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Mitigating Loss with Smart Home Technology

Be Proactive and Avoid Costly Claims by Jason Jones As a property owner, you are likely familiar with the benefits of smart home technology. But beyond the convenience of remote controls and automation, these systems can also play a critical role in mitigating loss at your investment properties. The right technology can help you avoid costly incidents that could otherwise lead to major repairs or liability claims. Smart Water Leak Detectors Water damage is one of the most common and costly issues for property owners. A leaking pipe or appliance left unchecked can cause significant damage to walls, floors, and foundations. Fortunately, smart water leak detectors are available to help you catch these problems before they escalate. There are two main types of leak detection systems:  »            Sensor-based systems are affordable and easy to install. They use sensors placed near high-risk areas, like under sinks or next to appliances, and alert you if they detect moisture. Some models offer push notifications to your smartphone, while others make an audible alert.  »            Water main systems are more advanced and can detect changes in water pressure throughout the entire property. If something unusual is detected, these systems can automatically shut off the water supply, preventing further damage. Though more expensive, if you are concerned about things like frozen/burst pipes, these systems are a worthy investment compared to the potential cost of severe water damage. Smart Thermostats For investors with vacant properties or homes undergoing renovation, smart thermostats can be a game changer, especially in colder climates. One of the biggest risks for vacant properties is frozen pipes, which can burst and lead to costly water damage. A smart thermostat allows you to monitor and control the temperature from anywhere, ensuring your property stays warm enough to prevent freezing, even if you cannot be onsite. This way, you do not have to guess whether your home’s heating is holding up in sub-zero temperatures. Plus, you can save on energy costs by adjusting the temperature as needed, rather than keeping it unnecessarily high for extended periods. Smart Sump Pumps Flooding is a major concern for investment properties in high-risk zones. Smart sump pumps and backups can alert you to issues before they cause extensive damage. If your property already has a sump pump, you can upgrade the current setup by installing a smart primary sump pump. These systems can send a text or push notification to your smartphone if high water levels are detected, indicating that the pump has either failed or lost power. This early warning gives you time to take action and prevent the worst-case scenario from occurring. In addition to primary sump pumps, there are two options for smart backup sump pump systems:  »            Smart battery backup systems automatically kick on to handle incoming water if the primary pump fails, is overwhelmed, or loses power. A common issue with older models is that the batteries degrade over time, and you might not know there’s a problem until it’s too late. With smart battery backups, you can monitor the battery’s condition at any time. The battery charge on these systems can last anywhere from a few hours to several days depending on the model and conditions.  »            Smart water-powered backup systems use the main water supply to pump out floodwater in the event of a power outage. For property owners who are concerned about relying on battery life for lengthy periods, these are a great option as they do not require anything but pressure from the water main to operate. However, as these systems rely on the home’s water supply, they can be costly to operate for extended periods. Like battery backups, these are equipped with wireless smart alarm systems that alert you to issues such as pump failure or incoming water. Smart Carbon Monoxide Alarms Carbon monoxide (CO) is a silent killer, and as such, it is important to have a reliable detection system in place to keep occupants safe. Smart CO alarms can detect harmful gas and send real-time alerts to your smartphone, so you will know if there is a problem even if you are not physically present at the property. Some smart alarms can pinpoint the specific area where carbon monoxide is detected and even contact monitoring centers, which can then notify emergency services, if needed. Combination smart home sensors are also available on the market and can detect carbon monoxide, smoke, and fire. Both battery-powered and wired options are available. Smart Locks Whether you manage short-term rentals, vacant properties, or homes under renovation, smart locks are an effective way to keep your property secure. With smart locks, you can monitor access in real time, receive alerts when someone enters or exits, and even remotely lock and unlock doors. There are several types of smart locks on the market:  »            Deadbolt replacements that completely replace your existing lock.  »            Deadbolt adapters that modify part of the existing lock system.  »            Keypad locks, which are simple and allow access with a code. Some models provide backup keyholes in case of battery failure. For vacation homes or rental properties, smart locks can make guest access easier by allowing you to set temporary access codes for visitors such as contractors or cleaners. Just be sure not to reuse codes and deactivate them when necessary. Some smart locks also track who enters and when, providing helpful records in the event of a security incident. Smart Lighting Vacant properties can be a magnet for vandals or burglars. Smart lighting is an easy, low-cost way to make your property look occupied when it is not. By installing smart plugs or bulbs, you can remotely control lights or set schedules for them to turn on and off at random intervals, giving the impression that someone is home. Some systems can be integrated into existing smart home devices while others offer their own applications. In Conclusion While smart home technology provides convenience, it also allows you to take proactive measures to prevent loss and avoid

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Real Estate Meets AI

Productivity Gains and Persistent Limitations by Jonas Bordo In the fall of 2022, OpenAI released ChatGPT and made the power and promise of artificial intelligence (AI) a tangible reality. To date, the impact has been most profound in the area of human productivity. For example, here at Dwellsy, we precisely map every SFR and apartment address that comes into our system (hundreds of thousands per month), and what was once a labor-intensive process is dramatically faster and more accurate with help from AI. Code debugging — one of the most painstaking and unpleasant tasks for our developers — is now (usually) a breeze. Processing emails is dramatically faster with AI reviews and drafts. It is almost as if we have doubled our team size — for only $20 per month per team member in most cases. What AI makes possible with scaled data is nothing short of miraculous. A human can tell in a heartbeat whether or not one single-family home has a garage. But, to look at tens of thousands of them each day and do the same? There is no one human capable of or willing to deliver at that scale, but Large Language Models (LLMs) are happy to take on the task — and they can handle it in minutes and without complaint. LLMs have had a similarly profound impact on our analytical ability. We can feed financial statements into LLMs like ChatGPT, Claude or Gemini and query the financials to get insights in seconds. We can give the LLM an enormous data set and ask for any kind of analysis. They are not always right (like the humans they are built to emulate), but they make an invaluable thought partner in our work. While AI is becoming indispensable, it has serious limitations that are not going away anytime soon. Let’s break them down. Without Good Data, AI is Pointless (or Worse) AI is only as good as the data it uses — the challenge of “garbage in, garbage out” has not changed. Poor-quality data, incomplete datasets, or outdated information can lead to inaccurate predictions and flawed decisions. And SFR is rife with data challenges. Here are some common issues that AI runs into:  »            Offline Properties // In SFR, many properties exist solely offline — rented via a yard sign and managed in someone’s notebook, or an Excel sheet. As a result, AI will miss many reference properties that could be invaluable for analysis.  »            Data Fragmentation // Even when digitized, many owners and operators do so on in-house platforms that are not shared, so much of the data is behind enterprise firewalls and inaccessible to AI.  »            Old Data // SFR evolves rapidly due to factors like new developments, economic shifts, or regulatory changes. Too much data is historical and AI models may rely on old data without factoring in real-time updates.  »            Bias in Data // Data sets used to train AI models are often not statistically significant. These issues can be as simple as dramatically better data being available in one neighborhood or from one provider, causing that data to overwhelm other, potentially more valuable data, in the AI’s analysis.  »            Incomplete Data // I have never yet seen a property that is fully digitized. This is doubly the case for SFR properties, which are small in individual scale and highly varied. At best, the core characteristics are captured in the data, but there is always more missing than present in the digital record. Without extensive, representative, timely, and high-quality data inputs, AI is always going to struggle. So as users of these tools, we need to make sure that we can feed it the right data if we want to be able to depend on the outcomes. Missing Character, Intangibility, and Nuance I was first attracted to real estate by its very “real” character. Unlike most financial assets, real estate is a living, breathing thing with character and life all its own. This fact always hits home when I am touring properties, dating back to one of my first. I still remember that feeling of walking into a decrepit property in the northwest side of Chicago and seeing nothing but potential in the well-aged bones of an unusual property located in an edgy, but up-and-coming neighborhood. That very potential — wrapped up in very human concepts like character — is extremely difficult to digitize and, as a result, remains beyond the reach of AI in this space. Here are some examples of the most challenging gaps in understanding character for AI:  »            Neighborhood Sentiment and Future Growth // AI can analyze current demographic and economic data, but it may struggle to capture the subtle, on-the-ground shifts that can indicate future neighborhood growth. Factors like new businesses, planned infrastructure projects, or changes in community dynamics are much more visible to humans through local knowledge and experience than through data.  »            Property Condition and Renovation Quality // While AI can estimate the value of renovations or upgrades, it cannot fully evaluate the quality of craftsmanship, the durability of materials, or the aesthetic appeal of the property. Human judgment is crucial in evaluating whether improvements will attract residents or increase the property’s long-term value.  »            Local Market Nuances // Some SFR markets have hyper-local characteristics that may not be fully captured by data. For example, two neighborhoods within the same city could have vastly different demand characteristics due to local attractions, schools, or even intangible qualities like “curb appeal.” AI models tend to overlook these nuances, relying instead on broad averages. Over-Reliance on Historical Data AI models often depend heavily on historical data to make predictions about future performance. This reliance can be problematic in several ways:  »            Failure to Account for Disruptions // AI models may not be equipped to predict sudden changes in the real estate market, such as economic downturns, natural disasters, or major regulatory shifts. For example, during the COVID-19 pandemic, could AI models have predicted the spike in demand

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How Climate Risk Financial Modeling Will Change Real Estate Investing

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A Q&A with Toni Moss and Matthew Eby In April of 2024, REI INK was an official publication of the groundbreaking AmeriCatalyst conference, GOING TO EXTREMES: The Extreme Climate, Housing and Finance Leadership Summit. The event brought together the primary constituents in US housing to discuss risks posed by climate change to the housing market. Recent hurricanes Helene and Milton have emphasized the need for astute real estate investors to factor the impact of extreme weather on their investments. These multibillion dollar loss events have brought the vital conversation of insurance, climate migration and declining property values to the forefront. This article features a conversation between Toni Moss, founder and CEO of AmeriCatalyst LLC and Matthew Eby, Founder and CEO of First Street, about the emerging field of climate risk financial modeling (CRFM) and how it will fundamentally change the way real estate investors evaluate the impact of climate change on their investment portfolios. Toni: The historic precedent and ultimate impact of attributing climate risk scores to individual homes cannot be understated. A lot can be read about the science behind the scoring, but I’m interested in knowing about your original idea to do this. Matthew: During my time at The Weather Channel, I observed the difficulty of making climate change real in people’s everyday lives. The conversation often centered around melting ice caps and surface temperature rise rather than its direct impact on individuals and their families. This led to the question: How can we make climate change tangible? For most people, their home is their largest investment. By linking climate change impacts to this major financial and personal asset, we were able make the issue more real and urgent. Thus, eight years ago, we established First Street with the mission of connecting climate change to financial risk. We began by assembling the leading climate scientists in order to develop a set of comprehensive physical climate risk models focused on flood, wildfire, hurricane wind, air quality, and extreme heat. Next, through a collaboration with Arup, a leading environmental engineering firm, we were able to translate climate risk assessments to individual properties in a more tangible way, enabling us to quantify damage due to exposure. We now have property-level climate risk and damage assessments for every property in the US and are expanding internationally. First Street is the leading provider of climate risk financial modeling (CRFM) to governments and major financial institutions, and our climate risk data is featured on all the major real estate platforms: Realtor.com, Zillow, homes.com and Redfin. As a result, nearly every home on the market in the U.S. now includes our climate risk data. We consider this data crucial for everyone from homebuyers to real estate investors to large banks because it allows them all to make climate-informed real estate decisions. Toni: Now that First Street is on all three major real estate platforms (Redfin, Zillow, Realtor.com), what impact do you foresee these scores having on the housing market? Matthew: The integration of climate risk scores into the major real estate listing sites marks a pivotal shift in the housing market, elevating climate awareness to the forefront of real estate decision-making. By offering visible and accessible climate risk data to homebuyers and investors, it empowers them to make informed decisions on property purchases, significantly impacting buyer behavior. Prospective homeowners may now weigh climate-related threats against traditional factors such as price, location, and amenities, leading to a potential reshaping of geographic demand patterns. We have already seen areas identified as high-risk for floods, wildfires, or other climate-related events experience a decrease in property values, while regions deemed as “safer” from climate risk see an appreciation in value as demand increases. Our own research has found that by simply raising awareness around climate risk, there is an associated 3-4% property value decrease for at-risk properties versus those not at risk. Additionally, we have seen systematic changes in search history on sites where this data has been made available, with high risk property searches being followed by persistently lower risk searches. Moreover, as lenders incorporate climate risk scores into their risk assessments, this could lead to changes in mortgage lending practices. Properties in high-risk areas might face higher insurance premiums or stricter lending criteria, complicating the acquisition process. On a broader scale, the housing market will likely witness a recalibration with increased pressure for sustainable development and infrastructure improvements in vulnerable areas. This shift reflects a growing acknowledgment of climate change’s inevitability, urging all stakeholders—from government officials to developers to consider climate in their investing practices. Toni: Which poses a more significant risk from climate change: physical damage to structures or the secondary economic impacts such as insurance costs, property value, local GDP, and climate-related migration? Matthew: When evaluating the risks associated with climate change, real estate investors must consider both direct physical damage to structures and the secondary economic impacts that can arise more indirectly. While physical damage — such as property destruction due to flooding, hurricanes, wildfires, or other extreme weather events — poses an immediate and tangible threat, the secondary economic effects can be equally, if not more significant over the long term. Physical damage to properties can result in substantial repair costs and loss of rental income during downtime. Properties in high-risk areas face increased insurance premiums or even become uninsurable, affecting their overall profitability and marketability of both the property and the local community. Moreover, repeated exposure to climate-related hazards can lead to depreciation of property values, making it difficult to sell or rent them at competitive prices. Most recently, we have seen the first evidence of climate related migration in the US. Specifically, we are not seeing this as large macro migration trends of people fleeing risky areas, like Florida, Louisiana, and California, but instead are using property level climate risk information to identify properties within their desired residential locations. These decisions are being made by homebuyers armed with high-resolution and high-precision climate-risk information and, over time, are going to reshape

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5 Title Issues Real Estate Investors Should Know

Strategies to Help Investors Deal with Them Proactively by Radian Title Services Build a thriving portfolio by identifying opportunities and implementing strategies to help protect your investments. Successful investors may use due diligence to their advantage, positioning them to navigate challenges and grow their real estate investments. But even the most carefully curated portfolios can face unexpected challenges. Here are five common title issues that could turn your portfolio into a financial nightmare and strategies to help you deal with them proactively: 1. Undisclosed Liens Consider this — you closed on a seemingly ideal rental property, only to discover it carries a mechanics lien from a previous, undisclosed renovation. This situation could impact your projected returns. Best Practice // Be proactive and insist on a comprehensive title search. Understand how the title company identifies recent liens that may not already be reflected in public records. 2. Survey Discrepancies Inches can cost thousands in boundary disputes. You may encounter situations where, post-closing, neighboring property owners contest the boundaries of a newly acquired property. This could lead to costly legal proceedings and property line alterations. Best Practice // Help minimize boundary-related conflicts by obtaining professional surveys, particularly for properties with complex lot configurations or newer subdivisions. 3. Unknown Heirs Don’t let heirs sneak up on you. In probate or estate sales especially, previously unknown heirs of a prior owner may emerge with legitimate claims to the property, complicating what appeared to be a clear title. Best Practice // Consider title insurance that affords coverage for potential heir claims. When acquiring property through probate or estate sales, it may be a good idea to conduct additional research into the deceased’s family history. 4. Document Forgery Be aware that instances of forged documents are possible. They can lead to your ownership being questioned and legal disputes regarding your ownership rights. Best Practice // Don’t fall victim to this issue by carefully examining the chain of title ownership. Be wary of unexplained gaps in ownership or unusual transfer patterns. If any aspects of the title history seem questionable, there may be reason to investigate. 5. Undisclosed Easements Investing in a property with plans to expand or develop is exciting! Just make sure you aren’t surprised with any undisclosed easements; they may impact property usage and development potential. Best Practice // Thoroughly review the property’s title commitment. Pay attention to the exceptions section, which details easements and other encumbrances that might not be covered by the title policy. Financial Implications Imagine watching years of hard-earned profits vanish due to an unforeseen title issue. Even seasoned investors can fall victim to these problems. Be proactive and take steps to help protect your investments. According to a study commissioned by the American Land Title Association, the most frequent types of claims can cost $26,000 on average to resolve, including $5,000 to defend. Some of the most expensive claims can exceed $143,000 — more than enough to wipe out the profits from a deal. Purchasing owner’s title insurance may help protect you from paying these costly claims out of pocket. Help Safeguard Your Real Estate Portfolio Pursue opportunities confidently by knowing that your investments are insured with title insurance. Comprehensive title protection can be your secret weapon for risk management and portfolio growth. Title insurance, offered by providers like Radian Title Insurance, provides protection for as long as you own the property, all for a one-time premium, making it an invaluable resource to add to your toolbox. Prioritizing title due diligence helps avoid potential pitfalls and position real estate investors to realize the maximum potential of their investments. Successful investors don’t just identify great opportunities, they excel at protecting their investments for long-term growth. Sharp insights may drive success, but proactive planning helps ensure it lasts. This communication is intended to convey general information only and not to provide any legal or accounting advice or opinions. An attorney or accountant should be consulted for specific information.

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How AI is Revolutionizing Private Lending

Embrace AI, Do Not Fear It by James Keegan Artificial Intelligence (AI) has crept into most industries in some way, and it is transforming not only the real estate industry overall, but private lending, specifically. As the private lending industry grows exponentially each year, lenders are facing a major rise in competition from new private lenders as well as banks that are actively expanding their lending offerings. From big data analytics to improved security, AI is a game-changer for private lenders who are striving to keep up with a rapidly evolving market and the changing needs of modern borrowers. AI technology is opening up a world where lenders can tap into these needs like never before and streamline the lending process, all while improving security and analyzing data, to create a seamless and unique experience for each borrower. Let’s take a closer look at some of the most impactful AI uses for private lenders as the future of real estate quickly becomes the present. Predictive analytics One of the most transformative ways that AI is being used in real estate in 2024 is to predict future market trends, property values and investment opportunities. Fast data analysis is perhaps one of AI’s most useful qualities, particularly for private lenders who can benefit from the deeper insights and hidden patterns that AI can deduce, which humans may not. AI is also more efficient at analyzing each neighborhood down to a granular level to identify changes that may impact properties and, by extension, real estate loans. A good example of this would be real estate appraisal companies that are now using AI for Automated Valuation Models (AVMs), to provide instant property valuations. Along with that, AI can predict future property values with much greater accuracy, which means that private lenders can assess the risk associated with properties more accurately and adjust their LTV ratios according to the future value of a property. Security and risk management AI is used to enhance security in real estate transactions by machine learning algorithms analyzing vast amounts of data in real-time to find patterns and pinpoint any anomalies. Through this, AI can detect fraudulent activities and, as such, ensure the integrity of transactions. AI systems can also detect fraudulent activities from small shifts in transactional data, which go unnoticed to the human eye, such as changes in digital signatures. This allows private lenders to keep up with fraudsters with ever-evolving tactics. Along with this, AI technology provides real-time risk scoring that adjusts according to the information gathered. So, risky accounts can now be identified quickly, which allows private lenders to intervene and manage these risks early to potentially save themselves from major losses. Streamlined application processing One of the most prominent enhancements that AI provides for the private lending industry is in the loan application process. AI is streamlining the way documents are collected and speeding up the entire loan application process which means that borrowers can get their loans quicker, with less paperwork and less stress. Loan processes are notoriously laborious and full of paperwork, but AI is optimizing this by reducing underwriting time through quicker borrower evaluations, extracting necessary information from documents, and verifying data using natural language processing (NLP) combined with machine vision. For example, AI technology can assess a borrower in just a matter of seconds by matching their income data with bank deposits and tax filings. Customer communication can also be customized to each borrower’s sentiment more accurately using AI, which can result in a stronger borrower-lender relationship. Automated documents and reports AI is being used to improve loan processes by automating the preparation of reports and documents. This not only speeds up the loan process but provides a transparent and efficient experience for borrowers. Loan agreements can be generated through AI using data from the loan application, the specific loan terms required, as well as the local laws and regulations that apply to each area. Smart contracts are one of the most revolutionary aspects of AI technology to be brought to the private lending realm. These are self-executing contracts that are triggered by certain actions and will execute according to pre-determined terms coded at the outset. Smart contracts are making loan transactions more efficient and hassle-free. Personalization In the age of individuality and customization, being able to offer loan products that can be tailored to each borrower’s specific needs is a pivotal moment for private lenders. Structuring loans in a way that suits each borrower in terms of their risk tolerance, financial situation and even their memory, is a great way to appeal to more clients and have more success with loan repayments. However, using AI, lenders can go one step further to create an overall lending journey that is uniquely designed for each borrower’s circumstances, goals and preferences. Beyond tailoring loan products to each borrower, AI allows for proactive customer service. For example, if a borrower is repeatedly missing their monthly repayments, AI technology could be used to pick up on this trend and proactively reach out to the borrower with a reminder each month. Alternatively, if the market conditions change within a borrower’s region, AI can be used to analyze the impact of this on the borrower’s loan and their loan structure can be adjusted accordingly. AI should not be seen as something to fear, but rather as a powerful tool for private lenders to use to stand out from the crowd by enhancing their existing processes, as well as introducing new features that are driven by data, personalization and proactivity. AI technology has created an eco-system where both lenders and borrowers can benefit from the transformative qualities it brings to real estate transactions and the lending journey. To learn more, please visit https://newsilver.com/

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Seasonal Upkeep and Winterization Tips

Helping Investors Maintain Property Values by Radian Real Estate Management As a real estate investor, regular upkeep may be crucial in maintaining assets. With winter approaching, it’s vital to prepare, as minor damage can escalate into serious issues. Consider taking these steps this fall:  »            A pre-winter prep party // While changing leaves are beautiful, tree and shrub debris can damage homes and lawns. Consider trimming shrubs and trees away from the house and removing all branches, twigs, and other leaves from the roof that could potentially clog gutters or downspouts.  »            Prepare for a winter wonderland // Snow and ice can be hazardous if properties aren’t properly prepped. These conditions can damage roofs, interiors, and plumbing through leaks or burst pipes. Before temperatures drop, it may be wise to service the HVAC system, ensure windows and doors are properly sealed to keep out the cold, drain and close off outdoor water pipes, and provide salt and shovels for snow and ice removal. After lines have been closed off, consider performing a pressure test on the system to help identify any leaks to prevent potential issues when systems are turned back on in the spring.  »            Vacant properties need love, too // Often prone to more damage, don’t neglect unoccupied properties, which may require additional winterization. Consider keeping the heat running throughout winter to avoid frozen pipes or other mishaps. As you enjoy fall, take time to prepare your investments before the weather changes. Proactive maintenance may help prevent costly repairs and ensure tenant satisfaction throughout winter. Be sure to hire reliable, licensed professionals to assist with winterization. That way, when the snow begins to fall, you can sit back, sip a cup of hot cocoa and enjoy it. Learn more by clicking HERE

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