The implementation of artificial intelligence in different business sectors has recently sparked contentious debate.
In May 2023, the CMA (Competition and Markets Authority) launched a review of the AI market to ensure that its benefits are equally spread across all UK sectors.
Currently, concerns surrounding AI’s effect on global industries are rife, with many experts suggesting that the continued development of the technology could severely impact decision-making.
Margrethe Vestager, EU Commissioner for Competition, believes the potential to amplify bias or discrimination is the “most pressing concern” surrounding the rapid growth of AI.
Specifically, Vestager highlighted that the use of technology by banks to approve mortgages or loans could be the most significant risk.
However, many have also pointed out the effectiveness of artificial intelligence as a tool in conjunction with the standard human workforce.
It has been suggested that a collaborative partnership between the two could enhance the overall workflow of various sectors, with a human worker’s leadership, teamwork, creativity, and social skills, and the speed, scalability, and quantitative capabilities of an Artificial Intelligence offering a massively optimised output.
The Benefits of Using AI in Property Investment
Something that comes naturally to human beings (i.e., irony or sarcasm) can be too complex for a machine to understand.
Likewise, something that a machine would find effortless (shifting through massive quantities of data, for example) could be a massive menial task, or even impossible, for a human to accomplish.
In the real estate industry, the benefits of applying AI towards sectors like buy-to-let investment have been as equally contested.
Is it possible to utilise Artificial Intelligence as a tool to maximise property investment?
Market Analysis
As mentioned, one of the strengths of AI is its ability to shift through massive quantities of data.
An investor that can utilise this to their advantage will likely have an invaluable tool added to their arsenal. With the right algorithm, an AI will be able to parse and analyse huge amounts of property data in order to make predictions towards the direction of the market, as well as projected rental/house prices and demand for specific property types.
Investors can use this information to guide their purchases, as well as help plan an exit strategy (if necessary).
For example, if the data collected suggests an influx in demand for young professionals seeking city apartments in the UK, a buyer could target their investments to enrich their portfolio.
Similarly, suppose data finds a market decline for a specific property investment type. In that case, an investor will be able to steer clear and find alternatives or wait for the situation to improve.
Streamlined Property Management
The management side of property investment can often be a hassle for investors.
Whilst many opt to employ the use of a property management company – who can take on the bulk of these responsibilities on behalf of the investor – those that solely take on the duties of a landlord can often become overwhelmed.
Once an investor has purchased a property and filled it with tenants, it can be a struggle to essentially balance a second job on top of the day-to-day duties of their typical routine.
In particular, dealing with any crucial repairs can take a massive amount of time – especially as it often comes without pre-warning.
Again, using predictive analysis, an AI could feasibly predict when home repairs would be required, proactively schedule maintenance tasks ahead of time to minimise downtime, and ensure that an investor is making full use of their time.
The implementation of this could see increases in tenant and landlord satisfaction alike, as well as an increase in the overall attractiveness of the property in general.
Like how it would track the market, an AI would analyse data from sources like property management systems and building surveyors to identify any issues before they become major (and costly) structural issues in the future.
Fraud Detection
Utilising AI against fraud could potentially play a crucial role in solidifying the integrity and security of property investment.
Purchasing a property involves the transfer of large sums of money and personal information. The major downside, of course, is that this typically opens an investor up to fraud and scams.
Utilising machine learning against fraud is an emerging but potentially massive tool in the fight against this.
Detection tools like these can once again waft through huge amounts of data and identify the most suspicious patterns or anomalies that may indicate fraudulent activity.
Currently, most machine learning algorithms can achieve up to 96% accuracy in reducing fraud for eCommerce businesses.
However, the more data you give to an AI, the more trained it can become, which means that this can only improve with continued development.
Investors can use this technology to monitor transactions in real-time and receive instant alerts if/when it detects potential fraud, allowing them to take prompt action and prevent any significant financial losses.
Overall, fraud detection can offer an additional layer of security for investors, improving the safety and credibility of the property sector as a whole.
Investors can also protect their interests and maintain the integrity of their investments, ensuring long-term success and growth.
Automation & Energy Bills
Utility costs, especially in the UK, can be exceptionally high depending on the property type.
For example, Student properties, or HMOs (House in Multiple Occupation), can see substantial energy bills due to the number of people living there.
Two ways to reduce these costs include installing motion sensors in communal spaces or setting a timer on the boiler.
However, introducing AI into a residence could reduce costs even further, according to RWinvest.
An AI could specifically identify the precise patterns of tenants within a property, including any arrivals or departures, and deal with any lights or appliances mistakenly left plugged in. An AI could ensure that TVs are entirely turned off whilst the residence is empty and return them to standby mode when they are anticipated to return.
Energy bills can ramp up if energy wastage is not managed correctly, so implementing AI in this way could result in improved experiences for tenants, cheaper costs, and better environmental effects for landlords.
Tenant Screening
AI can thoroughly screen potential tenants by – once again – analysing various data points, such as credit history, criminal background, and rental history.
Property owners can use this information to make informed decisions about who to rent their properties to and reduce the risk of wasting their time or having to deal with significant issues like late or non-payments.
The Downsides of Using AI in Property Investment
While there are undoubtedly huge benefits to utilising AI in property investment, especially in conjunction with a human interface, some risks remain to consider.
Quality of Data
AI is only as good as the data it’s given. If the data is biased, falsified, or incomplete, the findings produced may not be as accurate – and, therefore, could potentially damage an investor.
The amount of data that a system deals with can also be difficult to keep up with, meaning that it could become more time-consuming to monitor in the long run.
Privacy
While the appeal of AI tenant screening is apparent, it could raise some privacy issues that some may take issue with.
The kind of data that the software would deal with would be incredibly sensitive – including things like credit histories, criminal records, and individual renting histories.
An investor would have to ensure that all this information is collected in an ethical and legally-sound manner; otherwise, tenants would (and should) take action to defend their privacy rights.
Overreliance
If used correctly, Artificial Intelligence is an immensely valuable tool.
However, it is important to remember that it is an emerging technology, and any overreliance on it could be detrimental in the long term.
Despite many concerns surrounding AI and the end of humanity itself, the technology is very much still in its infancy.
Ask anyone who has even played around with services like ChatGPT, and there will be countless stories about how a simple request has been misinterpreted.
It’s understandable, then, how investors may be concerned about putting their faith in similar systems.
Artificial intelligence is undoubtedly a powerful tool. With its ability to process and analyse vast quantities of data, it makes sense how systems such as these could transform the real estate investment sector for the better.
By streamlining many of the time-consuming processes that many face when engaging with the market, investors would be able to maximise both their time and their portfolio.
However, with the technology still in its early stages, it’s essential that investors do not become too dependent on it.
