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Creative Disruption

Innovation is increasingly taking hold in the real estate sector—finally. Here are just five of many startups worthy of an investor’s consideration.

Innovation has been slow to arrive in the real estate sector, despite the fact that it’s a staggeringly large industry and would seem to be ripe for internet-fueled disruption. While real estate tech companies like Zillow get the lion’s share of digital ink, startups are creating innovation in almost every area of real estate.

Here are five real estate tech startups that could change the way you invest in real estate:

PLACESTER: Setting up a website should be a pretty straightforward process for a real estate agent. Yet a look at some agents’ lackluster sites (poor design, lack of contact information, etc.) shows that it’s a low-priority item for these busy entrepreneurs. Perhaps it shouldn’t be.

Placester, a Boston-based startup, says agents who use its sites and marketing solutions sold an average of 31 percent more homes than did agents who don’t use their solutions. And while it’s smart to take internally produced data with many grains of salt, the company has attracted significant venture funding and at least one major client. Keller Williams says it will use Placester’s tools to provide agents and local offices with responsive, SEO-optimized websites. Website visitors will be able to search for listings and obtain detailed information about a property.

HOME UNION: Many people want to invest in real estate but don’t have the time or inclination to find properties to buy and rent out, let alone manage them. Real estate tech companies like HomeUnion are serving this market by providing a seamless experience that is proving popular with investors and venture capitalists.

HomeUnion promises residential real estate investors a hands-off method for investing. The company does the heavy lifting by identifying prime residential investment opportunities in select U.S. markets (30 currently), helping buyers finance and purchase the property, finding tenants and handling property management duties. HomeUnion also helps clients sell when it’s time to move on.

The investment properties are located in areas that will produce positive cash flow. The properties are mostly in middle-class areas, as HomeUnion doesn’t believe that more affluent areas produce adequate cash flow, according to its website.

NESTIO: According to the National Multifamily Housing Council, apartment owners and residents contribute about $3.5 billion a day ($1.3 trillion per year) to the U.S. economy. Even with all that cash sloshing around, many landlords still track rents and unit availability by hand or via an Excel spreadsheet. Thanks to real estate tech, there are now more (modern) options.

Nestio is a cloud-based, real-time platform that says it streamlines the leasing process by allowing landlords to manage “the life cycle of leads and listings in one place,” according to the company’s website. The company says that its clients have reduced vacancy rates by as much as 75 percent.

The company automates a previously manual process by enabling listings to be easily shared with third-party websites and brokers. Listings are updated automatically. Nestio also provides marketing analytics so clients can track their ROI.

REALTYMOGUL: The commercial real estate space hasn’t seen as much “disruption” from real estate tech as the residential market has. That’s changing – fast. Much like Patch of Land did for residential real estate investing, RealtyMogul is bringing the crowdfunding model to commercial real estate. The 3-year-old startup has more than $800 million invested in its debt and equity transactions. With the U.S. commercial real estate market worth more than $15 trillion, it’s no wonder that it’s being aggressively eyed by real estate tech startups.

RealtyMogul cofounders Jilliene Helman and Justin Hughes are allowing investors online access to pre-vetted investments that were previously difficult to find, while also making it easier for real estate sponsors and borrowers to find accredited investors. It seems like it was only a matter of time before crowdfunding found the commercial real estate market.

While there are others offering similar services, RealtyMogul.com has topped $200 million in debt and equity in funded real estate crowdfunding. The platform is now the first site to surpass the $200 million mark for U.S.-based real estate finance.

RENTLYTICS: Startups are often born out of someone’s frustration with an existing system or technology. Such was the case with Rentlytics, a San Francisco-based startup, that Justin Alanis founded because he “saw inherent limitations in the way that property performance data was being analyzed, and began to conceptualize a better solution that would inform the decisions that he, and many other real estate professionals, make on a daily basis,” according to Rentlytics’ site.

Rentlytics’ tools give real estate investors an in-depth look at how their multifamily portfolio is performing. The software uses an investor’s data to answer questions like:

– Where are my greatest opportunities to increase rents?

– Where is my most concerning delinquency?

The company says that its software is analyzing more than $100 billion in multifamily real estate.

Of course, not all of these startups will become successes, so real estate investors should examine them closely before engaging with them. That said, it’s encouraging (and potentially lucrative) for investors that an old industry is learning new tricks. •