Twenty-four-year-old Dallas Basha is the founder and CEO of Basha Real Estate, a real estate investment firm in the United States. Over a short period, Dallas has scaled his company with a focus on smart homes and co-living space for college students. Dallas was named the youngest real estate developer in the state of Pennsylvania and continues to develop properties around his alma mater, Lehigh University. Recently, I got a chance to speak with Dallas regarding the future of the real estate industry and picked his brain on how he believes the landscape will change.
How do you see the real estate industry today?
I’m going to talk about the real estate industry from the perspective of the investor and not the typical home buyer. Right now, the buying and selling of properties are very inefficient. Let me explain with a comparison to the stock market. Before, the transmission of information was much slower due to technological limitations, which impacted the speed of how quickly the average investor could make a decision and trade stock.
Today, if Donald Trump tweets about the trade war with China, for example, people can make decisions within seconds and can immediately have a dramatic impact on the stock. It has become tough for individuals to take advantage because they no longer have the first-mover advantage. Nowadays, everyone is playing the same game. In theory, the price of a company’s stock takes into account all future projected cash flows and potential growth. Of course, this is merely theoretical. In reality, it’s based on human emotion. The development of tech and access to information made the market more and more “efficient”.
Now, let’s look at the real estate market. In contrast to the stock market, the real estate market has more inefficiencies. Buyers, for example, do not have all the relevant information needed to make an educated and accurate buying decision. Publicly traded companies in the stock market have to make all relevant information readily available to current and future investors and are regulated through the SEC. Although most real estate information is public, the time it takes to compile, analyze, and make a decision on said information can sometimes be too late. The underwriting process is time-consuming, takes money, energy, and at times, can be inaccurate. It’s a slow and tedious task.
Underwriting is also done by humans. They have to collect, input, and analyze the data collected through financial models on software like Excel and ARGUS. The average investor doesn’t always use these somewhat complex and useful financial models while making their buying decision. Because of the lack of information on a property, there are many uneducated buyers and sellers who misprice their properties. This allows the educated and more seasoned investor to take advantage of the spread by identifying and purchasing undervalued properties to then make a return. As time goes on, however, the use of technology will allow the average investor an opportunity to have access to more information and to make it easier to make investment decisions. This will increase the competition and, thus, make the profit gap smaller and smaller, which, in theory, will make the market more efficient. That said, efficiency isn’t good for today’s specialized investors.
Where do you see the real estate industry in the next 10 years?
Technology will disrupt the industry and make it more and more challenging to find great deals. We are beginning to see big real estate companies investing heavily in technology with a focus on big data, machine learning, and artificial intelligence. There’s an emergence of more and more real estate tech startups that help facilitate the buying process for investors by identifying key properties. The big challenge in the development of this type of technology is the talent needed, which isn’t easy to find and sometimes hard to keep. Companies will need the best of the best to properly create a useful tool that will have a positive impact on investors.
It’s important to remember that this technology is a tool and not the sole focus of the real estate business model. Many of the big firms have a competitive advantage, firms like Cushman & Wakefield and JLL. These firms have a critical advantage because they have access to millions and millions of data points. You need to have a lot of data to make it work, which right now is a great advantage the big firms have over anyone else starting from scratch.
As time goes on and as these startups enter the marketplace, it will make it easier for everyday buyers and sellers to participate in the real estate market, which will cause more and more competition. This is why I would say that regardless of your age or financial situation, I would highly encourage those who are interested in owning real estate to start now before it becomes more competitive. The hardest and most crucial part of investing in real estate is not having the money, but rather, finding the right investment property. Money flows to good investments. This is what I like to teach when I speak to my mentees.
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