Can the platform structure revolutionize real estate investments?
Digitalization has changed everything: the way companies work, how we consume, how we invest and how we find work. Concepts such as digital marketplaces, the gig economy or platform economy are part of the new, digitalized world. It looks like platforms are here to stay. But does the platform structure also offer advantages for real estate investments? Are platforms even suitable for the investment market? Or does it have to adapt to the platforms? We have the answers to your most pressing questions.
What platforms can do
Digital platforms such as Amazon offer every conceivable product to buy and sell. Google and Apple each run their own digital marketplaces, which bring together app developers and app users. Etsy is the platform for everything homemade, art and accessories, on which private manufacturers and lovers of individual business, Uber stirs up the global passenger industry and Airbnb causes squiggling knees among hotel and hostel operators. Platforms are turning entire industries upside down and are a prime example of the triumph of completely digital business models. The best argument for platforms is the tremendous efficiency they enable — selling and consuming in real time. Whether it's a holiday home, a car, a new television or entertainment products: You can find everything on platforms.
Providers and customers use platforms as a marketplace, which works better the more participants gather on the platform. The higher the demand, the greater the supply. Platforms are digital intermediaries and bring markets and market participants together successfully and efficiently. Digital platforms also increase the tradability of goods and assets. At the beginning of the 2000s, you still had to place newspaper advertisements or post notices on the supermarket bulletin board to find new tenants for your apartment. Today, just a few minutes after placing an ad on eBay Classifieds, the first hundred interested parties are running in the door for you. Platforms speed up transactions and create unimagined dynamism. But can platforms also revolutionize the investment sector?
Where do real estate investment platforms reach their limits?
Real estate platforms offering apartments for rent or private homes for sale are already established and function smoothly. In such digital real estate markets, buyers, tenants, sellers and owners are brought together and can evaluate each other. Advertisements for real estate properties offered on platforms such as Immobilienscscout24 often come with a wealth of digital documents such as an energy certificate, floor plan and exposés. Transparency creates trust. The exchange of information between prospective tenants and landlords even before the actual visit creates security. Platforms are ideal for businesses like this. But what about real estate investments?
However, if you want to invest in real estate as an investor in order to generate returns, things are very different in the world of the platform economy. Investing in real estate funds is much more complicated than finding a new rental apartment. Fund platforms charge deposit fees and issue charges, and there are also minimum order prices, which are often 500 euros. If you want to invest in securities and ETFs on fund platforms, you should be familiar with fund prospectuses and know how to properly analyse the information presented there. However, investors on investment platforms are often left alone here. Since there are usually no direct contacts who can answer your questions, the risk of your investment sometimes increases. The complete digitization of the investment business through platforms is always problematic for users when the actual advantages, efficiency and rapid tradability, become disadvantages. Anyone who trades ignorantly on fund platforms and does not have competent advisors at their side runs the risk of losing money. The risk of total loss of all savings then represents an investment disaster.
Time for revolution?
The platform economy can certainly revolutionize the market for real estate investments. The potential is enormous and smart providers are already working diligently to develop modern platform solutions that make it possible to invest in real estate. For such platforms to be successful, providers must be able to combine their new solutions with the benefits of the real world. Investment platforms only offer real added value if investors have direct contacts and know that they can talk to expert experts at any time if they have questions.
