Editor’s Note: Hal Cranmer has had a wild past. Born in India, he’s lived all over the world and started his working life as an Air Force Special Operations and Commercial airline pilot. After 9/11 brought him down from the clouds, he entered the corporate world and rose to the level of running a $36M machining plant. Yet from 2006 on, he caught the passion for real estate investing. He flipped a bunch of houses in Minneapolis and still owns several multifamily rentals there. Lately, he is into assisted living, and owns 5 assisted living homes in the Phoenix area. He loves to follow real estate trends, both locally and nationally.
As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Cranmer provides us with his own unique, lively and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out our other super-helpful Market News Updates. For now, enjoy...
From Hal Cranmer...
Maybe this title reference from the 1960’s TV show Lost in Space is a little dated. It’s still a good one though – especially for this lesson. I want to delve into how robots and automation are changing our society, and how it might affect the average real estate investor.
I’m not talking about robots becoming real estate investors. I don’t think you will see robots on the courthouse steps bidding against you on foreclosures anytime soon!
One thing humans have, at least right now, seems to be ingenuity. Real estate investing requires you to be innovative and solve problems that you don’t see coming. Robots need to have set rules and programs to respond to a certain situation. They are not ready to become investors.
What robots and automation are ready to do is start disrupting the real estate industry.
There are a lot of different aspects of the real estate industry that are ripe for massive change.
A few of them include:
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where people live
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how people work
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how buildings are constructed
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new ways to remodel and repurpose buildings
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property management
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bookkeeping
Let’s take a look at some of these aspects.
Changes to the Way We Live
Many people are already seeing how the locations of our real estate investing has changed. It used to be that if you weren’t a large investment company, you pretty much invested in your local area.
The internet has changed this.
Many investors are living in one state and investing in another state. Investors can look nationwide for a market they believe has great potential, and run their operations with a laptop and a phone.
These kind of changes are happening in a ton of different industries. It’s not just IT people who can work remotely now…
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Doctors can perform operations from anywhere in the world
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Teachers can interact with students over Skype
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Manufacturing can run ‘lights out’ with robots shouldering the load
The ‘location independence’ that is happening means people are no longer as excited about living close to their jobs. Families may be much more interested in raising their kids in more rural areas – or at least places that don’t need access to freeways for the morning commute.
As an investor, suburbs of large cities may not be the best place to flip that single-family home soon. With the growth of Amazon and other online services, proximity to the mall may not be so important either...
Access to leisure activities may become more important. Think about how much more free time people will have if they don’t have to battle daily traffic an hour each way.
There’s also potential for people to move around more as they are not tied to just one job. The term ‘gig economy’ is being used more and more because people are finding that freelancing, even as a side gig, gives them more independence and a chance to earn more money while having more free time.
It might mean you will have more short-term renters than the traditional single-family renter who stays for 10 years or more.
Robotics are also forecast to take over the jobs of up to 95 million workers. That may mean big changes to local real estate markets as people scramble to change careers.
Cities may be changing as well with the advent of more self-driving transportation, car charging stations, smart homes and buildings and planning and zoning to keep up with all of this.
Technology may make it easier and easier to repurpose existing construction than to keep building new, especially if the zoning boards want to preserve more and more of the natural environments.
Changes to the Way We Invest
Besides all the demographic changes, robotics and automation will help reduce costs and improve our businesses as real estate investors. There are soooo many mundane tasks that can be automated or done by robots, freeing up time for investors to do high-value tasks such as negotiating and closing deals.
Many of us (including me) are using virtual assistants to perform tasks that are necessary but not much value. Robots and automation may put their jobs in jeopardy.
Her are some examples for potential automation of real estate tasks:
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A large volume and repetitive nature of work (bookkeeping)
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Scalability through addition of labor (cleaning and maintenance)
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High occurrence of errors (Tax or lease document preparation)
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Use of traditional tools (CRM an project management)
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Budget constraints that are limiting system modernization (cost of VA vs. an expensive CRM system)
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Workflows where decision-making is based on disparate systems (using title companies, RE Agents and other people for paperwork)
This study from the Deloitte and Touche consulting firm (yup, they do more than accounting) found that there are many areas of real estate that are ripe for automation including:
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Property appraisal
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Budget analysis
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Accounting
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Bookkeeping
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Auditing
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Property management
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Future cash-flow projections
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Billing
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Payables processing and
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Payroll applications
Robotics and the Elephant in the Room
According to the Recode news site, over 200,000 construction jobs are currently (2018) unfilled. The reason a house is so expensive, primarily, is the material and especially labor that goes into constructing it…
Think about all the contractors you hire for construction and rehab. If you could greatly reduce their labor costs, you could have a dramatically cheaper piece of real estate.
Construction is the elephant that real estate investors would love to tame. Many real estate projects have gone from money winners to money losers because the costs of construction were not estimated correctly. Or the construction was not done properly and had to be done again.
The craziest examples come from the 3D printing world, such as this ‘printed’ house they are making in China:
Other projects include a house printed for just $4,000, intended to help people in poverty.
While most investors are not ready to invest in a 3D house printer, these videos give you a glimpse into what is to come for robotics. In addition, robots are making a difference on a smaller scale:
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Many construction projects are having walls and other large portions of a building pre-fabricated in a robotic factory. The walls even include plumbing and electrical. Then the walls are just put in place at a job site.
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Construction Robotics, a firm that developed the SAM100, a robotic bricklayer, can lay about 2,000 bricks a day, compared to a good human bricklayer who can put down about 400 a day.
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Drones are starting to be used to bring materials to job sites, which would greatly cut down contractor’s time (and money) in shopping for materials and transporting them. Drones are in their early stages but show promise for dramatically cutting costs.
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Sensor technology has come a long way in the past couple of years. Homes will have more and more sensors to detect leaks, short circuits and any other small problem that could turn into a big problem quickly. These sensors will be incorporated into a great deal of future construction, which will cut down on recurring maintenance for homeowners and property managers.
All of these innovations make the future look very bright for innovative entrepreneurs who can capitalize on them.
Something to Add
I’m always looking for new and innovative approaches to help me run my assisted living and rental property business better. Are you doing the same? Let our fellow Mogul investors know what you find in the comments below.
Hal Cranmer
Hal Cranmer has had a wild past. Born in India, he’s lived all over the world and started his working life as an Air Force Special Operations and Commercial airline pilot. After 9/11 brought him down from the clouds, he entered the corporate world and rose to the level of running a $36M machining plant. Yet from 2006 on, he caught the passion for real estate investing. He flipped a bunch of houses in Minneapolis and still owns several multifamily rentals there. Lately, he is into assisted living, and owns 5 assisted living homes in the Phoenix area. He loves to follow real estate trends, both locally and nationally.