By Max Sharkansky
Today’s investment managers must increasingly stay on top of their technology game in order to keep up with the competition—as well as savvy investors and their advisors. This communicates that they are both strategic and well-equipped to lead their investors to success.
Below, we highlight some of the proven strategies that real estate investment managers are enacting when it comes to utilizing technology, how it is changing the landscape, and what investors and their advisors should keep in mind when evaluating opportunities:
New Tools and Opportunities
Anyone can have a great strategy, but unless they have the proper tactics to enact that strategy, it doesn't matter. Technology is a vital tactic toward implementing real estate investment strategy, and its importance will only increase moving forward.
Further changing the landscape over the past few years is the JOBS Act, which opened up new avenues over the past few years with regard to how sponsors can advertise funds and interact with investors.
As a result of the factors above, tools like crowdfunding, Google Ads and Facebook Marketing are now becoming necessary elements of investment managers’ financing and marketing plans, and many are growing more comfortable using digital systems to help run their businesses.
On one hand, this means that investors have easier access to a wealth of information, education and transparency regarding potential investments before making their decisions, which can ultimately help them determine a strategy and lead to success down the line.
That said, investors and their advisors must remain increasingly discerning when vetting the many opportunities they are presented with, and should not allow any of the messaging coming directly from managers to replace their own research and due diligence.
Open Lines of Communication and Improved Reporting
Digital tools don’t just help managers promote and market their businesses and investments—they also help them to communicate with and better understand their existing investors.
In ideal situations, this communication and level of understanding can help managers become nimbler and better able to provide the best service to investor clients, ultimately helping them maximize returns for their investors.
For example, at our firm, we have moved away from simply emailing our existing investors to using software to communicate with them—now they can view all of our offerings, as well as their investments, financial statements and quarterly reports in their own digital Investor Room. Further, we welcome direct communication from our investors through the same channel.
Methods of reporting to investors have also benefited from technology. For instance, for our value-add and ground-up multifamily real estate investments, we provide our investors with a full quarterly PDF report that includes occupancy metrics, trending occupancy, trending gross income and trending net operating income. The report includes graphs, a qualitative update on the property, and before-and-after photos if the property is still in the renovation phase.
This ease of access not only streamlines communications between managers and their investors; in turn, it facilitates smoother processes for investors when evaluating their own personal finances and determining further investment strategy with their advisors.
Bringing Investors Closer to Assets
Another form of technology that investment managers are utilizing, especially in real estate and other real asset industries, is virtual technology, including virtual reality (VR) and virtual tours.
As an example, with real estate investments that involve development or renovations, the ability to walk investors through a property and show them, via this digital tool, what it will look like once it is complete is extremely helpful in moving them toward a decision about the investment or keeping them confident and engaged after they have partnered with a manager.
VR and virtual tours allow investors to become more comfortable with the property and to understand its potential, whether they are physically walking through a property or touring it remotely.
While investors might take advantage of these tools to varying degrees depending on personal preferences, the ability to go beyond time, geographical and other constraints to gain a deeper understanding of their investments can be invaluable.
We anticipate that we will see more of the above utilizations of technology when it comes to manager and investor communications. When executed correctly, these can serve investors better in their current investments and also give them a clearer picture of the industries they are investing in and what is possible for their future.
While an investment manager’s track record, strategy and how well their offerings complement an investor’s existing portfolio will remain the most important factors in determining the right fit, investment advisors should also consider how a manager’s use of technology might enhance their client’s experiences and overall success.
Max Sharkansky is managing partner at Trion Properties, a private equity investment firm that primarily acquires value-add real estate properties with an emphasis on multifamily. Contact him at [email protected].