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5 Real Estate Fintech Startups You Should Watch Out For
The rapid advancements in technology have led to lower barriers for tech startups. In the past couple of decades, the cost of setting-up an internet-based startup has plummeted from $3 million in the 1990s to just $200 – $300 today.
According to a study conducted by Deloitte, globally, real estate fintech startups increased by 18% from 246 in 2008 to 1,372 by 2017. During the same period, cumulative investments soared from $2.2 billion to $31.3 billion.
What is Financial Technology(Fintech)?
Financial technolog or “fintech” is used to identify new tech that aims to improve and automate the process and usage of financial services. At its center, fintech is used to aid business owners, organizations, companies, and consumers more effectively manage their financial processes, operations, and lives with the help of specialized software and algorithms accessed on computers and, increasingly, smartphones.
Why Are Investors Focusing on Real Estate Fintech?
Fintech allows investors to cut out the middle man in real estate transactions. For example, if a customer were looking for condos for sale in mississauga, all they have to do is open up an app or website, such as Precondo (see this page for more details), check its listing, and click to get more data about the property.
As a result, there is less friction, lower costs, and increased investment opportunities for the investor throughout the whole process for real estate acquisition, property disposition, and leasing and asset management.
How Is Fintech Being Used in the Industry Today?
Fintech startups that are most “talked-about” (and the most funded) often share the same characteristics: they are designed specifically to be a challenge, threat to, and eventually overtake traditional financial services providers by being more agile, providing better solutions to an undeserved segment or serving faster and/or better products or programs.
Here are 3 examples of publicly-owned fintech companies that are revolutionizing the industry of real estate investment:
Zillow describes itself as “the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help.” It is for all practical purposes a public version of the Multiple Listing Services.
Zillow provides real-time real estate market information and removes communication barriers that stand between buyers and sellers. In addition, the firm also offers programs to real estate brokerages and has recently extended into home flipping, rental services, and property technology (proptech).
Fair Isaac Corporation (FICO)
“FICO score” has become a common phrase in most households in the United States. But tit wasn’t always like that. There was a time when people had to wait weeks to receive information about their credit scores. With recent developments and innovations, however, home buyers and real estate investors can now shop for loans online knowing exactly what their FICO score is.
Fiserv is an institution that uses advanced financial technology to help improve the tradition lending process of risk management and loan origination. A financial powerhouse 35 years in the making, Fiserv is a great example of an established investor that has transformed itself by embracing this generation’s disruptive technologies. With a market cap of over $71 billion, Fiserv common stock price has climbed from $14.86 in January 2017 to $113.45 today.
5 Fintech Startup Companies to Keep an Eye On
SS&C Technologies HoldingsSS&C Technologies Holdings defines itself as “the world’s largest hedge fund and private equity administrator, as well as the largest mutual fund transfer agency.” In real estate, the firm’s products and services handle loan origination and credit risk management. On top of that, the company also provides software products to residential, commercial, timeshare, and resort property managers. Founded in 1986, SS&C Technologies Holdings runs operations in North America, Europe, Asia, and Australia.According to Investopedia, in the year 2019, SS&C Technologies reported $4.63 billion in revenue, up from $3.42 billion in 2018. Earnings were significantly improved at $438.5 million, compared with $103.2 million it reported the year before.
Roofstock The Roofstock platform lets everyone from first-time investors to global asset managers evaluate, purchase, lease, and sell residential investment properties with confidence from from over 41 markets across the world. Since their initial launch, the firm has surpassed $2 billion in transactions and continue to disrupt the industry with cutting edge technology and innovations.
Blend This cloud based software provider offers its customers a “simpler, faster, and safer process of getting a loan.” Blend has partnered with more than 285 lenders to help power their mortgage experience. The firm currently processes more than $4B in mortgage applications each day.Here’s what the digital mortgage process with Blend might look like:
Borrower begins their mortgage application via smartphone or in person at a branch
During the application process, the borrower has the option to directly connect with asset, payroll, and tax accounts. No need to access paperwork buried in a file.
Should the borrower stop their application, they can pick up where they left off wherever it is convenient for them.
The application interface provides real-time help at any point during the process should the borrower have any questions.Easy. Convenient. Quick.Blend’s latest valuation is $3.3 billion.
OpendoorIn 2014, Opendoor set out to reinvent real estate transaction with a new, radically simple way to buy and sell a home. After many years, Opendoor is now one of the leading digital platforms for residential real estate across the United States.Since it was established, the firm has served more than 700,000 cleints and currently operates in 23 US cities. It has also been recognised as the “most innovative company in real estate” by Inman for thelast 3 years and was listed as one of Forbes’ top 50 fintechs in the year 2020.
LendingHomeLendingHome is an automated lending platform that provides bridge and rental loans for a variety of fix-and-flip and rental projects, and offers a portfolio of high-return real estate to investors. The firm has funded over $5 billion loans since its establishment in 2013 and offers services to 27 U.S. sites.
Real estate companies with sufficient understanding of the startup business, adequate funding, and an appropriate risk appetite can invest in financial technologies with a good value proposition. Such course of action could help beef up any business’ future strategy as well as help them gain knowledge of the technology and other intellectual properties of the startup.
Note: Buying stock in any fintech companies should not be seen as a gamble. An investor is advised to perform due diligence and insist on strong company fundamentals before jumping into the game.
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