For the longest time, acquiring and pricing investment property has been more art than science. Even with all the data that has been available to real estate experts for decades, the sheer number of variables that go into determining whether a property will be a longer-term win or a lukewarm bath has been simply overwhelming for the average investor.
Everybody's out there just doing their best, though there are certainly some who do a lot better than others (that's where the art of the deal comes in, really).
What if there was a better way to decide at what price to buy, how much to charge for a property, and how to forecast future real estate prices accurately?
Well, Jones Lang Lasalle (NYSE: JLL), a global firm specializing in real estate investment management, may have cracked the code. It acquired Skyline AI, a software development company that claims to "reinvent real estate investment." JLL and Skyline AI are hardly strangers, though.
Back in 2018, JLL Spark, a division of JLL, provided a significant contribution to Skyline's Series A funding round, signaling that the company already saw something in the twinkle of this start-up's enthusiastic eye long before it reached out to form a stronger connection.
The potential AI brings to real estate investing
There's no doubt that computers have revolutionized how real estate is done time and time again. From the initial digitization of the multiple listing service (MLS) to digital contracts, they've literally recreated the industry in a short couple of decades. But what artificial intelligence (AI) could bring to the real estate industry is, literally, like fitting a manned rocket with the first real-life warp drive.
For example, all those variables that come into play when someone is trying to decide where to invest can be crunched in almost no time, depending, of course, on the size of the search area and other factors that make the decision more complicated.
But instead of having to ignore some variables because human brains are, in all honesty, limited when it comes to decision making, an AI tool can take in all that extra data, examine it, and decide whether it's useful after all.
With the increasing capabilities of AI, it's really no surprise that someone has thought to apply it to real estate investing. There are so many elements of the real estate profession that are, frankly, constantly shifting sands.
A computer that knows all the nuts and bolts of real estate can solve a lot of problems. For instance, it can help with small asks, such as maximizing rental rates based on the current market, competitors, unique elements of the property in question, and more.
But it can also help with larger asks, such as finding neighborhoods or regions ripe for investment, where the prices aren't too high yet, but enough factors indicate that it could be the next hot area.
Of course, you have to understand that no computer, not even a really smart one like Skyline's AI, can replace a professional real estate investment expert. It's a tool -- one that can analyze more data than anything else available. They can't make final decisions because the intuition isn't there, but they can make recommendations based on what we know about the present and the anticipated future.
The Millionacres bottom line
JLL's acquisition of Skyline AI is absolutely a fantastic move for this particular real estate investor. The company's been involved with the project for years, ever since it was a shiny start-up, so the people at JLL understand what the Skyline AI can and cannot do. And that means they haven't spent a bunch of money on a technology they ultimately won't be able to implement in the way they expected.
This is where so many businesses fall short when it comes to acquisitions of tech projects. They buy a thing, hoping it'll do whatever they dream it should -- for example, be an infallible crystal ball for real estate valuations -- and end up with a costly purchase on their hands that doesn't live up to their lofty goals.
Knowing a tool's limitations, in my opinion, makes it a lot more powerful because you know when it's time to kick off the autopilot and get your hands dirty. This may be a real game changer for JLL.