Uber announces plan to disrupt real estate …

This press release just hit the wires …

Uber Real Estate is Now Disrupting Real Estate with Their Uber Model

Okay.  That’s interesting.  Uber certainly disrupted the taxi business, so anyone interested in real estate should probably pay attention.

What’s the angle?

Well, according to their press release they’ve come up with the innovative value proposition of cutting commissions …

“Uber Real Estate is disrupting the traditional real estate brokerage brick and mortar business model by reducing the transaction cost by up to 50 percent using their unique on-demand model.” 

Of course, no one in the history of real estate has ever thought of that before … besides Help-U-SellPurple BricksAssist2SellRedfin, and probably many more.

BUT … we should be open minded.  After all, we were snarky about Bitcoin and missed out on a big pile of free money for adding no value.

Oops.  Sorry, more snarkiness.

Back to Uber’s press release …

“You will never again pay a full commission using Uber Real Estate.”

“Consumers receive Uber – Like Execution with only experienced professionals, no more drama and only substantive yes or no, answers.”

“Uber Real Estate provides Broker and Broker Attorneys with ten to thirty years of experience to the company’s clients.”

They actually do provide agency and work for the clients of the company as it should be …”

Consumers just want to go online and get it done with Uber – Like Execution.”

“ …we are completely website driven. An Uber, mobile application, for Real Estate, is under development.”

So let’s consider what all this really means …

From a practical standpoint, for real estate investors, we’re not sure there’s much direct impact.

Maybe if you’re flipping homes on thin margin, shaving a few bucks off the listing commission means more beer money … and extra profit is always nice.

Of course, we think if you need the agent’s commission to make your deal pencil … you don’t really have a deal.

But that’s not the point.  There’s a MUCH bigger picture here, which is why this blip of news caught our attention.

Uber’s a big brand with a powerful reputation for disruption.  They claim they can disrupt real estate.

But they are NOT real estate guys.  They’re tech guys.  Just ask us to fix a website, and you’ll realize there’s a HUGE difference between the two.

And THAT’s the point …

We often say that what you think and believe will affect your actions … and your actions produce your results.  So beliefs are at the root of strategy.

In this case, we see the solution being presented as the fruit of a core belief held by tech people … and many in the paper asset investing world as well …

… that real estate is a commodity, and brokerage is about facilitating transactions.

They think that’s a given.  We’re not so sure.

But because SO many people outside real estate believe this also, from time to time they attempt to enter the real estate arena with solutions which don’t really fit the actual problem.

In fact, the problem they’re trying to solve is actually what gives Main Street real estate investors opportunity.

Further, we’d argue that if they actually could solve the “problem”, it would dramatically change the opportunity that so many Main Street investors THRIVE on …

Real estate brokerage is inherently inefficient.  And the reason is because real estate is NOT a commodity.

EVERY property, ownership, and location is UNIQUE.

Even two houses on the same street, built by the same builder, are different …

… based on their condition, modifications, seller motivations, financing, and many other factors unique to the property and people involved.

In this case, Uber is focusing on properties marketed to and by owner-occupants, which means the idiosyncratic preferences and financial capacity of the buyers come into play.

Last time we looked, no two buyers are the same either.

Even if you’re talking income properties (which Uber isn’t, so to Uber “real estate” is just houses for homeowners) … there’s the tenant mix, payment history, property management skill, expenses, etc.

On other words, real estate is a diverse, complex, messy hot-bed of drama, inefficiency, and opportunity.

It’s why the paper guys can’t figure it out on an individual property basis.

Paper guys have to pool everything together into a REIT or mortgage-backed security, so they can blend it all into a single commodity they can focus on.

But you can’t do that with individual properties owned by individual sellers being marketed to individual buyers.

So Uber’s going to cut commissions “by up to 50 percent” so sellers will “never again pay a full commission”.

Yet somehow with 50 percent less, Uber will attract “only experienced professionals” who will deal with real estate transactions in a drama-free, binary, “yes, no answers” way?

Yes/no binarism is the epitome of tech think … but not real estate.

Real estate at the homeowner level is about feelings … yes, “drama” … and it’s quite the opposite of binary.  It’s more complexity theory.

Real estate agents are negotiators, not transaction facilitators.  It’s all very squishy.

Maybe Uber’s next project will be to automate hostage negotiations, corporate mergers, or international diplomacy.  Good luck with that.

Tech is GREAT for eliminating transactional inefficiency … and certainly there’s some of that in real estate brokerage.  But 50 percent?  Probably not.

The bulk of inefficiency in real estate transactions is the HUMAN component of the negotiation.  The art of the deal.

The skill-set of a great agent is that of uncovering and understanding the unique circumstances of the property …

… AND the unique needs, wants, desires, goals, and objectives of at least two (sometimes there’s family, advisors, and other influencers involved) very different principals …

… and then negotiating through the extremely non-binary thoughts and emotions of both sides.   And then, ultimately, getting a deal done.

This is why a SKILLED negotiator can get a GREAT deal.

So we don’t think there’s an app for that … nor will there be anytime soon because computers don’t do empathy very well.

Just ask anyone who’s called in to an automated attendant.

So while tech people bark up the wrong tree trying to solve the “problem” of transactional inefficiency in real estate brokerage …

… Main Street investors are busy CAPITALIZING on the opportunities created by the true cause of brokerage inefficiency …

Real estate is not a commodity and brokerage is not about transactions. 

Just like the properties and people involved, EVERY single transaction is unique … and full of drama.  Get used to it.

But that’s why real estate is both fun and profitable for those with the skills and temperament to embrace it for what it is.

Until next time … good investing!


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The disrupted American Dream …

One of today’s most popular buzzwords is “disruptive”.  It describes an event, idea, or invention that upends the status quo in some aspect of life or society.

“Disruptive technology” is used for everything from Amazon to Uber.

And as we’ve previously discussed, many of these things impact real estate and investing.

But disruption transcends technology.

Donald Trump’s election and Brexit are two examples.  The world appeared to be on one course … then boom.  A new direction.

So, political norms, societal norms, government and business models …almost everything is being disrupted right before our eyes.

In fact, disruption is so commonplace, it’s become the new normal.

But really, disruption is nothing new.  It goes back to pre-historic times.

The wheel was disruptive … and revolutionized the world (sorry, we had to…)

Farming was disruptive.  It changed the entire societal model … accelerating labor specialization, commerce … even banking.

The printing press was disruptive … connecting human minds past and present at greater speed, for lower cost, and with greater accuracy than ever before.

The U.S. Constitution was disruptive … protecting private property rights for the common man … the foundation on which all personal wealth is based.

That’s a personal favorite. 😉

Radio, telephone, personal computing, the internet, smart phone … all disruptive … each one taking idea sharing to never-before-seen levels.

Trains, automobiles, and airplanes all disrupted the transportation norms of their time … allowing people and their possessions to circulate faster and less expensively.

Now blockchain technology … at least for now … is threatening to disrupt how freely money and wealth circulate.  And governments have noticed.  Uh oh.

Of course, history shows with every disruption, there are winners and losers.

For every railroad baron or millionaire automobile maker, there were thousands of wagon-makers and liveries put out of business.

So while disruption isn’t new … the rate is unprecedented.  The world we live and invest in is evolving at a dizzying pace.

Blink and you miss huge opportunity.  Or worse, you get wiped out by a trend you didn’t even see coming.

The faster the world is going … the further ahead you need to look.

 So with this mindset, here’s a headline that caught our attention …

Why it makes more sense to rent than buy – Market Watch, 1/13/18

Obviously, a real estate headline.  But disruptive?  Seems pretty mundane.

After all, the rent vs. buy debate has been going on forever … usually linked to temporary circumstances favoring one side over the other at the time.

But this article references two interesting reports …

One is the ATTOM Data Solutions 2018 Rental Affordability Report.

It notes … buying a home is more affordable than renting in 54 percent of U.S. markets, but 64 percent of the population live where it’s cheaper to rent.

Hmmm …

Looks like folks prefer to rent where they want to live than buy where the numbers make sense.  Apparently, buying just isn’t that important to them.

Which leads to the second report, A Revision of the American Dream of Homeownership.

This one’s a premium report, so the link’s to the press release … but look at the title … “a REVISION of the American Dream”.

The idea that something so foundational as the American Dream is being … disrupted … is something worth thinking about.

Market Watch did another article based on this report … “Renting is better than owning to build wealth – if you’re disciplined to invest as well.”

Some might say it’s a hit-piece on real estate to entice millennials to put their savings in the stock market rather than a home.

But that would be cynical.

More interesting is the possibility there’s really a disruptive trend developing in terms of the way society views home ownership.

Consider this …

We have a friend who’s a very successful millennial, who can easily afford to own any kind of car … several of them … if he wanted to.

He doesn’t.

Now that he’s discovered ride-sharing, he sees no value in owning a car … not as a status symbol or an investment.

We’re not suggesting this guy’s viewpoint represents the millions of millennials out there.  But it’s worth noting.

Millennials are a big, powerful demographic rolling through the seasons of life … just like the baby boomers did.

Except millennials aren’t like Boomers …they live in a different world and view it through their own lens.

Career, opportunity, family, community, home ownership … roots … are very different today compared to 50 years ago.

In a world where you may change jobs a dozen or more times in a career, and you operate in a global economy, with a social network that’s not local, but virtual …

… home ownership can go from being stabilizing to burdensome.

The sharing economy is changing the way people think about the value of owning things they simply want the use of.

Absent paradigms of ownership, sharing is arguably more efficient.  But for the first time in history, it’s logistically possible.

No generation before has had as many options for sharing as there are today.  

And while pay-per-use seems like a no-brainer when discussing a depreciating asset like a vehicle, Market Watch isn’t the first to argue a home isn’t a great investment.

The pioneer in the “your home is not an asset” mindset is none other than our good friend (and boomer), Robert Kiyosaki.

Of course, Robert’s an avid real estate investor, so his issue isn’t real estate.  It’s about respecting the difference between consuming and investing.

Investing is about profit.  But when you consume, you want value … the right mix of quality, service, and price.

Some people rent their residence because they get a better value, have less responsibility, enjoy more flexibility and variety …

… and it frees up money to invest in rental properties.  They get a better ROI.

So they own real estate … just not the home they live in.

If there’s a new attitude about home ownership working its way into the marketplace, it could lead to a new experience in landlording too.

Because now you might have more affluent, well-qualified tenants competing for longer term tenancies in nicer properties in better areas.

Stable people with good jobs and incomes, who want to live and keep a nice home in a good area, but don’t want the responsibility of home ownership … can be great tenants.

They can also be a way for you to collect premium properties while someone else pays for them.

It’s a trend we’re watching.

Until next time … good investing!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.