As the largest asset class in the world, the real estate industry is constantly evolving. Real estate trends come and go like the seasons, so it can be challenging to identify which buzzwords are worth paying attention to.
PropTech is a relatively new concept in the real estate realm that has people talking. While the technology and focus area has been around for decades, the term “proptech” is relatively new.
You have likely heard it thrown around, but what is PropTech, and how will it impact the industry? Continue reading, and I will lay out everything you need to know about PropTech.
What is PropTech?
PropTech is the technology that optimizes real estate processes and transactions in an online format. It is essentially the union of the real estate industry with technology. In some cases, it may have an overlap with other industries such as MarTech (marketing tech), financial services, smart home technology, etc. PropTech companies aim to make the entire property transaction process and real estate industry more efficient, convenient, accessible, and profitable from start to finish.
Disrupting the real estate market, PropTech companies are providing better solutions to existing problems. This innovative use of technology examines how people research, buy, rent, sell, and manage properties to make improvements for all parties involved.
Proptech includes companies that help with real estate problems (e.g., tenant relationships, property management companies, mortgage-related, etc.) and marketing technologies that get explicitly used within real estate (e.g., IDX, Realtor CRMs, etc.).
There are advantages and disadvantages to using the term. I have spoken with VCs and private equity firms that love the term and those that are turned off from the PropTech label, believing that you should be able to describe your company in more specific, problem-focused terms.
Though recently popularized, many PropTech companies are well-known and have been around for years. Examples of popular PropTech companies are Zillow, OpenDoor, Frontsteps, Briq, Snapdocs and others. Modern brokerages such as eXp Realty and Compass have PropTech components too but are not specific PropTech companies.
How PropTech is Transforming the Real Estate Industry
Let’s look at some features offered by PropTech:
Providing Data-Backed Actionable Insights
Big Data is changing real estate operations and the ways we interact with our properties. You relied on previous records, trends, and customer experience not so long ago to inform your decisions. Thanks to big data, we have access to real-time statistics to point you in the right direction and aid in making wise decisions. This data is the basis for PropTech.
PropTech makes real-time data available to its users to help them make smarter decisions. It may pull and synthesize data from across the real estate space and others, including investment volumes, home-value trends, consumer demands, consumer experience changes, construction sites, commercial properties, capacity in rental property management, your customer relationship management tools, recent customer satisfaction, asset lifestyle, your company’s business model, asset lifecycle, 3D cameras, commercial lending rates, online portals, and many other digital technologies and cutting-edge technology.
This sort of data access allows agents to identify possible risks and optimal opportunities for their real estate ventures.
Opening Up Opportunities For Sales
Realtors can see where the market is hot or cold and adjust their strategies accordingly. Instead of spending time spent theorizing how to make your next move, you can invest that time elsewhere, thanks to PropTech.
Additionally, agents can create custom marketing campaigns based on buyers’ needs and preferences. PropTech examines consumer behavior so that real estate professionals can optimize their operations. It looks at trends, past and present, to inform and guide your strategy.
On the other hand, buyers can easily find properties with the help of this technology. PropTech truly benefits all parties involved. People in housing markets will appreciate the ease these applications add to their property search.
An example of a PropTech solution that helps boost property sales is improved accessibility to new listing information, real-time relevant alerts, and the ability to unlock alternative funding options. A central goal behind PropTech is to make real estate more accessible to more buyers and additional investors.
Think about the change in property searches since the early 2000s. Online property listings are not only more convenient to look into with virtual tours so you may not need to actually visit the property, but they are also available to a considerably wider population than traditional listings. The more buyers accessing the listing, the more sales will incur.
Generating Reliable Property Development Insights
Developers can create better plans based on the data collected and made easily available, sometimes through 3D models, a property portal, and a wide range of other techniques. Decisions on critical project factors, such as location and amenities, can be informed by PropTech data analyses of potential residents. Property developers will appreciate the reduced risk and maximized benefits from this property technology. It takes the typical controlled risk approach and increases the ROI while reducing risk exposure.
PropTech not only aids in the planning phase of property development, but it can also map out an accurate construction timeline. Developers can know what sort of deadlines to plan on before breaking ground, which can avoid significant blunders and save thousands of dollars.
Having helped a PropTech startup come through an accelerator at Georgia Tech, I was able to see the advantages to all sides of large commercial projects by bringing more modern technology to the project preparation, planning, sign-off phases, and more. So many of these construction industry projects with budgets of $10M – $300M are still handled by outdated technologies like excel/google sheets, project management tools built for other purposes, and people printing and comparing thousands of pages on a sometimes weekly basis. The PropTech solution brought through GaTech took that time to minutes and provided true transparency into the construction projects as well as tracking approvals as pieces were completed. There has been so much construction technology brought to the physical build, while leaving so much room for improvements from SaaS and other software with digital capabilities.
Nationwide and Enterprise-Scale Lead Generation
Increased accessibility also compliments lead generation marketing strategies. Convenient and widely-accessible PropTech interfaces lend to improved customer interactions.
PropTech may provide Product-led SEO and Enterprise SEO types of solutions for national (and international) brokerages or large teams. PropTech makes this possible by creating solutions to rank tens of thousands of keywords to drive millions of potential clients to the solution.
These solutions can look like a brief survey to gather a prospect’s information. For example, when a client visits your website, they are prompted to answer a few questions to get an idea of who they are and what they are looking for. The user’s responses are then sent to the agent or property owners. At that point, the website can share some property info that is relevant to the prospect, such as size, condition, and amenities.
Previous IDXs provide basic search and alerting experiences. Newer solutions proactively use both human and algorithmic approaches to build the solution in anticipation of what will meet the needs of both the active buyer and the casual visitor who will be a client/buyer/seller in the future.
All of these virtual tools help with establishing connections and reducing response time to guide the customer to their end goal better. When the visitor and customer is happier, the real estate company wins in the end through increased transactions and a higher IRR (internal rate of return).
Improving Risk Prediction
Risk assessment tools are now more accurate than ever before, thanks to PropTech. Real estate companies can gauge their operations’ successes by analyzing relevant data. Examining the safety, sustainability, and profitability of a project reduces overall risk.
PropTech Big Data examines real-time and historical trends to predict the risk of investing in that project you have had your eye on. When armed with an accurate risk assessment, real estate professionals and investors have an increased capacity to make informed and profitable decisions. Spend less time calculating and worrying about your next venture’s projected risk and more time on your other pressing duties.
Operations win in the end, and data and tech help you spend more time on what matters the most.
Streamlining Most Back-Office Processes
How much of your valuable time is spent gathering, organizing, and analyzing data? On top of this, lead generation, marketing, and sales are time-consuming and laborious. PropTech can help real estate agents and brokerages automate and streamline these tedious back-office processes.
PropTech software will organize and analyze your data while comparing it to a large pool of other relevant data. Through this data comparison, PropTech helps you establish various strategies to boost your productivity.
An example of this PropTech perk is automated responses. Without PropTech, real estate professionals can find themselves caught in a never-ending cycle of repetitive tasks like drafting messages to potential clients. Automated answers will take care of establishing that connection and even addressing subsequent inquiries through a chat tool.
With recent advances in AI and chat, data gathering, cleansing, and even basic tasks like setting up relevant saved searches for new listings can be automated in a way that feels both personalized and friendly for buyers and sellers.
Frequently Asked Questions
Let’s take a look at some common questions regarding PropTech:
What does PropTech mean?
PropTech is the combination of property and technology. It uses technology to simplify real estate operations, including buying, selling, developing, and managing properties. PropTech analyzes consumer behavior and market trends to reduce risk and guide users to prime opportunities. PropTech also aids in streamlining time-consuming back-office processes.
What are examples of PropTech?
Well-known PropTech companies are Curbio, AirBnb, Showcase IDX, OYO, Obligo, Divvy, and StackSource. These PropTech companies use real estate technology to improve the real estate related processes for their users. Any instance of real estate processes occurring online is considered PropTech.
Property searching, renting, selling, and managing online are all great examples of PropTech. These are virtual tools that simplify real estate operations for all parties involved. If you have ever conducted an online real estate search, inquired about a property through a live chat feature, or sold your property over the internet, you have utilized PropTech!
What do PropTech companies do?
PropTech companies facilitate real estate operations in an online format, provide meaningful data insights to users based on consumption patterns, and speed processes around owning properties. The underlying technology examines Big Data to make these operations more convenient, accessible, and successful. These companies help people buy, sell, rent, manage, and develop properties.
Many PropTech companies also specialize in providing this technology to existing real estate brokers. Adopting this innovative approach to real estate can seem daunting for many businesses, so PropTech specialists help with this transition.
Is PropTech the future of real estate?
Many people wisely consider PropTech as the future of real estate startups. It is reasonable to believe that users will continue to prefer having the option of partaking in real estate operations online.
The evidence for this claim can be seen in the FinTech industry. For years we have reaped the benefits of online banking and money lending. FinTech, the union of finance and technology, made these modern conveniences possible.
Just as FinTech shaped the future of the finance world, PropTech is fulfilling a much-needed solution to the lack of convenience and accessibility in the real estate sector.
Why is PropTech important?
PropTech is responsible for filling many holes in the real estate industry. Through Big Data analysis, this technology can boost productivity and profitability for any real estate venture. This analysis helps with assessing risk and improving accessibility for both customers and real estate professionals.
Considering many real estate agents view PropTech as the future of real estate, it is vital to understand and embrace this new technology.
Should large brokerages build PropTech solutions in-house or license from independent companies?
PropTech enhances all real estate operations, regardless of how it is implemented. That said, many real estate professionals do not feel tech-savvy enough to establish this technology on their own.
In this case, outsourcing PropTech data collection and other services to independent companies is wise. Once you map out your company’s areas of growth, a PropTech specialist will come up with data-based rates, strategies, and other tools to help you meet your goals.
Building in-house PropTech solutions requires thorough technical expertise that is different than the expertise needed to successfully run (and grow) the realty side of a typical brokerage, but it can be a lower-cost option in the medium-to-long-term. Once you establish the framework of your PropTech software, it is helpful to enlist other engineers and specialists to ensure top functionality.
To be successful in building in-house PropTech solutions, the brokerage does need to bring in those with proven track records of building technology solutions, from both within the real estate industry and more importantly those from other industries. Trust these technology and product leaders to build an agile team and give them the resources to wisely invest in these in-house PropTech solutions. I’ve found it helpful to intentionally find time to safely allow leadership to ask questions, discuss problems that need solving, find agreement on stable resources, and agree on the leading indicators to prove the solutions are on the right track towards success.
When did PropTech start?
Dating back to the 1980s, early PropTech manifested as real estate companies searching for more productive methods of indexing data, managing portfolios, and analyzing their stats. Early PropTech used platforms like Excel and Lotus but had no way of communicating with other companies and datasets.
PropTech modernized as online real estate transactions became more reliable and accessible. From 2001-2007 and the dawning of the internet era, companies like Zillow and Tourbuzz emerged and became wildly popular.
Significant data processing advancements made recent PropTech advancements possible. Nowadays, PropTech utilizes Big Data, machine learning, and AI to sort past and current trends that inform all types of real estate decisions.
How big is the PropTech industry?
With a massive demand for its improved accessibility and profitability plus reduced risks and costs, it is no wonder that the PropTech industry is booming. PropTech currently accounts for an estimated $18.2 billion in the U.S. market as of 2022, and it is projected to increase to $86.5 billion by 2032.
PropTech has already disrupted the real estate world by incorporating Big Data, automizing tedious tasks, and conducting real estate operations in an online marketplace. By modernizing the largest asset class in the world, PropTech is sure to be a top-growing industry in the years to come. Just think how many real estate assets there are just within your local town and that will give you an idea of the proptech market size.
Should I start a PropTech Company?
Before you jump into building the next proptech startup, take a look at the real estate tech startups already out there. Look at the real problems people in the industry are solving with manual means or multiple solutions. Is there real pain enough for people to pay for an early access program before you have the solution completed? Do you have a solution with a real competitive advantage? Answering these will guide you towards if starting a company is a good idea to explore.