Ayman Alashkar, Founder & CEO of overwrite was on Dubai Eye 103.8 , he highlighted the urgent need to address the threat of deep fake misinformation.
Reflecting on recent events, Ayman Alashkar highlighted the spread of deep fake misinformation in the Chicago elections last year, where a candidate’s voice was synthesized using advanced technology just before the vote. Are we to now expect similar malicious acts in the Democratic voting systems of these countries? That represents 4 billion people. Ayman Alashkar stressed the importance of people being able to recognize and address fake news, urging policymakers to develop strategies to counter its influence on electoral processes.
OpenAI has unveiled a new artificial intelligence tool that can mimic human voices with startling accuracy. The AI voice generator has a range of potential applications, including for accessibility services, but could also prompt concerns about misinformation and other forms of abuse.
OpenAI on Friday shared samples from early tests of the tool, called Voice Engine, which uses a 15-second sample of someone speaking to generate a convincing replica of their voice. Users can then provide a paragraph of text and the tool will read it in the AI-generated voice.
An AI-enabled text-to-voice tool could help with translation, reading assistance for children or aiding people who have lost the ability to speak, the company says. But some skeptics worry it could also fuel the creation of disinformation or make it easier to perpetrate scams.
OpenAI says Voice Engine is currently being used by only a “small group of trusted partners,” including education and health technology companies, and it will use their tests to determine whether and how to allow more widespread use. Those testers have agreed not to recreate people’s voices without their explicit consent and to clearly identify to listeners that what they’re hearing is AI-generated, according to the company.
“We recognize that generating speech that resembles people’s voices has serious risks, which are especially top of mind in an election year,” OpenAI said in a blog post. The company acknowledged the need for major changes as AI-generated audio becomes more widely available, although it doesn’t plan to release Voice Engine to the public immediately. For example, the company suggested phasing out voice-based authentication for bank accounts.
“Any broad deployment of synthetic voice technology should be accompanied by voice authentication experiences that verify that the original speaker is knowingly adding their voice to the service and a no-go voice list that detects and prevents the creation of voices that are too similar to prominent figures,” OpenAI said.
Voice Engine can use a voice sample in one language to create a replica voice that can speak in multiple other languages.
Its blog post includes an example of an audio clip of a human reading a passage about friendship, alongside AI-generated audio that sounds like the same person reading the same passage in Spanish, Mandarin, German, French and Japanese. In each of the AI-generated samples, the tone and accent of the original speaker is maintained.
Click here for audio samples from OpenAI that show how Voice Engine works. The first audio clip is the real human speech that was used was the input for the tool.
This column does not necessarily reflect the opinion of overwrite.ai and its owners.
This story has been published from an article in CNN published on April 2024.
For informative news and views on the world of real estate, proptech and AI, follow overwrite on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog
overwrite | real estate content creation, reimagined
The United Nations has moved to protect our Human Rights from Artificial Intelligence.
If you haven’t caught up on the latest news, Last Thursday, The United Nations General Assembly unanimously adopted the first global resolution on artificial intelligence.
The non-binding resolution, proposed by the United States and co-sponsored by China and 121 other nations, took three months to negotiate and also advocates strengthening privacy policies, the officials said, briefing reporters before the resolution’s passage.
The resolution is the latest in a series of initiatives — few of which carry teeth — by governments around the world to shape AI’s development, amid fears it could be used to disrupt democratic processes, turbocharge fraud or lead to dramatic job losses, among other harms.
“The improper or malicious design, development, deployment and use of artificial intelligence systems … pose risks that could … undercut the protection, promotion and enjoyment of human rights and fundamental freedoms,” the measure says.
Asked whether negotiators faced resistance from Russia or China — UN member states that also voted in favour of the document — the officials conceded there were “lots of heated conversations. … But we actively engaged with China, Russia, Cuba, other countries that often don’t see eye to eye with us on issues.”
“We believe the resolution strikes the appropriate balance between furthering development while continuing to protect human rights,” said one of the officials, who spoke on condition of anonymity.
In November, the US, Britain and more than a dozen other countries unveiled the first detailed international agreement on how to keep artificial intelligence safe from rogue actors, pushing for companies to create AI systems that are “secure by design.”
Europe is ahead of the United States, with EU lawmakers adopting a provisional agreement this month to oversee the technology, moving closer to adopting the world’s first artificial intelligence rules. The Biden administration has been pressing lawmakers for AI regulation, but a polarised US Congress has made little headway.
The White House sought to reduce AI risks to consumers, workers, and minority groups while bolstering national security with a new executive order in October.
Like governments around the world, Chinese and Russian officials are eagerly exploring the use of AI tools for a variety of purposes. Last month, Microsoft said it had caught hackers from both countries using Microsoft-backed OpenAI software to hone their espionage skills.
This column does not necessarily reflect the opinion of overwrite.ai and its owners.
This story has been published from an article in Khaleej Times published on March 2024.
For informative news and views on the world of real estate, proptech and AI, follow overwrite on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog
overwrite | real estate content creation, reimagined
This is a list of things real estate agents should never say to their clients.
1. You HaveHorribleTaste
Agents often face challenges with sellers who refuse to alter their unique decor choices, like an extensive collection of taxidermied cats. While taste is subjective, staging a home neutrally tends to attract more buyers and potentially lead to higher sale prices, instead of criticizing their taste.
Say This Instead:
You have a beautiful collection of stuffed cats. It is so meaningful and important to you. However, we might have potential buyers who are allergic or may miss their dear departed cats. They will spend the whole time looking at your cats, thinking about their cats, not your lovely property. Let me show you some simple things we can do to stage your home that might even bring a higher sales price!
2. Call Me Anytime, 24/7
As an agent, maintaining open communication with clients is essential, but setting unrealistic expectations of being available at all times can lead to frustration and burnout. Balancing professional responsibilities with personal commitments is crucial for long-term success and well-being.
Say This Instead:
You can commit to top-tier customer service. You can promise to return all emails and texts within one business day. You can pledge to monitor messages and respond promptly and regularly. You can also introduce your clients to a fellow team member or assistant who can step in if you are unavailable. You can deliver the best customer service in your area in many ways without sleeping with your phone.
3. I Only Make Money if You Buy a House
Real estate agents should avoid saying they only get paid when clients buy a house, as it can create undue pressure. Recent commission lawsuits highlight the confusion surrounding agent compensation and their value. Agents should take the opportunity to clearly articulate the various roles they play in helping clients find their dream home.
Say This Instead:
If asked how you make money, be careful not to answer by assigning any responsibility to your clients. Rather, point to the many services you provide. Make sure they understand commission but do so in a way that ensures they never feel like they are responsible for you keeping your lights on at home. Even if they are.
4. Your Dream Home Doesn’t Exist
Avoid telling clients that their dream home doesn’t exist, as it can crush their hopes and aspirations. Many buyers are influenced by media portrayals of ideal homes and may have unrealistic expectations. Instead, agents should navigate compromises with sensitivity and understanding, acknowledging the challenges of the current market and managing client expectations accordingly.
Say This Instead:
I understand that these not-granite countertops make you want to gouge your eyes out with pruning shears, but countertops are replaceable and are easier and cheaper than you think. Let’s look at some cosmetic changes that can make this house (the one that checks every other box) your dream home.
5. You’re Delusional
I’m guessing you may have said this in your head many times to different clients about different issues. After all, any time you work with people, there will be a time when there’s a difference of opinion. For example, agents might want to call a client delusional when they submit a low-ball offer.
They say, “I know it’s listed at $380,000,” they say, “but let’s go in at $290,000 and just see what happens.” You’ll be tempted to respond, “You’re delusional.”
Say This Instead:
Instead of questioning their ability to reason, you’ve got to lean on your numbers and their emotions. Explain how the comps make the listing price pretty accurate. While there might be room for negotiation, a basement-level low offer will sour the relationship from the outset. The sellers might not even counter, cutting off further opportunities for negotiation. In a seller’s market, those lowballs aren’t going to get it done (highest and best should be the order of the day). Try to suss out if they really want the home, and if so, how badly. And is it worth making a realistic offer to get it?
Agents must refrain from making insensitive remarks, even in challenging situations like viewing homes with unconventional decor. Instead, they rely on diplomacy and persuasion to guide clients effectively. By offering tactful feedback and professional advice, agents can help clients prepare their homes for sale successfully.
This column does not necessarily reflect the opinion of overwrite.ai and its owners.
This story has been published from an article in The Close published on February 2024.
For informative news and views on the world of real estate, proptech and AI, follow overwrite on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog
overwrite | real estate content creation, reimagined
Have you ever had a conversation on your smartphone, only for your newsfeed to shortly thereafter show you unsolicited ads and articles relating to what you’d recently spoken about?
The phenomenon of content targeting based on private conversations, has sparked widespread debate.
Could our phones be actively listening to us, using microphone data to tailor content in breach of privacy settings?
Ayman recounted numerous occasions where he experienced this phenomenon. One memorable instance he shared involved a conversation with a friend about rugby scrums. Watch what happened.
To his surprise, his phone seemingly intercepted the conversation, as ads related to software development scrum methodologies began appearing on his feed within moments. It was clear that his phone had been listening. And if that wasn’t bad enough, it had misunderstood the context entirely.
These instances not only confirm the active listening capabilities of our devices but also highlight their tendency to misinterpret our conversations.
So what can you do to improve your smartphone’s privacy settings?
Anybody that wishes to take their privacy and security seriously, should regularly review their app permissions every 6 months. Decide which permissions they’re comfortable granting to apps. Some apps may overreach for data that they have no business wanting. Stay vigilant and consider uninstalling apps that request excessive permissions. This proactive approach helps enhance smartphone privacy settings.
The debate surrounding whether our phones are eavesdropping on our conversations remains highly controversial, with numerous publications such as The Washington Post weighing in on the matter. However, what becomes evident is that there are arguments supporting both perspectives.
Now, the question remains: Do you believe our phones are actively listening in on our conversations, or is it all just speculation?
For informative news and views on the world of real estate, proptech and AI, follow overwrite on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog
overwrite | real estate content creation, reimagined
Every real estate agent has encountered their share of challenging Clients, each presenting unique hurdles to overcome.
Take a look at this story shared by a real estate agent in the USA.
Phone Rings.
I answer.
A guy is calling from a listing sign, and he doesn’t know where he is.
He can’t read the agency name — he blames the sign — and he can’t describe the property for crap. He starts getting really impatient with me, but I finally get enough information to McGyver his location by intuition and the hard science of assuming he’s looking at one of our cheapest listings because of his demeanor. I am right, and after I answer his basic questions about the home’s layout, this conversation ensues.
Caller: “How much is the rent? I’m interested in making it my home.”
Me: “Sir, the house is not for rent. You can only buy it.”
Caller: “Well, that’s dumb. Why did you put the sign here, then?”
Me: “I’m not the agent listing the house. [Agent] is out of the office, but the sign clearly says, ‘For sale,’ with the number to get assistance right away.”
Caller: “That’s why I called. I want the house, and I’ll pay rent on time.”
This goes around and around, with me using analogies comparing buying versus leasing in other situations like cars and equipment. Trying to make him understand makes it worse.
Me: “If you really like it, I will have an agent get in touch with you to show you the inside and explain the buying process. Remember, though, it can’t be rented. The owner only wants to sell it.”
Caller: “Look, idiot, I know this may be hard for you to understand, but I just want to rent it. I think I can come up with the $130,000, but I need to know what the rent will be after that. It shouldn’t be hard for an educated person to figure out.”
I once again try to explain loans, mortgages, and buying a home.
Caller: “So, what happens after I come up with the money? I won’t get a loan like you tried to sell me on; that sounds like a scam, and I don’t want to pay rent to a bank. What will I be paying per month, and who do I pay it to?”
Me: “So, you’re wanting to buy the house for cash? And now you want an estimate of the monthly costs? Is that right?”
I start pulling up Excel to estimate closing costs and taxes.
Caller: “Yes, finally, you understand. I need to know what the rent will be.”
Me: “That is not called rent. Those are monthly expenses, not rent. If you pay cash to buy the house, you won’t have a rent payment; you’ll be the home’s owner. You’ll only pay the taxes and utilities if you occupy it, and you’ll have to pay closing costs and title insurance.”
Caller: “So, you mean if I pay cash, I won’t pay rent? Just that other stuff? What about cable?”
Me: “That’s up to you. Nobody is forcing cable on you.”
Caller: “This sounds great. Tell me more. This will be cheaper than I thought.”
Me: “Is this a joke? This is [My Boss], right? You’re hazing me or something?”
Caller: “I have no idea what you’re talking about. Back to cable…”
Me: “You can hire a company to mow your lawn, get a satellite dish, or anything you want as long as it’s not illegal or against neighborhood rules. It’s your house to decide what services you want.”
Caller: “Those are great ideas. And I’m going to rent this house. You are smarter than I thought. God bless you, son. Jesus loves you. Praise the Lord, I can retire!” *Hangs up*
In this story lies a reflection of the challenges and triumphs that define the daily lives of real estate professionals and it serves as a reminder of the importance of patience, communication skills, and adaptability required to guide clients through the intricacies of property transactions.
This column does not necessarily reflect the opinion of overwrite.ai and its owners.
This story has been published from Not Always Right on July 2023.
For informative news and views on the world of real estate, proptech and AI, follow overwrite on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog
overwrite | real estate content creation, reimagined
From Bloggers to Vloggers to Tik-Tokers, the real estate industry has ridden every social media wave. But this week, we’re diving into the world of Podcasts. While it’s not the freshest face in the crowd, savvy agents are turning to this medium in growing numbers and unlocking the secrets of success in the ever-evolving real estate world.
Dubai Property Podcast provides you valuable information about the real estate market in Dubai. Including property investment, property management, market trends, legal requirements, and comprehensive information if you are looking to buy or sell property in Dubai, as well as for real estate agents and investors.
Ever wished that you could read your client’s mind and be one step ahead of them?
Understanding the way your client thinks is your secret weapon to bringing home that sale.
We reveal the 4 most common personality types and the clues that could help you sell to them, better.
Getting inside their minds
Experts believe that individuals are wired to make purchasing decisions, based on their personality type. Which type is your client?
1. The Leader
This client type has come prepared; they did their research, and know exactly what they’re looking for. Super motivated, they have no time for small talk, wanting to cut to the chase. They’ll make decisions quick and generally don’t have the time to deal with sales people. Be on your toes, this personality type will be the one to walk into the home, take one look around, and sign the very same day. They’ll equally walk away in an instant if you pussy-foot around.
How do you sell to the Leader?
Tune in to these behaviours quickly, or risk losing them to a competitor. If they’re a Leader type, remember they need freedom to do just that, so let them lead the conversation, and to a degree, stay out of their way. Do not hand-hold (we’re not talking literally during viewings, although that’s equally not advisable!) and give them space to absorb the product, until they’re ready to ask questions.
2. The People Person
Common traits of this client type include them being talkative, easily excited and often extroverted. Their number one need is to connect with the sales agent. As the name suggest, they’re “people-people”, and value a personal touch, so stay close (and then close).
How do you sell to the People Person?
Tip 1: Do not be pushy! Drop the sales pitch, turn off “sales mode” and turn on “relationship mode”. These customers are people-oriented, so create an environment free of confrontation or pressure.
“They enjoy the journey, have time to talk, want to get value from your expertise in the sales process, and value your knowledge in helping them make a sensible investment or find their dream home. Reinforce their beliefs, be a great listener, be available, be “with them” and support them. If you master this type and serve them really well, they’re going to be a walking, talking, billboard for you. Put lots of business cards in their hands.”
Tap in to key personality types
3. The Free Spirit
The Free Spirit is fun-loving and likes to have a good time. They’re extremely independent and are risk-takers. They are open to ideas, won’t mind being thrown a curve ball, but will be turned off by slick, rehearsed sales routines. They like to be in control of how and when things get done, so you could be in for an exhilarating but rocky ride.
How do you sell to the Free Spirit?
Get excited and celebrate with them! They’re creative people so make the sales approach equally exciting and celebratory, not boring and stale. Offer something they haven’t yet considered yet; you never know with this personality type just what might trigger that decision to buy.
4. The Task Master
The Task Master will be your most challenging personality to deal with. They are punctual, meticulous, structured, and very detail-oriented. They are the total opposite of the Free Spirit. Dependability and reliability are their biggest needs in dealing with a sales agent.
How do you sell to this Task Master?
They are cautious and need reassurance, so going in full throttle won’t work. Don’t try to pressure-sell them; they’ll just shut down. They’re going to listen to every piece of information, so make sure it’s 100% on point.
And be prepared for them having to “think about it” even after numerous conversations. The technique here is to have great follow through, stick with the plan, and unlike the Free Spirit, do not throw them any curve balls. Be dependable, and do what you said you were going to do. Eventually, your credibility and trust will win them over before the final purchasing decision.
Know yourself, too
Knowing as much as you can about your client, as quickly as you can, will be a game changer. This is as close as you’ll get to being inside your customer’s brain and know what they’re thinking, so you know what your next move is.
Yet, even armed with all this knowledge, you must also know your own personality or sales style. This will enable you to adapt your natural behaviours and manage their expectations. You’ll need to shape the relationship along the way if you want to establish effective communication.
As you get more confident, you can begin to adjust yourself, and integrate your understanding of your own personality into the sales process.
But with any human interaction, no amount of self awareness or clever second-guessing of their verbal or visual cues, will be of use if the foundations aren’t set around honestly and integrity.
For informative and light-hearted news and views on the world of real estate, follow overwrite.ai on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog.
overwrite.ai | the AI writing assistant for estate agents | Sign up for your Free 7 Day Trial.
Social media marketing has engulfed the residential real estate business, providing a 24/7 reality show reel of real estate agents and their antics.
First Bloggers, then Vloggers, and now Tik-Tokers. It seems as though every agent has their finger in one or more social media pie, promoting themselves and their listings to a worldwide, property-hungry audience.
This week we’re talking Podcasts. They’re not the newest medium on the block. But they’re what growing numbers of savvy agents are turning to.
Elon Musk has just spent a mind-blowing $44 Billion on acquiring Twitter.
The Deal of the Year needs no introduction.
Twitter, arguably the internet’s most influential social media platform, is under the control of the world’s richest person.
And he’s now considering monetising it for commercial users.
“I (sic) want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”
Elon Musk , Twitter Post
But forget all that.
The real question is, will Elon give Donald Trump a Twitter Board Seat?
Elon Musk ‘vehemently opposed Twitter banning Donald Trump’
Have your say….
Take a second to tell us what you think, or hope, will happen…
For informative and light-hearted news and views on the world of real estate, follow overwrite.ai on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog.
overwrite.ai | the AI writing assistant for estate agents | Sign up for your Free 7 Day Trial.
Appetite for Dubai luxury residential units among investors and homeowners is hitting an all-time high.
From 2021 to date, luxury residences by all major developers in Dubai have been fully sold out, and are now trading at a premium on the secondary market.
This is a marked difference from what was witnessed during the Covid pandemic.
At the height of the pandemic, every luxury residential unit worth more than $1 million was considered by many brokers to be a burden on the real estate market in Dubai, and premium properties were barely selling.
During Covid, Dubai turned into a predominately buyer’s market. In 2020 and 2021, most investors adopted a buy-to-let model, purchasing small-scale, low-ticket units in bulk to achieve a higher return on investment.
Tourism was primarily driven by low-income investors who were more likely to opt for smaller, affordable units.
Post-Covid era sees investor interest increase in luxury properties
With the pandemic coming to an end, all that is changing. More and more people, especially millionaires, are moving to Dubai with their families and investing in holiday homes and permanent residences.
According to New World Wealth, Dubai’s population of high-net-worth individuals (HNWIs) soared to 54,000 HNWIs in June 2021 from 52,000 in December 2020, achieving a growth of 3.8 percent.
This column does not necessarily reflect the opinion of overwrite.ai and its owners.
Author,Anup Oommen, is a Middle East Journalist and Digital Editor for Arabian Business
This story has been published without modifications to the text. Only the headline and cover image has been changed.
For informative and light-hearted news and views on the world of real estate, follow overwrite.ai on Instagram and LinkedIn, and keep up-to-date with our weekly NewsBites blog.
overwrite.ai | the AI writing assistant for estate agents | Sign up for your Free 7 Day Trial.
Bad Real Estate Agents. Unfortunately they’re out there. There are those that lack training. Those with limited experience. Poor local community knowledge. Zero negotiation skills. Pushy sales techniques.
Not every agent is a bad apple. Many are ethical, informed and professional. Genuinely intent on finding the best possible outcome for their clients.
Language is at the heart of human intelligence. It is the basis of our communication. It is therefore at the heart of our efforts to build artificial intelligence. No sophisticated AI can exist without mastery of language.
And the field of language AI—also referred to as natural language processing, or NLP—has undergone breathtaking advances over the past few years.
We now stand at an exhilarating inflection point in human history.
Where Language AI is poised to make the leap from academic research, to widespread real-world adoption. Generating billions of dollars of value, and transforming entire industries in the process.
Every once in a while an idea comes along that you wish you’d thought of.
In this case it was the perfect combination. Sizzling-hot, super-prime real estate. Two of (arguably) the world’s most legendary A-list sport celebs. And a phenomenal piece of dare-devil stunt marketing.
In possibly one of the craziest real estate launch stunts ever performed, Formula One racing legend David Coulthard took to the top of the Miami’s tallest residential tower to spin some donuts – 700-feet off the ground!
And to top it off, fellow sporting superstar David Beckham dropped a cool US $20M on a full-floor penthouse in the Zaha Hadid designed building.
Hark the (re)emergence of the Real Estate Crowdfunding Platform.
Real Estate Crowdfunding isn’t new. The concept’s been around for over a decade. Although now it’s enjoying a re-birth during this age of post-pandemic excess liquidity.
Let’s start at the beginning.
What is Real Estate Crowfunding? It’s the ability for retail investors (Mr or Mrs Smith) to invest nominal sums towards a direct real estate asset acquisition, via a platform that manages the transaction, the financing, and the asset, in exchange for a fee.
In plain English, ‘Invest in property for as little as $500‘.
These soundbites may sound sexy, but they’re often misleading. So together let’s take a closer look at the Pros and Cons of real estate crowdfunding:
The Pros – Why to crowdfund a real estate investment?
AccessAll Areas
The biggest benefit of real estate crowdfunding is access to dealflow.
Some years back I participated in a crowdfunded acquisition of a commercial property on London’s Oxford Street. The deal proposed that investors would earn an income yield of 2.15% (net of fees) and an IRR of 13% from the value uplift that was explained within the investment pitch. It was a 4-hear hold. I’ll tell you how it went, further down this article.
Point is, the deal was fully subscribed. Investors like me, who’d have never otherwise had the chance to participate in an Oxford Street commercial property acquisition, piled in. Access.
Small Tickets to Big Plays
Real estate is traditionally a very lumpy asset class. It takes a large amount of capital to buy a property, and ties up that money for the duration of your holding period.
Crowdfunding real estate can be done with small tickets. Enabling investors to participate in big real estate investment plays, without needing to have, or indeed lock-up, large sums of equity for long periods of time.
Liquidity – Getting your money out.
Direct real estate ownership is when you directly own a property in your name. Like your house.
Crowdfunding real estate is not direct asset ownership. It’s indirect. You will own shares in companies that are set up to buy and own the properties directly. Those shares can be sold to the other shareholders of the company, or to third party investors, via the crowdfunding platform’s internal marketplace, without the need to sell the property. Making your ability to get your money out, easier. More liquid.
Diversification
Crowdfunding investors can distribute their capital across an array of property types and sectors. That’s investment theory 101. Spread risk out strategically, across a diversified range of properties. Instead of putting equity into a residential rental investment.
Invest across a basket of residential, commercial, and retail properties. Each with their own economic and tactical opportunities.
The Cons – Why not to real estate crowdfund?
Fees
Where direct real estate investment puts you in the driver’s seat. Indirect crowdfunded investment leaves you, the retail investor, reliant on the platform you’re investing through, to manage your investment and the property. They’re putting this deal together from beginning to end. And they’re going to charge a fee.
Whether they charge a stack of them; like a sourcing fee, an admin fee, an early-exit fee, or a carry… Or they roll their remuneration into a single, seemingly innocuous ‘Administrative’ fee. The platform you’re investing through is clipping a slice of your investment for themselves, before you see a penny.
Illiquidity
Promoting crowdfunded real estate platforms on the basis of their liquidity sounds nice in theory. You’ll be told you can sell your shares in the company that owns the property, fast. And get your money out with little administrative hassle. But read the fine print.
There might be a minimum lock-in period during which you can’t exit your capital.
It’s not uncommon for a crowdfunding platform to demand the right of first refusal to buy your shares. Not a bad thing, but it won’t pay full value for them.
Often the platform will give themselves the authority to approve (or reject) any buyer for your shares that you might find on the secondary market.
Any one of these conditions, creates illiquidity. So read up on your chosen platform’s T&C’s. Know your rights.
The Unspoken Upside
Here’s the dirty little secret that crowdfunding platforms don’t want you to hear.
Before it can offer a property to its crowd of investors, a platform needs to source and secure it.
To do that, the platform either buys the property outright and flips it to the crowd. Or locks in the right to buy it at a price, then secures the crowd funding for it, at a higher price.
In both cases there’s a markup. A delta, between the price the platform secures the property for, and the price it pitches it to its crowd at.
That difference is an upfront upside, that the platform keeps for itself. It’s an immediate profit that’s coming out of your investment’s bottom line. An ethical crowdfunding platform should declare the property’s true acquisition price, source a deal for its crowd at no profit, and justifiably charge a sourcing fee for its troubles.
Beware of any platform that does not declare the true purchase price of its properties to its crowd. Especially if they’re also charging a sourcing fee. Big red flag. 🟥
The Waterfall
Remember that deal on London’s Oxford Street that I invested in years back? The one that promised a 13% IRR? Guess what ended up happening with it.
The distribution of returns didn’t play out as the platform had proposed in their pitch.
The pitch was based on a rental income uplift to be gained, from a lease renewal that was due during the investment holding period. That renewal ran into trouble. Negotiations between the property manager and tenant dragged out. Lawyers got involved. Legal fees skyrocketed. The platform didn’t distribute dividends as they’d promised. After 4 years, what was supposed to have been an IRR of 13% ended up closer to 7%.
This despite all the ‘professional’ opinions (from lawyers, property professionals etc..) that the pitch had cited at the start.
The sting in the tail is that when you’re a retail investor, sh*t falls down. It’s not the platform that’s at the bottom of the totem pole. It’s you.
The platform’s banked its upfront upside. It’s been paid all its administrative fees. All it’s got to lose is its carry fee. That’s the fee they get if things go as well as, or even better than planned. Think of it like a performance bonus.
The platform’s banked its upfront upside. It’s been paid all its administrative fees. All it’s got to lose is its carry fee. That’s the fee they get if things go as well as, or even better than planned. Think of it like a performance bonus.
But let’s face it. Things don’t always go to plan. And when it hits the fan, the only one losing…is you. Because here’s the thing about being an indirect, retail investor. You’re too small to matter. In the cascading waterfall of profit distribution, you’re last in the queue.
Let’s Wrap This Up
So, is real estate crowdfunding a good investment?
If you want to diversify your portfolio. Get in on property deals you otherwise can’t access. Put smalls sums of capital to work. Then sure. Give it a go.
BUT…read up. Know who you’re investing through and the conditions of your investment. Be aware that the platform you’re investing through is carrying little or no risk on the trade. And that they will make more profit from your money, than you will.
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