We never forget our first deal. It was 2010 and after three handwritten letters, four emails, fourteen telephone calls and a box of cookies, I got my first listing. It was a two-story commercial building with burnt red brick and rectangular-shaped windows. The windows were framed with black and white casings that were slowly bleeding paint down the side of the building making it look like ice cream sandwiches melting on the surface of Mars. Not class A but classy enough. My first prospective deal was a 10,000/SF technology company. To prepare, I studied everything there was to know about my cosmological desert and the potential tenant that would be moving inside.
As I was unlocking the building I saw the CEO hop out of his Tesla and make a beeline straight towards me. Mustache Mick (as I later nicknamed him) and I exchanged pleasantries then began our journey towards the empty space. As I went into my well-researched choreographed pitch I was immediately cut off by Mick:
“I understand the building is a two-story 50,000/SF structure with a common area factor of 20% and …..”
Mustache Mick then began reciting sensitive details like recent building improvements, utility costs, and tenant comps. Being the somewhat skeptical individual I am I concluded Mustache Mick must have hacked my email and intercepted my pitch (I emailed it to my now wife just days earlier for feedback).
After weeks of negotiation and a few computer security classes, I closed the deal but couldn’t let go of my speculation. Mustering the courage, I emailed Mick and asked how he obtained such detailed data. Shortly thereafter an email popped into my inbox with a response that changed my career:
“Google : )”
With a computer, internet connection and a little bit of time, you can obtain any information you desire. We’ve been living through this information revolution since the 90’s and it’s impacted every major industry verticle worldwide.
What I didn’t realize when I entered the real estate industry was that it was a good decade behind from participating in this revolution.
Today, real estate seems to be making up for lost time. Companies like OpenDoor are redefining the transaction process, blockchain is flipping the data, ownership and escrow paradigms on their head and consumers are educating themselves like never before thanks to Google, LoopNet, Zillow, and Trulia.
The question I had after receiving Mick’s response and the one many industry participants are asking themselves today is, where will the opportunities lie when we cross this technical chasm?
Follow the money + get creative.
First, learn about fractional ownership. Companies like Meridio and RealT are selling shares or fractions of a home or building to ready, willing and able buyers. This is going to establish new onramps for buyers that previously could not participate in real estate ownership. The more you can learn about these companies and ownership models, the more scale you add to your business.
Contacting founding team members can go a long way. These companies will be looking for deal flow. Negotiate referral fees or ambassador incentives. When fractionalization becomes mainstream, there will be a big business built on referrals.
Fractionalized ownership opens new doors for investment. If one believes in the neighborhood and buyer, they can purchase shares in the property, aligning interests and participating in the upside. There will be questions around regulation. First, is it ethical to buy shares in a property that you are advising on? Second, is it legal? Every property I’ve ever sold, I’ve done so with the financial conviction it was a good deal. However, just like equities and bonds, there are ways to manipulate a market.
Second, sell your data (like comps). You join how many MLSs or portals, paying subscription fees for a few specific comps? When you own your data you own your comps. Sell them. Make it easier for people to purchase them ala carte.
Using smart contracts, you can offer the comp for sale, marketing it by only showing pertinent information (address, your name, firm, neighborhood). When buyer x wants to purchase the comp, they submit your asking price to the smart contract. When the smart contract has both the comp, money and transaction participants, it automatically releases the money to the seller and emails comp details to the buyer. This can be done with inspection reports, custom CMA’s and anything else that provides value to someone else.
$1,000,000 Invested in Digital Real Estate - BBC
Third, broker Virtual Land. I am going to dedicate an entire post to this. There is a project called Decentraland that is a virtual city where people can build houses, businesses, theme parks and pretty much anything else you can imagine. Decentraland is decentralized, meaning it is not owned by a gaming company like EA Games. There is one city called Genesis City that has 90,000 land parcels. These parcels were purchased by individuals and companies around the world. Some people are building games, other casinos. Even Armani is opening a retail store.
I own a ten parcel estate and I am designing a virtual retail center where I will lease out each space to virtual tenants. My first tenant is a women’s boutique called East Meets West. They are designing virtual clothes that can be purchased for user avatars. Why would anyone buy a virtual blouse? Unlike the current web where designs, photos, and virtual goods can be replicated on demand, on the blockchain these assets are produced with a finite supply. That means everything that is created has scarcity to some degree or another. Therefore, East Meets West can design a digital blouse that only has 100 copies. After all 100 copies are sold, no more can be created. A young lady walking around Decentraland talking to and meeting people from all over the world may want a certain look and one of those blouses may fit the bill. The young lady’s avatar looks good, East Meets West earns a sale and I collect rent. It sounds like the real world. Anyone can buy, sell and even broker land on Decentraland. With single parcels of land trading as high as $40,000 a parcel, one could create their own version of a digital Sotheby’s and do a pretty good business.
Real estate is changing and new opportunities are emerging, taking this conservative industry to the frontlines of innovation and creativity. It’s not mandatory to be technical, only to be creative. Technology can be overwhelming but like many did in real estate all you have to do is start. Read about the above-mentioned trends, ask questions, reach out to founders, start your own digital real estate business. As I learned early in my career from Mustache Mick, the information is available you just need to know how to find it.
Resources
“It seems to be one of the paradoxes of creativity that in order to think originally, we must familiarize ourselves with the ideas of others.”— George Kneller