4 Ways The Sharing Economy Has Dramatically Impacted Real Estate

You have probably already noticed how the sharing economy has impacted finance, transportation, publishing, and IT. In addition, peer-to-peer platforms have dramatically affected many different facets of the real estate industry, from hospitality to home financing.  Explore some significant ways that changing technology and mindsets have allowed the sharing economy to disrupt real estate.

Explore Four Ways the Sharing Economy Can Transform Real Estate.

As with other industries, the sharing economy offers people and businesses alternatives in the way they can conduct transactions. It’s up to you to decide if these alternatives offer you benefits over more traditional services. This is true if you plan to use the shared economy as a consumer or to invest in it.

1. B2B and Consumer Rental Lodging.

Both companies and individuals can use services like Airbnb to book lodging. Typically, patrons use these services for short-term stays, so they take the place of hotels. However, some people even use them to make long-term arrangements that can replace apartment rentals. Even Warren Buffett unofficially endorsed Airbnb by listing his childhood home. While many real estate owners just use platforms like this as a way to enjoy extra money from unused bedrooms, a few real estate investors make millions from their properties.

2. Managed Office Sharing.

Instead of buying or leasing office space, entrepreneurs, freelancers, and small businesses may rely upon co-office arrangements. These shared offices come with furniture, amenities, utilities, internet access, and sometimes even mailing addresses to help startups and small companies enjoy the same amenities and professional appearance as more established companies.  Some larger companies even use them for remote or traveling employees.

3. Real Estate Sales.

The shared economy has hardly replaced traditional real estate brokers in volume, but it still provides an alternative. For example, a company called Homie charges a flat-fee to handle the legal side of real estate sales. The seller still has to show and market their home. They can’t count on the support they would get from an experienced agent.

Sellers gain the advantage of modest, flat fees to begin selling and then a somewhat larger charge after the home sells. Typically, this fee works out to a fraction of the five- to six-percent commission charged by real estate agents. The company estimated on their site that their fees would save a seller over $8,000 for a $300,000 home and a traditional agent.

4. Real Estate Financing.

The concept of peer-to-peer mortgages is hardly new. You can certainly consider family loans and even investor bridge loans as types of P2P real estate loans. Access to online peer-to-peer mortgages still haven’t spread all across the United States, possibly because of different regulatory environments. However, you can still find some examples of companies with plans to expand and possibly, disrupt the traditional mortgage industry.

These are examples of some companies that intend to disrupt traditional real estate lending with P2P mortgages:

  • Sofi offers both mortgages and refinancing in several states and DC.
  • National Family Mortgage handles P2P mortgages between relatives.
  • Lending Club has plans to expand into this space in the future.

These alternative platforms claim to offer borrowers lower rates, lower fees, and somewhat looser approval rules than banks and mortgage companies. In turn, they offer investors higher returns.

Is the Sharing Economy Good for Real Estate?

Some people benefit from having alternatives when they want to conduct a variety of different real estate transactions. Just as with all industries that the sharing economy impacts, some transactions are better left to traditional providers. For complex transactions, both sellers and buyers may benefit from the services of traditional, licensed brokers who can handle problems and make certain all aspects of the deal are legal. Some localities have restricted P2P rentals because they say that they skirt hotel taxes and regulations to compete in an unfair manner.

Like any economic revolution, the rise of P2P real estate has had both some positive and negative effects. Still, if the sharing economy can offer better returns, lower costs, and more convenient alternatives, it’s likely to keep growing.