Proptech: Building the future of residential real estate investing [podcast]

Investor Mindset Podcast, Let's talk residential real estate investing - Episode 2

In this episode, our host John Asher and guest Matthew Trinneer discuss the role of technology and innovation in advancing the residential real estate investing space.

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In This Episode We Cover:

• The changing landscape of real estate technology

• Eliminating pain points using technology and innovation

• Data at the core of proptech

• Proptech benefits for the first-time homebuyer

• The future of proptech specifically in residential real estate investing

The live video version of this episode can be found here. View all Investor Mindset show episodes here.

Full transcript:

John Asher: Hello, everyone, and welcome to the next episode of The Investor Mindset. My name is John Asher, President of Konfidis, and today we're going to talk about property technology. This has to be one of my favorite topics, and if I think about what makes people smarter, more educated, faster in decision-making, it has always been and started with advances in technology. And so, I am so happy today to join with Matt Trinneer, our next guest, Chief Technology Officer for Konfidis, and a very long-term friend. So Matt, you and I have known each other now for over 20 years, delighted that we're working together and pushing this venture together. But for those who don't know you, maybe could you share a little bit of your background and experience over the last 20 years?

Matt Trinneer: Thanks, John. Glad to be here. And I won't tell anyone, but I guess I am now, but I think we've known each other close to 25 years. Anyways, my name is Matthew Trinneer, I'm Chief Technology Officer at Konfidis. I've been in the real estate technology space for the past five years with Konfidis since it was founded in 2018. And prior to that, I was Chief Technology Officer at TheRedPin, which was another Toronto-based real estate technology startup. I've spent the past 20 years involved in a number of startups across a variety of sectors including real-time media, education, social media, and emergency management. So I've seen a lot of things, but the thing that got me excited and continues to be exciting for me is the opportunity that kind of sits at the intersection of real estate and technology because in many ways real estate has been resistant to the technological tailwinds, that have reshaped so much in so many parts of our lives. We've seen massive shifts in transportation and entertainment, finance, education, communications, retail. The list goes on and on, but real estate stands out as having had comparatively little in the way of significant innovation occur which was something that I have seen.

John Asher: Let's get right into it then. Thinking about those investments that you have seen in real estate and thinking about what you've seen in the U.S. or what you've seen globally or things that we've studied in the past. Where are the major trends, like where did the dollars go? Where do the time and the energy and the development go, like what aspects of real estate are you seeing are on trend for proptech development?

Matt Trinneer: That's a great question. Maybe we could start by quickly looking backward. What I've considered being the first wave of proptech, real estate technology, and then we take kind of a look at current trends and what the future may hold. I think the first big wave was the formation of marketplaces for real estate listings. This was a move away from agents who produce binders full of printouts from the MLS [Multiple Listing Service] system. The MLS system, was completely access restricted, so you couldn't get on to or see the listings without going through an intermediary of an agent. Once the access to listing data was opened up to third parties, we saw the emergence of large centralized listing portals like Zillow and Redfin in the U.S. market. And these companies kind of did the legwork to create a unified portal that combined MLS listings from many different MLS boards into a publicly available portal and you no longer had to rely on the real estate agent for access to information. We kind of saw that same thing in Canada, there are some familiar names like Zoocasa and Zolo, but the Canadian marketplace a little bit differently, insofar as the most highly trafficked real estate portal Realtor.ca is a product of the real estate trade association itself, rather than an independent company. And that's probably a function of data kind of being locked down more tightly and for longer here than it was in the U.S. You know there's an argument to be made that Canadians have not seen some of the benefits of innovation as quickly or in the same way as we may have otherwise had as a result of that protection of data. So that I think was probably the big first wave of proptech innovation.

John Asher: It's funny, you know, I speak with a ton of sales reps all over the place, and access to Realtor.ca had totally turned the tables. And now, I think a lot of sales reps will, they'll say, “Oh my god, you know, I've got clients now that are seeing new listings before I see them. I've got clients that are pushing 30, 40, 50 properties in front of me, you know, wanting to know when they've status has changed, that they sold.” It's, really, really obvious and clear, from a client perspective, totally unable, finally being able to see properties when they come on anything that's new, and really kind of taking control of it. You're absolutely right. That's a big foundational building block.

Matt Trinneer: Yeah, probably reshaped the role of the real estate agent in the market very quickly to being I think a little more transactional, just because consumers are so aware of what's going on and able to evaluate homes without having to talk to their agent first. It changed everything, and I think what we're probably in the middle of right now is like the second big wave of real estate technology, and the way I look at it, there are a variety of buckets into which different trends kind of can be categorized. One of the things I see are companies who are applying technology to achieve operational efficiency and scale, and from an investment standpoint, some of the companies, for example, Tricon, American Homes 4 Rent, Invitation Homes, are the companies that have amassed large portfolios of single-family residential homes, primarily in the United States market. And they're able to do that now because technology allows them to operationally coordinate not only the acquisition of the homes initially but the management of a distributed portfolio. By distributed, I mean, geographically distributed, and I think in the past that wasn't considered to be economically viable so how do they coordinate tradespeople, property management, etc. when homes can be 50 miles apart. They can do that today by leveraging technology to make that process happen. So there's been a lot of innovation there.

John Asher: Yeah, so let's go down memory lane, I remember you and me sitting in 2018 looking at companies like Amherst, and thinking, “Man, look what they've done. The idea of, can you buy a house from anywhere, in any location, state, county, city, and properly evaluate it” And you know, not only just evaluate the house, but like, think about is the neighborhood right? Is the city right? And then yeah, like to your point is like coordination of resources to be able to go in and look at the property and manage it all in real-time. You know, I think for a lot of individual people, there's a real value in having an explanation for how the acquisition process actually works. You know, there's tons of trust studies that are done that say that a sales rep sits as the most trusted person in that whole acquisition because they can help you manage your way through the acquisition process just by simply knowing the right people and the connections to make it happen. And you know, it's interesting that we're at this stage now in proptech development, where you can start to pick apart, automate or make that chain of acquisition so much easier.

Matt Trinneer: Absolutely. And these companies, in addition to using technology for the coordination of resources and process management, they're also applying it from a purely analytical standpoint, to make decisions around which communities are best suited to build their portfolios. And then all kind of like rolls back to the data being available.

John Asher: Yeah, so that takes me to my next question, what is the true building block to proptech? Where does it start? Where do you begin to see, you know, how does development start to build on each other and where do we really have to start?

Matt Trinneer: The one thing that stood out to me over the past five years that acts as a foundation to pretty much all of the innovation we've seen in the industry is data, and that data comes in a variety of formats and is used for a variety of different purposes. But at the end of the day, data, that's data used for decision-making, data used to identify opportunities, for operational efficiency, the democratization of data, allowing third parties to build experiences and tools that would have otherwise been impossible to build. What we're doing here in Konfidis, I think, is a good example of that. Data is used in a predictive capacity for underwriting and real-time appraisal of properties, which enable a variety of business models that may not have been possible prior. You know, the list goes on and on. Some of the interesting things I'm seeing now, tying back to the big portfolio owners are sensor advancements that are allowing the collection of data in the field in ways that were not previously possible. So that's things like moisture sensors, sensors connected to HVAC and plumbing systems, air quality sensors, that type of thing. And deployed at scale, collecting data in these portfolios with 10s of 1000s of homes allows the centralized organizations to kind of proactively identify issues before they become significant and achieve operational efficiencies that wouldn't have otherwise been possible.

John Asher: That kind of advancements, I mean, I'm just thinking about it from like a tenant’s perspective. Fix my house before there's an issue, reducing the frustration of there's a leak. I need to now create a ticket, get somebody here. Man, it'd be a whole lot better experience if somebody is just taking care of these things for me, and I don't really have to do any other work with it. You know, it's funny, I would say about 10 years ago, I remember doing a stand-up Townhall. And we talked about big data and how big data was going to sort of bring us into the next decade and we're going to invent all these things and I got to be honest, I remember leaving some of those presentations and thinking like, “Okay, that all sounds great, but I don't really know what we're going to do with it.” Let's be totally honest with ourselves, but that was, a decade ago, the thought of I have so much data that's available to me. What am I going to do with it, what is it really going to tell me? So can you kind of talk about how we've been able to take it not just us, but like how developers have been able to take these reams and reams of data to make it usable. Like what's required before you can actually build product and help people?

Matt Trinneer: Yeah, great question. Let's use some examples, then we'll talk about the Konfidis example and maybe some third parties. For example, Opendoor in the U.S. So if you're not familiar with Opendoor, they are a company that will provide you an offer on your home, sight unseen, based on you filling in a handful of details about its location, condition online. And they're able to then produce a real-time quote, “To purchase your home from you” because they have access to and built up a collection of data about similar homes in that location of a similar quality that allows them to, with a high degree of confidence, to evaluate what they believe the true value of the home to be. And they need the data behind that in order to offer that service. In a similar way, Konfidis, we are looking at the entire real estate market, through the lens of an investor and single-family residential real estate to evaluate each home individually, across the entire market and surface the most likely candidate homes that would make good investments. Then what is a good investment? I think that it's hard to get a consensus on exactly what that means, but the platform that we've built allows each user to come up with a different definition of what a good investment is, and tailor the output of our algorithms to support their particular thesis in a way of looking at the market. Then on our side, we provide a wide variety of process-related technology advantages post identification, that make acquisition easy and straightforward.

John Asher: Yeah, and when I think about investing, the hardest thing is always, I need to see the property. I need to be able to see it, there's always that “Go and see it”. That’s the old sort of adage. That's the old saying, and it's gotten me out of a whole lot of trouble. The problem though becomes, there's time, maybe the house I want to go see I can't get to. Thinking about this market, things move really fast. They move exceptionally fast, the house listed today might be sold tomorrow. And when you think about, how do you close those gaps? How do I give enough confidence to somebody that it's like they were there, it's like they've experienced walking into a property seeing for themselves where the issues are. So how do you start to think about technology solutions to close that gap? How do I recreate as close as absolutely possible the feeling of “I've gone into a property, I can see it for what it is, I understand where the issues are. Yeah, you know, yeah, you told me a bunch of things in a spreadsheet and there's data there, but how do I begin to create that sort of full envelope of confidence of like I can really understand this property.”

Matt Trinneer: Yeah, interesting. Well, that I think is super interesting insofar as someone's sitting here in Toronto, with the market being the way that it is and the prices of homes being what they are in the local area. Which makes investing in or even owning property here, difficult for a large portion of the population. Being able to look further afield in places where they can't physically be and have the same kind of confidence in their decision-making around an investment property is something that is a very interesting problem to try and solve. And, what can you do? So, the smartphone has enabled a lot of things and with boots on the ground, even if they are not your own boots, going through a property, knowing what to look at, and being able to capture information about that property beyond the standard bedrooms, bathrooms, square footage, type data that is available from a trusted party, who you feel your interests are aligned with, and being able to get that data back in a format that you can review and evaluate extremely quickly in order to make a decision because like you said, the market is moving so quickly right now that speed of decision-making is really important. The platforms that are being built to support that really can give you an advantage in the market or allow you to be in markets that you just wouldn't otherwise be able to be in, due to them not being in your local area. And I think going back to that Amherst example, it was really eye-opening to hear how they had a team of half-dozen people on Madison Avenue making decisions for properties in Alabama and Georgia sight unseen. And that's because they were able to not only evaluate which properties they wanted to look at but have a trusted source on the ground in that area that can get them some real-time intelligence about the property. That's something that we had, Konfidis had been really successful with is having a great network of local professionals who are able to be your trusted partner in those markets that you are in and gathered information that you need to make decisions.

John Asher: Okay, I really think that's kind of the key, making sure you've got enough confidence to be able to make that kind of decision sight unseen. That for me is the Shangri-La, that's kind of our big objective here, but let's shift a little bit. I want you to put on your imaginary 10 years down the road and think about “Where do you think this will go?” Like what do you think the next tech milestone will be reached in order for us to, once again, think about buying real estate much easier and changing a lot of the systems and structures, and processes that we have in place today.

Matt Trinneer: Yeah, first, looking forward 10 years, you know, I would start to think that you'd be more likely to buy your home or sell your home to a company. The reason for that is a company, there are so many pain points connected to transacting on a home that could either be reduced or eliminated by transacting with a company. And the company can kind of bring the benefits of pooled comparative advantage to a transaction. That might come in the form of not having to do showings, or staging, eliminating the headaches associated with lining up multiple transactions if you're moving, avoiding delays when property sits on the market. Although that may be hard to imagine, given the hyper-competitive, fast-moving local market conditions here in Ontario today. But I think there's a lot to be said for organizations who will sit and act as kind of market-makers rather than individual transactions between buyers and sellers. So that's kind of one thing I see happening. Another thing I see happening is automated decision-making, which is more analogous to human decision-making becoming possible, and I think that's probably going to be a function of an expanding footprint of data becoming available that goes beyond that just like the primary characteristics of a home. And this data can be sourced from a variety of spots including extraction from photographs, using machine learning techniques, satellite imagery, street view, etc. And just like the basic data, I call it basic, but it's not so basic, but the data we have today has enabled all of these new business models and ways to evaluate and operate within the real estate market. It's just scratching the surface of the type of information that we can figure out about a property in the same way that you as a human, going in and looking at a place are able to evaluate it on a completely different level than the computer does today. I think we're going to get closer to that over the next 10 years.

John Asher: You talked about a company, and again, my thought immediately goes to a company like Opendoor that you know their big value add to a homeowner was liquidity. The ability to sell a property quite quickly, a simpler process, and have it out the door. Let's say in a scenario where we're in a seller's market it's quite easier to sell your property. However, the friction point becomes all the steps in the process, right? Those, “I have to list, I have to clean, I have to stage, I have to coordinate lawyers, I have to negotiate.” I have to, I have to, I have to, I have to. It's a very long sort of process. And I do kind of see the advantages then of dealing with an entity that kind of has those pieces figured out. But I'm going to ask you a question because this is always a super-hot topic. If I want to buy a house, right so I have a family, I want to move into a house. I think a lot of the fear is those houses become corporate property and they don't leave that system. If I'm a first-time homebuyer what kind of advantages do you see proptech providing me as a first-time homebuyer to get into the marketplace?

Matt Trinneer: Yeah, interesting. So one thing I have noticed that's possible now is people who are living in areas where home prices are prohibitively high, or sometimes getting on the property ladder by purchasing homes that they don't live in immediately in markets where the home prices are comparatively more reasonable. So this is the example of the Toronto homebuyer buying a home in Moncton while renting in Toronto, holding that home for 10 years. So they're on the property ladder, they're just not living in the home and then selling the home at some point in the future and the gains that they realize from the appreciation allow them to purchase a home in their local market. And again, that's something that just wouldn't be possible without platforms that exist today to enable it. Then there are a whole bunch of new ownership models that are showing up that are kind of tech adjacent, whether or not that's co-ownership, or fractionalized ownership, or there are some modern takes on rent to own and equity co-investments. Those types of programs that I think benefit from technology, insofar as it supports the underwriting aspect at a minimum are designed to help first-time homebuyers get into the market.

John Asher: Yeah, it's a hot topic for many different sides. The ability to live where you want to live and the idea of homeownership. But I think you are touching on something which is I don't know if there's a negative sort of feeling towards you know, we don't want homeownership, but there might be a different solution to be able to own property as an asset class, yet live where you want to live and having a little bit more freedom to have a choice around how you invest in property. The example that comes to mind is Roofstock in the U.S., you know that whole business case was millennials in San Francisco that could not get on the property ladder as they were priced out. Exactly to your point, can you own real estate to help build the equity within a property that might not be in my city or state? And the answer is yes. They were able to do it quite successfully and using technology to give comfort, that what they're buying is going to be properly taken care of and evaluated properly. And at the same time, fulfilling those needs of I get my money into the property ladder. Okay. Super interesting topics and I wish we kind of had more time to explore them, but, you know, Matt I think you should come back and we can talk about this a little bit more. So last question that I'm going to ask you. Your footprint. If you think about, if you look back and we're sipping cocktails at a Konfidis reunion party someday. If you think about your legacy, and what you'd like to build and develop, what is that for you from a proptech perspective?

Matt Trinneer: I think probably I've been most proud of enabling individuals to get involved in property investment in a successful way that wouldn't have otherwise been able to. By building a system that they can feel comfortable with, they're making good decisions about how to get into the market. I think it's something to be proud of.

John Asher: Okay, thank you very much, Matt. Really appreciate your time. If I could sort of summarize and wrap up kind of today's discussion. I still feel that technology advancements in this industry are always going to be to the advantage of the end consumer, the end homeowner, or the end home seller. I think you don't have to go too far to see where that has helped in other industries, whether it be the automotive industry, whether it be in the financial investing industry. And now, I think we're finally seeing, Matt, as you properly described it, scratching the surface around how it can help the real estate industry and help it in so many different fashions. Whether it be using data to help us make better decisions, or using technology to simplify the acquisition process or the selling process. Probably third is opening up new markets to us, letting us think about real estate differently. This isn't a local community decision anymore, that it could really truly be - investing around the country, province, or even the globe. And I think those pieces become very exciting for Canadian investors when they think about property going forward. So again, Matt, thank you very much for joining us. And have a great day.

Matt Trinneer: Thanks, John.

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