Redefining Real Estate Finance
With a few exceptions, the real estate transaction process for both commercial real estate and residential homes has remained relatively unchanged for decades. From financing to paperwork, it’s traditionally been a long, drawn-out process that hasn’t experienced much innovation from the financial sector.
Of course, it was only a matter of time until technology permeated the financial industry and gave birth to fintech, or financial technology. Fintech is a general term used to describe the use of technology to improve and automate financial services. Given its broad definition, fintech encompasses everything from depositing a check using your phone to cryptocurrencies.
Fintech and Real Estate
While real estate may be a little late to the party compared to other industries, the opportunities fintech provides can help disrupt and improve traditional real estate services. Real estate fintech is a cross section of fintech and proptech (property technology) and may include advancements in some of the following categories, as they relate to real estate:
- Lending technology
- Transactions, including leasing and asset sales
- Property management
- Property engineering
- Construction and design
- Capital markets technology, including investment management tools
- Capital availability through crowdfunding
Fintech is offering new and innovative solutions through these channels that are improving financing and investment in real estate. These advancements include digitalized real estate transactions, digital lending platforms and online investment platforms, among others.
One example of how fintech has intersected with the world of real estate is the rise of real estate crowdfunding, offering greater access for individual investors to heretofore unobtainable institutional quality commercial real estate, offering that access faster and with greater ease and, in the case of some crowdfunding platforms, providing investor-friendly low fee structures. Modiv is one of the pioneers in this direct-to-consumer commercial real estate product industry having created one of the largest public non-listed real estate investment funds built exclusively via crowdfunding technology.
Venture capital funding is flowing into the fintech industry, with funding in 2020 nearly double what it was in 2017, indicating that more disruptions and innovations may be on the horizon. With the relative lag real estate has had in financial technological innovations, we anticipate this digital shift is underway. Through its various platforms and solutions, fintech can make commercial real estate investing simpler and improve the traditional process that were previously onerous, clearing the path for individuals and institutions to gain greater exposure to this asset class.
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The views and opinions expressed in this commentary reflect Modiv Inc.’s (together with its affiliates, “Modiv”) beliefs and observations in commercial real estate as of the date of publication from sources believed by Modiv to be reliable and are subject to change. Modiv undertakes no responsibility to advise you of any changes in the views expressed herein. No representations are made as to the accuracy of such observations and assumptions and there can be no assurances that actual events will not differ materially from those assumed. The forward-looking statements in this paper are based on Modiv’s current expectations, estimates, forecasts and projections, and are not guarantees of future performance. Actual results may differ materially from those expressed in these forward-looking statements, and you should not place undue reliance on any such statements. These materials are provided for informational purposes only, and under no circumstances may any information contained herein be construed as investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any Modiv program or offering. Alternative investments, such as investments in real estate, can be highly illiquid, are speculative, may not be suitable for all investors, and there is no guarantee that distributions will be paid.