For a few ambitious real estate professionals, the burst bubble of 2007 was not a disaster, but an opportunity.
“The world started to change in 2007,” recalled Joy Hou. “I had a young child, and had to ask myself: am I better off with my current job, knowing that the market isn’t coming back anytime soon?”
She resigned from her position as a director at Barclays’ U.S. Real Estate Capital Markets Group in New York in 2008. And, after a real estate career spanning 25 years, Hou co-founded the tech startup Metis, an online platform that stores information on properties and deals, in 2009.
Hou is one of a handful of real estate professionals turned tech entrepreneurs in the wake of the Lehman collapse. If successful, their companies could jumpstart the sector’s second tech revolution.
Websites like Propertyshark, Trulia and Zillow — founded between 2003 and 2006 — transformed the way buyers look for properties. But technological progress has done too little to improve the way brokers, banks and appraisers work — at least according to a new brand of web entrepreneurs.
By bringing new technologies into the work of real estate professionals, companies like Metis and Compstak hope to revolutionize the industry once again. When the housing bubble burst, Hou realized not only that she wanted to change her life, but also that the real estate sector had to change the way it handles information. “We looked at the banking distress as something we want to tackle,” she said. “Banks needed to get a better handle on their portfolio. The credibility of data was not great.”
Hou said that a lack of accessible information on mortgages was a big reason for the financial crisis — a flaw she wants to solve through Metis, co-founded with Floyd Kephart. The platform allows real estate and financial professionals to store information on a property online, ideally throughout its entire life cycle.
For example, a Metis site for a mortgage portfolio would show when each mortgage was signed, information on each borrower, information on each property and whether a mortgage is performing or not. The information can be constantly updated, and an asset’s manager can choose how much of it is visible, and to whom — much like Facebook. “I remember the many late nights I pulled just to get the information ready to make decisions,” Hou said, referring to her work pre-2008. With all relevant information in one place, there would ideally be no more need to request data from different lawyers or brokers.
Metis, officially launched in September, hopes to give appraisers, brokers and investors easier and faster access to information on an asset.
Compstak, an online platform for lease comps officially launched in January 2012, has a very similar business model. Its co-founder and CEO Michael Mandel said that easier access to comps through Compstak saves appraisers time and allows brokers to use data to better negotiate on behalf of clients.
The 31-year-old, who worked as a broker for Grubb & Ellis for more than five years, had the idea for Compstak in 2010. A graduate of Babson College — his BA in Business had a specialization in entrepreneurship — Mandel said he always wanted to start a business.
Other recent tech startups include Honest Building – basically a social network for developers, architects and engineers.
As exciting as running a startup may be, it’s a risky business. When former New York broker Jonas Rudofsky founded Mighty Map in 2001, he was convinced that the website showing information on New York’s buildings on an interactive map would be the next big thing. But in 2009, he had to shut the project down.
“I had a good time doing it, but it ruined me financially,” said Rudofsky. Still, he believes that technology is the way forward for the real estate industry. “I still harbor tech ambitions,” he said. “There’s just a need for people with knowledge of the industry to create tech products.”
“There’s a long way to go for technology in the commercial real estate world. It is far behind compared to other industries,” said Michael Mandel of Compstak. He added that technology should play a much greater role in the sector, given the amount of capital involved. “Brokers have always relied on their relationships and there has been less of a focus on metrics and performance,” said Mandel. As far as he is concerned, this should change soon.
Mandel concedes that he would probably be making more money today if he had stayed a broker. “Whenever I see a lease comp for tenants or landlords that I used to represent, I add up the commission in my head,” he said with a laugh. But when asked if he ever regrets his decision, he answered: “not for a second.”