real Estate not so much and we must keep in mind who the audience is on BP those that are on this site who believe agents are obsolete are generally investors or experienced buyers sellers and to them then ya maybe so but investors make up a tiny fraction of the actual transactions that happen every day in real estate.
- Flipper/Rehabber · Grand Rapids, MI · Member since 2020 · 10 posts · 8 votes5y
@Steve K. Thanks for this excellent conversation! Learning so much! It goes without saying but the importance of being comfortable at home will grow as more and more people work from home. So adding those extras to rentals could make a huge difference in increased cash flow.
- Lender · San Diego, CA · Member since 2016 · 62 posts · 29 votes5y
Thanks for posing an engaging question. The comment about pre-fab housing @Allen L. and the climate change migration to places with fresh water @Marcus Auerbach. To add a couple more thoughts to some already interesting dialogue...
1. As it relates to @Tim Delaney Blockchain point, I believe that could have further implications than just the simplification of the process (thanks for the link of what is going on in Reno @Ryan Olsen ). It could also provide new options for split ownership. This could make offering "shares" of a home easier and could provide the ability for renters to earn some type of equity on their rent and create an entirely new hybrid model of ownership. 90% of my parents net worth is wrapped up in the home where I grew up. That is not exactly a diversified financial risk strategy. I'm wondering if the future holds a model where people are willing to have less commitment to one specific house, in exchange for building equity in a multiple houses.
2. Which leads me to a second potential disruption. Increased Mobility. With more people working remote, as noted by and others, in addition to more Boomers retiring and not wanting to travel, furnished rentals will continue to establish a larger percentage of the rental inventory. Weekend rentals are still at risk of further regulation, but I see 30+ day furnished rentals gaining demand. IF more people use long term furnished rentals as a primary housing solution, THEN people don't have the traditional "Community" anchored in neighborhood friendships, therefore the furnished rentals that have multiple units or shared common spaces where interaction with other "digital nomads" / "slow vacationers" will be able to get a premium price.
3. Related to @Max T. point about solar, I see the decentralization of energy sources being a future disrupter. Battery storage (think Tesla's solar wall) will dramatically drop in price and allow a neighborhood solar farm / or multi-fam roof solar to collect and store enough energy for all the local needs. This could allow RE investors to become the proxy utility and add a revenue source by billing tenants directly.
- 5ySteve K.Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votesOP
@Jay Hinrichs great points Jay. I’ve only been working as an agent for a short time period but I definitely see how buyers and sellers have opposing interests inherently, and tend to get upset and blow deals up over non-material nonsense. People may see agents as unnecessary, overpaid etc. but a primary function is keeping deals on the rails. More deals would fall apart (or end up in litigation) without agents greasing the skids and preventing buyers and sellers from screwing each other over or walking away for petty reasons.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve K.:
@Jay Hinrichs great points Jay. I’ve only been working as an agent for a short time period but I definitely see how buyers and sellers have opposing interests inherently, and tend to get upset and blow deals up over non-material nonsense. People may see agents as unnecessary, overpaid etc. but a primary function is keeping deals on the rails. More deals would fall apart (or end up in litigation) without agents greasing the skids and preventing buyers and sellers from screwing each other over or walking away for petty reasons.
My wife just closed on .. a professional couple and they neglected to disclose a major issue they had with their plumbing and the subsequent fix's.. so a buyer non represented maybe would not have caught that.. or in this case when tempers flared on both sides you have Ms.. Lori holding this together and keeping the other agent in check and her buyers..
- Member since 2018 · 13 posts · 10 votes5y
Originally posted by @Jim K.:
I see five trends:
1. Cameras are going to become still cheaper and more capable. In 10 years I suspect there isn't going to be such a thing as a multifamily rental property bigger than a duplex that doesn't have a camera system. The decrease in local street crime where cameras are means that true D-class areas are going to get smaller and marginal C-class areas are going to get larger.
2. Autonomous driving vehicles are going to essentially kill the need for garages and greatly expand taxi service and rideshare offerings. This will further redraw the C/D map in urban areas. At the same time, autonomous driving vehicles will also make longer commutes more comfortable. A 1-2 hour commute isn't going to be such a hassle if you can sleep, do your email, and study effectively while driving.3. I have been working from home for 11 years now in my W-2. Although the pandemic increased the number of jobs that can be done remotely, there really is a natural limit to how many office jobs can be turned into work-from-home opportunities. I don't see radical change coming on that front.
4. In our new age of the greatly increased power of the automated background check and ever-growing computerized databases, owning and operating rental properties has become much safer than it used to be. This has led to a huge influx of people buying rental properties as investments, especially large business concerns doing it as a form of alternative investment. This will continue.
5. Landlords have never been more hated. By and large, the influx mentioned in (4) above is the main reason for this. The political backlash has begun and will continue to develop. More restrictions on evictions, collections, more county and municipal inspections, more moratoriums are on the way. In some places, these are very obviously going to backfire and either rent will be untouchable or landlords will simply sell and get out en masse, creating acute housing crises in the affected areas. That's when the trend will quietly reverse, as politicians realize they can't continue to effectively use and abuse the poor for political gain without keeping landlording profitable and keeping the rent down by creating landlord-favorable policies.
---------------------------
One major thing that could disrupt or take advantage of these trends is cheap modular multifamily construction to replace our ever-decaying residential construction housing stock. This could be achieved through onsite 3-D printing of components, drone labor to assemble the multifamily building, major NGO investment in these technologies. I don't see this happening in 10 years. Maybe 20-30.
I don't see much else, @Steve K.
This is a great list and comprehensive
- 5yPat GoodyearPro MemberSyracuse, NY · Member since 2015 · 77 posts · 48 votes
In my limited view: State and National government is the biggest disrupter. In NYS - rental registry with inspections and fees, Good cause eviction, changes in ability for landlords to screen properly (evictions are blocked), rumors of possible rent control, eviction process made more and more difficult, rent relief tied up in so many regulations that the front line landlord never sees it.
- Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 654 posts · 622 votes5y
@Steve K. I think the obvious disruptor already happening is the shared economy - AirBnB and VRBO. Maybe if more people want to move around more often, furnished units may grow and unlike AirBnB for a 1or 2 night stay maybe minimum 3 months.?? You got us thinking…
- Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes5y
Originally posted by @Alex S.:
In 1970 George Akerlof wrote a paper about "Information Asymmetry." He argued that sellers of used cars have an information advantage over consumers, because they know more about the condition of the vehicle. So, they have a lot of power to set the price higher than the vehicles real value. George won a Nobel Prize in 2001 for this work and lots of folks started applying that concept to other businesses. Give the consumer access to all of the information and you'll have all the consumers. So, exactly what @Will Gaston said.
Rich Barton applied that concept when he built Zillow. His end goal is to move house buying completely online and make it more reflective of the e-commerce environment we know and love.
Regulation represents the biggest obstacle in the path of modernization of the real estate industry. We'll get there though and I'm glad to be along for the ride!
Totally agree that regulation is the biggest obstacle, no matter what aspect of real estate you're talking about.
We hear so much about 3D printed buildings and how they'll change everything. There is no chance of that happening until regulators start allowing it, and that is a long time away from now.
- Investor · La Jolla, CA · Member since 2016 · 66 posts · 169 votes5y
Originally posted by @Karl Eisenhofer:
It seems the government may be a big disruptor. It could change the way properties are financed, leased, renovated and more. You can expect a proliferation of rent control, increase in section 8 type assistance, longer evictions or even permanent landlord non-renewal moratoriums. (They already have this in EU. My parents had a renter that was paying 50 cents a month (!), but they were not allowed to set a market rent, nor terminate for 20+ years. This is despite the house being owner occupied. The house and renter were inherited. The only way my parents were able to recover that part of their house was when the renter finally passed away.)
Yikes. If I had to let a tenant rent from me for 50 cents a month I might help them "pass away".
- 5yRick H.Pro MemberInvestor · Joliet, IL · Member since 2013 · 59 posts · 32 votes
Current construction practices are very antiquated. Super labor intensive, inefficient, and costly. At the same time, there is a massive unmet demand for affordable housing (because the economics don't work at the lower end of the market under the current system). This would seem to be a recipe for disruption. My question is, what happens to the value of the existing housing stock (and rental portfolios) if new more efficient methods are developed that reduce construction costs substantially while also producing a superior product? Especially in areas where there is no shortage of land for people to print homes on, or have them delivered from the Amazon warehouse, or whatever.
- Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes5y
Originally posted by @Rick H.:
Current construction practices are very antiquated. Super labor intensive, inefficient, and costly. At the same time, there is a massive unmet demand for affordable housing (because the economics don't work at the lower end of the market under the current system). This would seem to be a recipe for disruption. My question is, what happens to the value of the existing housing stock (and rental portfolios) if new more efficient methods are developed that reduce construction costs substantially while also producing a superior product? Especially in areas where there is no shortage of land for people to print homes on, or have them delivered from the Amazon warehouse, or whatever.
Rick, you and @Steve K. may find this interesting about Prefab and why it hasn't taken off despite its many advantages. Short answer is complexity, supply chain, and consumer tastes. IDK what the impact of 3D printing will be, but it always bothered me that such a clearly better means of production across many facets [prefab and/ or modular] never took off,
So You Want to Build a House More Efficiently
Construction, Efficiency, and Production Systems
That last one doesn't give a lot of answers, but rather more questions, but I think they get to the heart of the prefab/ modular issue. If construction is truly a subset of manufacturing and Toyota, arguably the world's preeminent manufacture can't make it work, in Japan, where the environment is much more conducive to prefab/modular, WFT.
That's where I think the first article comes in and chops the legs out from the idea that construction and manufacturing are as related as we think and thus the economies of scale don't play as large of a role?? I don't have a good answer at all, but found it interesting.
- Rental Property Investor · Red Bank, NJ · Member since 2017 · 1k+ posts · 1k+ votes5y
@Drew Sygit Hit the nail on the head for very real disruptions that are happening now and will continue to happen.
As for autonomous vehicles- we have those where I live, trains, buses and ferry's... and people are not going to be happy to sit in a vehicle that is going nowhere in traffic, just because they aren't driving. In my market, the pandemic made many office workers realized how much of their lives they were giving away to commuting, when it was completely unnecessary.
Work from home is real, it will continue in a hybrid model and it will continue to open up markets that are farther afield and more rural.
There are many people who are far more financially stable- that rent, and will continue to rent. They learned of it's advantages from the FIRE enthusiasts. Additionally, they are not us and our parents- they are jumping jobs at the drop of a hat. They are not tied down in the same way and the last thing they want is a mortgage payment on a house they may have to sell in a few years. Home ownership is a heavy yolk around many peoples necks and: Many homeowners falsely believe that they are making money on the resale! When costs are correctly computed- which they never are, and can't be- they may at best break even.
Governments are going to seriously have to look at zoning laws if they want to address "the housing crisis." And that will make for a lot of NIMBA battles in the future and perhaps, real, sustained investing in depressed urban areas.
But as Drew eludes to- the institutional investor is going to be driving the bus. They LOVE the rent moratorium instituted by the 2 parties and are snatching up loads of properties from fatigued investors- mom and pops and large holders.
There is a very real market for an Uber property management app. All attempts up until this point have been half assed, but one could be developed and marketed to both homeowners and landlords. We have become a nation of individuals who don't know how to perform minor repairs and maintenance- the market is there.
- 5yRick H.Pro MemberInvestor · Joliet, IL · Member since 2013 · 59 posts · 32 votes
@Bill F. Great reads! Thanks for sharing.
I get that the variation common in typical home design and construction does not lend itself well to automation or mass production. I am just not sure that such variation is necessary. Many millions seem content enough driving around the same beige Camrys, why not living in the same beige houses if the price is right?
Additionally, 3D printing actually allows for greater variation than conventional methods (who needs straight lines?). I actually know someone who is purchasing a printer from these guys: www.mudbots.com. And they have approved permits to build. I can’t wait to see how it goes. I have already done a lot of looking into it though and I don’t think the cost savings are really that great yet. The technology is still too new.
But, back to my original point, there really is a massive unmet demand for affordable housing and I am confident that, as long as we have capitalism, someone will figure out a way to meet it.
- New to Real Estate · Santa Cruz, CA · Member since 2020 · 20 posts · 17 votes3y
Probably companies like Boxabl. Basically maybe in the future people can just acquire a tiny land and stack modular homes on top of each other as they expand. Vertical expansion. Everybody will be a home owner.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.