When you hear words like “machine learning” and “artificial intelligence,” you might think more about algorithms and search bots than you do about real estate. Prepare to rethink that after you learn what the leadership team at Entera is doing.
To Entera, the future of real estate revolves around investor access to information—and that means combining AI, machine learning, one of the nation’s biggest residential real estate databases and the human element into one comprehensive buyers’ platform that ultimately serves everyone involved in any real estate investment.
Martin Kay, co-founder and CEO of Entera, described the platform as a backbone that pulls all the strategic components of real estate investing together.
“We…provide our clients in residential real estate with an AI-powered buyers platform that helps them scale their capabilities, control their outcomes and drive returns all in one place,” Kay said.
Kay and Entera’s other two co-founders, Gregory Morrison (CTO) and Robert Salmons (vice president of brokerage), work primarily with institutional and midsize professional investors and real estate funds that buy between 100 and 10,000 or more homes each year. These investors are already dedicated to adopting the innovative technology necessary to find and buy more properties, make better decisions and become more competitive in the increasingly tight real estate market.
“Our clients want to find and buy the best homes, scale their capabilities, control their outcomes and drive returns,” Kay said. “We apply technology, real-time data and an on-demand network to the investing process to create a platform that accomplishes this all
in one place.”
Because efficiency is integral to ongoing growth and success in real estate, that element of consolidation is key, Kay believes, to a successful scaling process for investors.
However, those investors are not “cookie-cutter” in nature by any means. Each client leverages the Entera platform in unique ways to accomplish their specific goals.
“We present a powerful combination to our clients, and they leverage these tools in highly specific ways that could not take place if they were not able to access all of these resources and data in one place,” Kay said.
Profitability and Scale
According to Kay, Entera excels in the real-estate platform space because the company’s three co-founders integrated three distinct and vitally important components into the fabric of the platform at founding:
- Property source aggregation and automated discovery. The platform aggregates real estate from dozens of unique on- and off-market sources and matches the right properties to the buyer’s unique investment thesis.
- Comprehensive market information and analysis fueled by AI and machine learning. Kay said Entera may be explained simply as the “Bloomberg of Real Estate,” meaning it offers professional-grade decision tools and local on-demand real estate experts to determine the right home and offer for each client.
- Full-service transaction services. In addition to AI and machine learning, Entera’s human element is dedicated to making sure transactions move smoothly from beginning to end. On-demand local and centralized transactional services “make investors more capable,” Kay said.
Harnessing Data and Details
Thanks to powerful data integration technology, Entera’s discovery engine has access to roughly 215,000 on- and off-market properties available for purchase across the 14 markets it serves. That number might seem overwhelming, even to an institutional investor. But Entera’s machine-learning technology can customize “short lists” of properties optimized for individual investors’ requirements and already vetted for a high likelihood of success based on the investor’s past actions as well as the market data available.
“We have been successful at quantifying qualitative investment criteria like ‘family-friendly,’ ‘millennial-friendly’ or ‘crime-ridden,’ and combining that with information about construction costs, renovation risks, tenant demand and geographic appeal, both present and future,” Kay said. “Then, we consolidate all our information about the properties in our system with our information about the investor’s wants, needs and capabilities. At that point, it is just a question of making a match between properties and investors.”
For example, in Atlanta, Georgia, Entera has about 38,000 on- and off-market properties available for purchase. Kay said that on any given day, Entera can find the 10 properties that fit the exact ‘buybox’ (yield, tenant profile, location, home characteristics) of any potential client in a manner of seconds.
“Our system runs 24/7, and it is smart,” Kay said. “The platform uses advanced machine-learning technology to interpret how the client interacts with real estate and refine recommendations for future deals.”
This means that a client who has a history of loving certain types of neighborhoods, fighting certain types of comp values or finding rehab budgets to be “too high” for them to buy will soon find that the lists of properties they receive factor these preferences and behaviors into the equation.
“At that point, it is just a question of making a match between properties and investors,” Kay said.
The Entera philosophy places heavy emphasis on matching the right investor to the right property in order to create a living environment that is conducive to long-term residence. The co-founders believe that optimizing investors’ ability to give residents “the home they want” is integral to long-term, large-scale investing.
“At the end of the day, what we care about most are the residents living in the home,” Kay said. “The place you call home really matters. When investors give residents the home they want, residents love where they live, stay for a long time and pay their rent.”
The co-founders designed Entera to point investors to the right neighborhoods and properties
that exhibit growing demand compatible with their investment strategies. This means helping clients understand how to rehab; how to charge competitive, profitable rents; and what amenities and other home features will attract the residents who are the best fit for an investment property.
Releasing and Realizing Hidden Potential
Entera’s focus on the individual components that make up the biggest and largest-scale real estate strategies in the sector is the key to its clients’ successes. Those successes often come in areas that most investors would likely overlook as too dangerous, too blighted or just too far gone.
“We have clients who will move into almost entirely vacant, dilapidated neighborhoods and completely change the entire market because our technology enabled them to see, from a scientific point of view, what was possible in those areas,” Kay said.
Kay explained that certain clients with the wherewithal to make sizable investments in renovation, rehab, development—and even demolition and infill—use the Entera platform to identify markets in which demand could exist if the product were present to fill that demand.
“Our AI identifies neighborhoods and markets that would be particularly attractive if there were housing supply of a certain type in that area. Then the investor evaluates the cost of creating that housing and makes a decision,” Kay said.
In one instance, an Entera client acquired, rehabbed and flipped about five dozen homes in a single neighborhood thanks to a suggestion, insights and guidance from Entera’s machine
“It did not necessarily look like somewhere you would normally go to invest a high volume of properties, but the machine crunched the numbers and we found some amazing gems,” Kay said. “We were able to run progressions and regressions on the neighborhood to accurately predict not just what kind of finishes were needed in the houses, but also what type of resident—buyers in this case instead of tenants—we should seek as the homes were completed.”
SFR 3.0: Fueling Growth By Refining Focus
Interestingly, Entera recently announced it would be expanding its services to support real estate funds and operators interested in investing in single-family rentals that do not want to build out their operations from scratch. Given that most platforms dedicate most of their growth-oriented energy toward attracting “big fish” like Entera’s institutional investor clients, it surprised many in the industry when the company announced its expansion initiative.
Kay, however, believes the move just makes good sense. He called the decision an “asset-light, real estate-as-a-service solution” for these funds and operators. He said the service will allow these clients to use the Entera platform to not only find, choose and buy the best real estate, but also to integrate external construction, property management and other services in a highly scalable, cost-effective, returns-driven solution.
“The best thing about this expansion, in our opinion, is that investors who haven’t built out all the infrastructure internally like the largest operators in the space (e.g., those who own 15,000-plus homes) are now able to use Entera’s institutional grade infrastructure, partners and systems for their own investing,” Kay said. “These funds historically had very limited exposure to the single-family rental space: only opportunistically buying portfolios or investing in another fund.”
Entera leadership hopes the pending expansion will “open up the residential real estate sector to a more diverse array of investors and investing entities” by eliminating much of the prohibitive upfront costs associated with setting up infrastructure and scaling that infrastructure after setup. This will mean, they believe, that funds will be able to dedicate more capital to acquisitions, improvements and generating returns, which will serve both investors and project managers well.
“For example, real estate funds and syndication managers can now pursue a broader investment mandate to include single-family rentals with the right return profile because they don’t have the hurdle of building out a brokerage, construction and property management companies or any of the other service-related systems required for large-scale real estate operations,” Kay said. “We like to think of this as SFR 3.0.”
He said that bringing transparency, insight, control and scale to the single-family residential space in a way “never seen before” will be a benefit to both the real estate investors and the residents they serve. “We are very proud to contribute to the continued robust growth of single-family rental as an institutional asset class, and it is a goal we are thrilled to see
coming to fruition.”
Sidebar: Entera’s 13 Major Markets
The Entera platform provides insight and access into on- and off-market properties in 13 major markets. The company recently expanded into Sacramento, California, and also operates in:
- Las Vegas, Nevada
- Phoenix, Arizona
- Denver, Colorado
- Dallas, Texas
- Houston, Texas
- Nashville, Tennessee
- Atlanta, Georgia
- Pittsburgh, Pennsylvania
- Charlotte, North Carolina
- Raleigh-Durham, North Carolina
- Jacksonville, Florida
- Orlando, Florida
- Tampa, Florida
Sidebar: Market Access Could Make or Break Investors if the Economy Softens
Most economic predictions made right now come with a huge caveat about the as yet unknown results of the 2020 U.S. presidential election. Even so, most economists do agree that at some point in the next 12 to 24 months, the national economy is likely to soften. When that happens, most real estate investors expect opportunities in previously hyper-competitive markets to emerge—at least for those who are prepared.
Martin Kay, co-founder and CEO of Entera, believes his company’s real estate platform is the perfect entry point for investors who are looking to play bigger in residential real estate. In the event of an economic correction, the large-scale and institutional investor involvement can provide a safety net to housing markets by insulating the broader market from the fallout of a downswing.
“There will be entry points when the economy softens that will be very good for investors already using a platform like ours to identify opportunities, strategies and potential in specific markets and for specific resident populations in those markets,” Kay explained. “The ability to quickly become knowledgeable and operationally efficient in a market will be important during that time.”
He also predicted an economic shift will likely be positive for real estate investors who own or are acquiring rental properties that attract and maintain longtime residents.
“We are already seeing a tremendous demand for really high-quality rental properties, and we expect tremendous prospects for single-family rental, affordable fix-and-flip and infill developments for both tenants and homeowners,” Kay said.
Sidebar: Entera by the Numbers
˜215,000 on- and off-market single-family homes across 13 markets have been analyzed and underwritten by Entera and are currently available for purchase
20 major markets in which Entera intends to service investors by the end of 2020
˜38,000 on- and off-market single-family homes have been analyzed, underwritten and are available for purchase in the Atlanta, Georgia, area.