The impact of AI in real estate
According to JLL’s 2023 Global Real Estate Technology Survey, respondents expect AI and generative AI to significantly impact the real estate tech industry in the next 3 years. For example, up to 91 percent of real estate investor and corporate real estate leader respondents said they are willing to pay a premium for a more ‘tech-enabled’ space, to obtain strategic value and increased revenue.
In understanding how real estate is being transformed through AI, it is essential to see how AI and generative AI are different from each other and how they impact the real estate industry differently.
Artificial intelligence (AI)
In a broader sense, AI is widely used as analytical AI - for predicting values, data interpretation, analysing data for future forecasts (eg AI-assisted forecasts), implementing dynamic pricing models, AI-powered documentation and management systems, and tenant behaviour analysis.
These uses help landlords and investors manage properties more efficiently and generate insights to make informed decisions through predicted values and data interpretation using AI.
Generative AI
By definition, generative AI is a subset of AI that mainly focuses on creating content through text, imagery, and other data types, which it was trained to develop using deep-learning models (ie a type of machine learning that utilises multilayered computer processes that mimic complex-decision making brain processes).
In the real estate industry, generative AI is becoming a game-changer for efficiency and risk mitigation. Some of the benefits that generative AI can give the real estate industry, according to a report from Ernst and Young (EY), sit within:
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asset management
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finance and accounting
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property operations
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acquisitions
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investor relations
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business support
AI use cases in real estate
With AI and generative AI making a slow but steady impact in the real estate industry, here are some of the use cases for how landlords can benefit from AI in terms of increased value and revenue:
Property valuation
Property valuation is essential to a landlord’s task in managing and selling real estate. It is a complex process that examines an investor’s (ie the landlord’s) and the customer’s buying and selling behaviours, as well as the overall behaviour and status of the real estate market.
Considering these factors, you can arrive at an optimal property valuation. These valuations were done manually before but, with the advancement of technology, AI has made it possible for real estate appraisers to arrive at smart property valuations through computer algorithms that gather data from vast data sources - including public listings, sales data, and other existing public records.
Jeffrey Zhou, CEO and Founder of Fig Loans says, ‘With automated valuation models (or AVMs), AI can automate data collection at enhanced speed and precision, keeping it timely and up to date with current real estate market trends. It also allows detailed report generation on these property valuations that are not labour-intensive, reducing the cost and time spent on manual data gathering.’
AI-powered property search
The power of AI over search engines isn’t one to be underestimated. AI tools analyse a customer's online searches, recent property views, recent purchases, and other real estate-related search queries to recommend the best-fitting property beyond their inputted parameters.
‘For example, if you input a specific sneaker brand for research on a search engine and go to an online e-commerce store to search for “sneakers,” the first few results would give you the exact sneaker brand you were just researching - that’s the power of AI. That’s how it works for property searches powered by AI as well,’ says Reyansh Mestry, Head of Marketing at TopSource Worldwide.
Landlords who leverage AI will significantly benefit from AI-powered property searches, which make property searches easier, more convenient, and less time-consuming for potential buyers.
AI-powered property management
Property management can be tedious, whether you have one or multiple properties at hand as a landlord. You would need to consider rent collection, maintenance, attending and answering tenant queries, screening potential tenants, and many more landlord obligations. Multiply that by the number of properties you hold, and ineffective property management can become a disaster in no time.
Coming into play to help landlords and investors effectively and efficiently manage properties are AI-powered property management tools designed to streamline a landlord’s management of all its existing properties from beginning to end.
AI-property management tools can help landlords:
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automate rent collection
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send automated reminders to themselves and their tenants
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automate maintenance requests
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easily schedule maintenance requests
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answer tenant queries in real-time
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automate the screening process of potential tenants, including by analysing existing public data to identify risks posed by tenants
Virtual tours and staging
When it comes to property searches, many potential buyers now prefer to do virtual tours and staging before actually checking the property physically, to get an initial overview of how it may look. These can be done through augmented reality (AR) or virtual reality (VR) and are especially useful for properties still undergoing construction.
Alan Parkes, Owner of Denver Roofing & Colorado Springs Roofing, says, ‘Using this AI and technology, the realtor and potential buyer get a bird's eye view of the property, saving time and energy for both parties and eliminating buyers who are not interested in a property’s plan and layout from the get-go.’
At the same time, AI-powered virtual staging gives buyers the closest, most realistic view of a property’s potential, increasing its chances of sale. Empty spaces in properties are decorated digitally and virtually with the most attractive set-ups, to catch buyers' attention whilst incurring costs and energy spend that’s less than when traditional staging is done. It also allows for faster and easier decision-making and transaction processes in the industry.
AI-powered chatbot assistants
AI chatbots and virtual assistants have become game changers in the customer support sector for every industry, and real estate is no exception. With the help of chatbots and virtual assistant agents, tenants and potential customers can get relevant property information, virtual tours, and schedule appointments without waiting for an actual human agent to get on the line.
‘Simple, repetitive tasks often become efficiency bottlenecks, and with the help of AI, they save landlords (and all businesses) a lot of time and money. From answering simple FAQs to conducting complex data analysis, AI assistants and chatbots will help streamline communication and information between you and your customers,’ says Kyran Schmidt, Co-Founder at Outverse.
Challenges of AI in real estate
Whilst AI paves a new path for the real estate industry, it doesn’t come without costs and challenges, especially in data privacy and security. In particular, landlords must be highly sensitive about protecting tenants’ data privacy rights as outlined in the UK General Data Protection Regulation (GDPR) and Data Protection Act 2018. These are the main pieces of legislation protecting individuals’ personal data (ie information about them from which they may be identified) in the UK.
The GDPR does not specifically outline the extent to which AI is covered and affected by data protection law, but AI applications should be consistently applied in accordance with the relevant data protection principles and other rules. Examples of data protection principles include:
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lawfulness, fairness and transparency (eg ensuring there is a lawful ground for using personal data)
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accountability (eg being responsible for demonstrating compliance with data protection law)
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storage limitation (eg not storing personal data for any longer than necessary)
For more information on how to abide by data protection laws, read Complying with the GDPR.
According to Roman Zrazhevskiy, Founder & CEO of MIRA Safety, ‘In this sense, AI in real estate must augment human skills and not manipulate them. It must also protect any consumer data obtained through AI, which must not be used to harm, unfairly bias, or discriminate against any individual.’
The future of AI in real estate
AI continues to revolutionise businesses and organisations worldwide, and the real estate industry is seeing the impact of AI and generative AI through automated property management, marketing, property search, valuation, virtual shows, and customer support.
With AI's ever-changing impact and regulatory context posing challenges not only for the real estate industry but the entire world, it is important for real estate investors to keep themselves informed of AI developments in the industry to utilise its power to better manage processes and use AI in a safer, more ethical way.
Do you have questions or concerns about using AI and other technologies as a landlord, tenant, homeowner, or real estate professional? Ask a lawyer how Rocket Lawyer can help. For help with any other property law matters, see Rocket Lawyer’s catalogue of property documents and guides.
