As the influence of artificial intelligence (AI) grows, concerns about job displacement, particularly among lower and middle-income workers, are escalating. Critics argue that this trend will primarily benefit business owners, leaving many workers vulnerable. Billionaire investor Ray Dalio highlights a troubling statistic: approximately 60% of the American workforce struggles with literacy levels at or below the sixth grade, raising questions about their ability to thrive in a knowledge-based economy.
Compounding these worries, a report from J.P. Morgan identifies a concerning rise in unemployment rates among recent college graduates, alongside stagnation in job growth in sectors susceptible to AI automation. This situation prompts an examination of how real estate is faring in this evolving landscape.
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Evaluating AI’s impact on real estate
Real estate investing encompasses a wide array of niches, many of which remain largely insulated from the threat of AI replacement. For example, the intricate process of house flipping cannot be fully automated. This endeavor involves numerous steps, from coordinating bank inspections to managing various logistical details before a house can be successfully flipped.
The complexity of house flipping
Those involved in flipping houses understand that this business entails more than a simple transaction. While AI can assist with specific tasks, it cannot manage the entire process. House flippers must navigate numerous steps, whether they engage in this work full-time or as a side hustle. The BRRRR strategy, which stands for Buy, Rehab, Rent, Refinance, and Repeat, exemplifies how rental investors undertake similar processes, requiring a careful sequence of actions that AI cannot replicate.
Even when opting for turnkey rentals, investors face various tasks that necessitate human oversight, from securing financing to obtaining necessary permits. While AI tools may facilitate certain activities, rental investing is far from passive; anyone claiming otherwise likely has an agenda.
A closer look at wholesaling and land flipping
Wholesaling in the real estate sector generally involves fewer steps than flipping houses, yet it still relies heavily on human interaction. Successful wholesalers must evaluate properties, estimate repair costs, and negotiate with sellers to secure discounted prices. Moreover, establishing a trustworthy network of buyers is crucial for success in this model.
Similarly, land flipping can be somewhat automated due to its less hands-on nature, primarily focusing on paperwork rather than physical renovations. However, it remains a business that requires human decision-making and negotiation skills. While AI can streamline marketing and sales processes, the final decisions and human touch are paramount.
Passive investment opportunities in real estate
For those who prefer to avoid the rigorous demands of active real estate investing, passive investment strategies present an appealing alternative. Investors can partner with established real estate operators. For instance, a co-investing club may fund a series of house flips in exchange for a share of the profits, allowing members to invest without the burdens of day-to-day management.
This collaborative approach can extend to various real estate syndications. By pooling resources, investors can participate in larger projects, such as apartment complexes or commercial properties, with lower entry costs, often starting from contributions of $5,000 instead of the typical $50,000 to $100,000.
Recently, our club participated in a land flipping fund, where the operator manages around 50 parcels annually, maintaining an average hold time of 4.5 months. By raising private funds, he offers attractive returns, consistently providing a 16% yield through quarterly distributions.
The lasting value of real estate
Compounding these worries, a report from J.P. Morgan identifies a concerning rise in unemployment rates among recent college graduates, alongside stagnation in job growth in sectors susceptible to AI automation. This situation prompts an examination of how real estate is faring in this evolving landscape.0
Compounding these worries, a report from J.P. Morgan identifies a concerning rise in unemployment rates among recent college graduates, alongside stagnation in job growth in sectors susceptible to AI automation. This situation prompts an examination of how real estate is faring in this evolving landscape.1
Compounding these worries, a report from J.P. Morgan identifies a concerning rise in unemployment rates among recent college graduates, alongside stagnation in job growth in sectors susceptible to AI automation. This situation prompts an examination of how real estate is faring in this evolving landscape.2
