Discover 4 ways to use AI (Artificial Intelligence) in commercial real estate investing that will make you faster, more efficient and give you an edge over your competition.
Why Use AI in Commercial Real Estate Investing?
AI technology is a hot topic these days, but whether you love it or hate, most of us are already using AI daily. Do you have an iPhone and use Siri? What about an Android device with Google Assistant, or Amazon’s Alexa? And of course, we are all familiar with Tesla autopilot, or self-driving cars. All these technologies are powered by AI. This same AI technology can be used in commercial real estate to make you faster, better, and more efficient. By using these AI tools, you will gain an advantage over investors who are not using AI simply because AI gives you access to crucial information at incredible speeds allowing you to solve commercial real estate problems quickly.
For example, when you search Google on a specific commercial real estate topic, it will give you an answer, but you must scroll through five or six pages of search results and then pull the information together yourself. But when you use AI, it will compile the results in a usable list for you and it does it at lightning speed.
How to Use AI Platforms
The AI platform that I use is Google’s AI platform named BARD. ChatGPT is another platform that I use but they charge a fee to use the ChatGPT Plus Service. Since Google’s BARD is free to use, even for highly technical questions useful for commercial real estate investing, it is a great tool for commercial real estate investing. You simply search your web browser for BARD, click on it, and then sign up. Or you can sign in with your Google Account. After you sign into BARD, there is a window that will appear where you can ask your questions. You simply enter your questions, hit return, and Bard will begin finding information for you.
4 Ways to Use AI in Commercial Real Estate
1. Use AI for Faster Market Research
Using AI to become faster, better, and more efficient in your commercial estate investing begins with market research. In our Protege Program, we teach our Proteges how to locate the best markets to invest in and how to make smart investment decisions. Part of that used to involve subscribing to expensive services, but now we can use AI to help us make these decisions. Let’s say you are considering investing in California, and you need to know which cities are the best for investing in multifamily real estate. To find out, we need to ask BARD specific questions. It will take about one minute to answer each one. That’s minutes for market research that would have taken you an entire day!
5 Commercial Real Estate Questions to Ask BARD
When we ask BARD these five questions, we can learn important current and future trends which are extremely helpful when deciding which market to invest in.
- Which cities in California have the highest rent growth this year? This is crucial information and the first place to start when you are deciding where to invest.
- Which cities in California will have the highest rent growth next year?
- Which cities in California have the most construction starts? Many investors haven’t considered this, but the answer, both positive and negative, will help you make smart multifamily investing decisions. For example, if BARD tells you that there are a lot of new apartment buildings being built in an area, you may consider that a negative and too much competition. On the other hand, it could be a positive because banks and economists will consider this a healthier economy.
- Which California cities have negative rent growth this year? If your area has negative rent growth and rents are dropping, that could mean the city isn’t growing and people are struggling to pay rent. Or you might discover the opposite. Both are valuable information to have when deciding where to invest in multifamily commercial real estate.
- Which California cities are losing the most jobs? If a city is losing jobs and has a negative rent growth, you will want to cross it off your list.
BARD can help you identify both positive and negative market trends quickly, without hours and hours of research. Whatever area you are investing in, BARD will give you fast results and key information for your market research.
BARD Can Help Determine Property Value
I started using BARD from day one when it was in the beta testing phase. In the beginning, I would enter questions about real estate, and nothing worked. But over the next few months, the results started to improve to the point that now BARD has become invaluable for my commercial real estate research. And every month moving forward, BARD just gets better and better. In fact, in just the last couple months, BARD has had a “breakthrough” and now you can use BARD to determine the value of a given property. To do this, you need to act like an appraiser, and find comparable properties in an area and find the market cap rate. In commercial real estate we call these the Comparable Sales Method and the Income Method.
In the past, finding sales comps and market cap rates was difficult to do, and expensive, because this data was held very close to the chest of companies like Cosar. They knew the value of this information and charged investors top dollar to provide it. Now it's available by simply using an AI tool like BARD. However, BARD needs very precise prompts to get this kind of information.
- Prompt 1: What is the sale price per unit for C-class multifamily in (insert city, state)?
- Prompt 2: What is the cap rate for C-class multifamily in (insert city, state)?
2. Use AI to Create Investor Presentations
The second way you can use AI is for creating investor presentations. Let’s assume that you have used BARD to find the the best area to invest in, and you have made an offer on a multifamily investment, like an apartment building. Your contract has been accepted and now you need to get financing for the deal. You can use AI to structure a presentation for you, in what I call Fast Investor Assistance.
Hammering out an investor presentation can take a long time, or it can be costly to pay someone else to do it for you. Now, you can use BARD to help you. Simply type “create a multifamily investor presentation” into the BARD prompt window and hit return. BARD will produce a format that will include a title for your investment, the multifamily market your property is in, benefits to multifamily investing, multifamily investment strategies, a case study if you have one, and a conclusion. All you need to do is fill in the blanks. Of course, filling in the blanks can be a challenge, and this is yet another reason to have an experienced mentor to guide you through these steps.
You can also use BARD to help you with presenting your deal to potential investors. Just type in the prompt, “create phone script for calling investors and asking for money, and BARD will produce a script with an introduction, a pitch, and a call to action. Again, we provide our Proteges with tips on how to make AI work well for their individual investment needs.
3. Use AI to Be More Efficient and Increase Cashflow
Now that we have covered how BARD can make quick work of deciding where to invest and with getting investors, what about after you own a commercial property? Can BARD help to make my property more efficient and increase my cash flow? Absolutely and here’s how:
You can use BARD as a tool to help you create a lease agreement clause. Let's say you own an apartment building, and you see an opportunity to raise the rents. You can use BRAD as a tool to help you create a lease agreement clause. This works when you already have a tenant who will be renewing a lease and you need to add something to the lease, like garage storage, use of parking spaces, or to begin billing back utilities to the tenant. Simply type in the prompt window “create a lease agreement clause.” BARD will create a detailed paragraph for you on all the particulars for the amount you will charge and the rules and regulations for use.
Disclaimer: Now, using BARD for legal agreements comes with a disclaimer. You are creating a legal agreement, and no AI, BARD included, is attorney approved. Which means you need legal advice for all legal agreements you use before you implement them. The advantage of using BARD is that it will cut down on the legal fees. Instead of having an attorney draw up the clauses from scratch, all they will need to do is look over the clauses BARD created and make the necessary changes. In this case time is money, so using BARD could save you hundreds of dollars.
4. Use AI for Smarter Operations
You can use AI to make you a better operator of your commercial property. For example, you can put this prompt into BARD: “create a list of multi-family expenses and their percentages.” In a minute or less, BARD will produce a list of expenses like property management, maintenance repairs, insurance, taxes, and supplies, what they should cost and their percentages compared against the income of the property. You can then take this list and compare it to a property you own or are considering buying. When you do this, you will gain insight into your expenses; are they too high, or too low? Again, using BARD like this is going to make you smarter.
A second use in your operations for BARD is to create a table for you of renovation costs. Ask BARD “how much will cost to renovate my one-bedroom multi-family unit”. If you use Google search for something like this, who knows what results you will get. But BARD will give you a table of kitchen renovation, bathroom renovation, flooring, lighting, and all the expense details. Now, of course, if you live in California versus some small Midwest town, cost will be different. But the flexibility of BARD is helpful here. Just ask it, “how much will it cost to renovate my one-bedroom unit in Cincinnati, Ohio or Dayton, Ohio or someplace in North Dakota?” And BARD will give you that cost, and then you can use this table to compare to contractor quotes to see if they are overcharging you or if their costs are in line with the average. That's just another way AI can be a tool to make you a better and more efficient investor.
Every Successful Investor Has a Mentor
Every successful commercial real estate investor has a mentor. Get your mentor here: Commercial Property Advisors Protege Program