Real estate has always been a profitable business opportunity and Investopedia acknowledges this saying that. However, it has always been capital intensive, technical, and time consuming to administer properties. Due to technological advancement especially the internet, real estate investment has been opened up to many people.
This has provided new chances for investors who can now engage in real estate with little money and from any location. In this article, we present the results of the study of the real estate investment environment through the digital platforms in the USA and its prospects.
The rise of digital real estate platforms
Due to advancement in technology, many sectors have been affected, and the real estate sector is not left out. Technological advancement has made it easier for people to make investments in real estate since one does not have to have a lot of cash to invest in property.
Such platforms work by collecting the funds from several investors and using them to acquire properties which are then managed by experienced personnel. The following are some of the advantages of these platforms; Firstly, it is easy to invest in a variety of properties at once.
Thus, the investors can distribute his/her investment across different types of real estate and minimize the risks and maximize the gains. However, these platforms also offer a lot of information about each property; whether it is financial information such as projections, locational data and management information, which can help the investors make sound decisions.
Furthermore, the convenience of the digital platforms has also made it easier for the young people to invest in real estate since they can easily conduct business online. The ability to invest from any location at any given time together with low capital requirements to enter the market has broadened the investors’ pool in the real estate sector.
Benefits of investing in real estate digitally
Real estate investing is also possible through digital channels with the following benefits. After the investment is done, the platform handles all the management process of the property such as sourcing tenants, collecting rent and maintenance among others thus enabling the investors to generate returns from the investment without having to be involved directly in the process.
Other than that, they can also provide liquidity as another feature. Unlike the conventional real estate investment which is quite cumbersome and time-consuming to dispose, many of the digital platforms have secondary markets where investors can buy and sell shares in various properties.
This feature increases the liquidity of the real estate investment to allow the investor to make adjustments to his or her portfolio as desired. Moreover, it is possible to get tons of performance indicators and analytics on digital platforms.
This way investors can keep an eye on the real-time market, they get detailed financial reports, and the overall health of the portfolio. Such level of transparency and analysis is very useful in decision making and enhanced productivity of returns.
Challenges and risks involved
Investing in real estate using digital platforms also has its own set of issues and problems that cannot be overlooked. The first of these is the possibility of platform failure. Since such platforms are relatively new, there is a danger that some of they may be financially unstable and/or poorly managed – thus putting investors at risk of loss.
This is why investors need to take time to research the platforms in which they want to invest in, looking at the history of the platforms, their financials, and the experience of the management teams of the platforms.
Another issue is the inability to govern the characteristics of the properties. On the positive side, the properties are professionally managed which can be an advantage, however, it also implies that investors have no say in the management of the properties.
All the decisions about the maintenance, selection of tenants and other important matters are taken by the platform which can sometime go against the wishes of the investor.
Another factor that can be mentioned is market volatility. The value of a property might also change as a result of various factors such as economic factors, change in interest rates and many other factors.
Though diversification may to some extent reduce the risk, it does not eradicate it completely. The investors have to be ready for such situations in the market and check whether their portfolio can withstand such changes.
Future prospects of digital real estate investment
Real estate investment through digital platforms for the future is a bright idea. These platforms are expected to become more complex in the future due to technological advancement to provide better features and service delivery to the clients.
Sometimes the industry can be completely transformed by new innovations like blockchain technology that can enhance the element of transparency, security, and efficiency in the real estate business.
Also, the general acceptance and use of digital platforms by investors indicate the existence of market opportunity. Many more people are getting used to the concept of investing in real estate online and with the increased awareness more investors are expected to enter the market.
This trend may result in increased investment in the real estate sector which might increase property prices as well as the returns on investment for the investors. Also, there are potential risks that can be caused by regulatory changes and become critical factors influencing the future of digital real estate investment.
These platforms may attract more scrutiny in the future which would mean that they have to be more transparent and non – discriminatory in their operations. This could, however, create further compliance obligations and, at the same time, increase investors’ confidence and prevent fraud and mismanagement.
Conclusion
Real estate investment through technological means has become a new way of investment to get into the real estate market. All these platforms are advantageous to the investors due to the diversification, passive income, and improved liquidity.
However, one has to be careful of the following drawbacks; reliability of the platform, lack of control, and market fluctuations. This means that as technology advances and more investors come on board to use these platforms the future of digital real estate investment is promising.
Advancements like the use of blockchain as well as more rules and compliance could also help the industry become even more efficient and open to investors. The digital platforms present a viable means through which investors can expand their portfolios and invest in real estate at their convenience.