The Internet has proven a powerful ally for anyone wanting to dabble in real estate these days, with a wealth of cold, hard data available to download at our fingertips.
And now, an increasing number of private companies are taking things one step further, creating platforms from which people can transact, seek and offer finance and property deals; essentially circumventing traditional avenues and eliminating the ‘middle men’.
Ringing in the changes
Only the blink of an eye ago – a couple of short decades really – residential real estate was generally transacted in one way. A buyer would approach an established lender (usually one of four) to provide capital, which they would add to their own equity, for the purchase of a property.
Said buyer would then look at the marketed wares of different real estate agents, who represented the sellers wanting to offload their home for whatever motivation. You know how it goes…
Fast-forward twenty years later, and my how things are starting to look different! We’ve already seen a dramatic rise in the number of buyers’ agents taking part in property deals for their clients. And a higher number of dwellings are sold at auction than ever before. There are more commercial lenders on the market. And things generally move a lot quicker than they used to.
A new investment approach
Now, sophisticated investors are using technology to “disrupt” traditional real estate transaction pathways even further.
The real estate middleman has morphed into various online investment platforms, some of which allow investors and those seeking capital in property opportunities to transact in an efficient, confidential and transparent way.
These portals give investors looking to buy into new developments a greater sense of control, whilst providing another funding avenue for developers who fail to meet the banks’ ever tightening lending criteria.
It’s not surprising this escalation in online investment activity is occurring presently, as traditional lenders tighten both their pre-sale thresholds and loan-to-value ratios on new developments.
Indeed, this type of self directed investment activity is predicted to increase in Australia over coming years, rising from $71 billion to $315 billion by 2030, according to financial insights group Rice Warner.
How does it work?
Most of these investment platforms allow for a minimum buy in of around $10,000, which provides access to high-growth property opportunities marketed online that are normally required to meet a higher investment threshold.
Upon registering as an investor, you gain access to a deal’s “data room”, where you can peruse feasibility studies, project information and risk analysis…all the bits and pieces you need to make an educated decision as to whether you want to park your investment dollars in said development.
The final step in the process involves an investor selecting their transaction amount and agreeing to the transaction documents. Investors have their own unique login to track the progress of their investments and changing unit prices, and can access a secondary market to trade units with other investors on the platform.
The bottom line
The time for these types of investment alternatives is most definitely upon us, as an increasing amount of mass consumption of products and services becomes part of the global, online domain.
There’s a whole new world opening up to those who are not afraid to embrace technologies currently emerging around online investment options.
I’ll never tire of real world, real estate transactions that involve a good, long negotiation process with a celebratory beverage at the end. But these are ever changing times. And we must be open to the changes occurring around us if we’re to thrive as successful, long-term investors.
As always though, it’s about what will and won’t work for you. Ultimately, any investment option has to align with your intended diversification of assets, according to your own personal investment strategy. Even the “Geeky” tech-savvy ones!