By Meghan Hall
When investing in real estate, potential property owners consider a variety of fundamentals and consult with experts as to what their local market might look like in several years’ time. While traditionally those in the real estate market have made predictions based on market reports and personal connections, emerging technology platform Lofty AI is looking to take the guesswork out of real estate investment by using artificial intelligence to make market predictions. The Registry spoke with the Co-Founder of Lofty AI Max Ball on how the technology could impact investors’ approach to real estate.
Please tell The Registry a little bit about Lofty AI; why did you want to create a technology that specifically focused on real estate predictions?
Lofty AI predicts the best investment properties by using alternative data. This data ranges from high speed internet usage and Airbnb nightly rates to sewage data and the types of dog breeds in an area. Our product shows investors thousands of cash flowing properties primed for rapid appreciation in just under 40 different U.S. markets. We decided to focus on real estate because it’s the last trillion-dollar industry left in which decisions are made off gut feel and lagging data. We knew the industry was ripe for disruption, and we had a very unique approach that nobody else seemed to be taking. We conceptualized Lofty AI after living in the Arts District in Los Angeles and watching property prices double over a 3-year period. We’d always been fans of using alternative data to make predictions in other industries, so we decided to give it a go in real estate.
From your perspective, what is the national real estate industry like today, and how do you think consumers could benefit from technology such as Lofty AI?
Real estate investing is beyond fragmented. Almost every real estate investor I talk to looks for properties the same way. They’ll start by going on Zillow and scrolling aimlessly through the thousands of potential investment properties in their local area for hours on end. Then they’ll use gut feel to find “ideal” properties, plug the property details into an excel spreadsheet and attempt to calculate the ROI. After that, they’ll get in their car and drive around looking at properties in their local market. Most aspiring real estate investors are told that they should only invest locally in their own backyard, so when they’re unable to find a deal right down the block from their house, they often give up before they’ve even started.
We started Lofty AI to combat this fragmentation and provide investors with a data-driven approach to real estate investing. Investors shouldn’t be forced to make less money because they happen to live in an area with mediocre investment properties. By leveraging real time, social nuanced data, we’re able to automate local knowledge in dozens of markets throughout the U.S.
Investors using our product are aware of the same nuances and social cues about a market 3,000 miles away, as an investor that’s been investing in that market for the past 20 years. This allows them to invest in properties across the country without ever having to step foot outside their own home.
How did you work to design Lofty AI? What features are included in the technology that you believe are particularly important for users?
The most important thing about Lofty AI is the frequency our data is updated and the granularity of our data. Most investors use data that is updated quarterly or yearly, and granular at the city level. At Lofty AI, we use daily-updated data that’s granular down to the block-level. This gives our customers a massive competitive edge by allowing them to save time, money, and pick up on trends months before the rest of the industry has a clue.
What data and leading indicators does Lofty AI use in order to make predictions? Why does Lofty AI believe these fundamentals are important?
We use a variety of leading indicators to make our predictions. A few examples include the amount of foliage in a neighborhood and the types of bands playing in an area. Our goal isn’t to simply use data that sounds interesting and unique, it’s to use real-time data that is extremely granular and has positive correlations with property price growth.
Lofty AI is currently located in 36 markets around the continental United States. What are Lofty AI’s plans for growth in the future?
We plan to expand to every single market in the US over the next year. We’re also looking to expand internationally in 2021 as a large portion of the data we utilize is available internationally.
What challenges does Lofty AI anticipate it will face as it grows? What strategies will Lofty AI employ to overcome them?
Real estate is an industry that’s done things the same way for a long time. With that comes the challenge of convincing people to change their ways and embrace automation and A.I. We expected this challenge going in, as it’s always been the case in every other industry that’s gone through a technological revolution. It happened in finance, insurance, marketing — and now it’s happening in real estate. We’ve been able to overcome these challenges by proving through walk-forward testing that our data is significantly better at predicting the best investment properties than any other existing method. I’m sure many other people have realized, but COVID-19 has actually forced the real estate industry into this technological revolution 5-10 years before anyone expected. Things like virtual tours, virtual notarization, and virtual appraisals became essential over the past 4 or so months because of social distancing. Large brokerages were forced to move from manual to automated processes because there was no other option. Without this crisis, it would have taken years before these technologies became the norm.
How does Lofty AI plan to remain competitive in an industry that is increasingly accepting and innovating technology?
It comes down to our data at the end of the day. We are a data company first, not a real estate company. We come from tech backgrounds whereas most of the real estate tech companies today were started by former real estate professionals. We think this gives us a unique advantage in that we think about data a lot differently than these other companies, because we didn’t come in with any preconceived notions. That’s why when we read an article that you may be able to predict rising income levels in a neighborhood by tracking an increase in the number of French bulldog posts on social media, we don’t think it’s that crazy.