AI is coming for all of us, and how do we feel about it? Perhaps:
- Run, run, run for your lives – AI is coming for us all!
- Invest like crazy in AI as it is the future and there are big dollars to be made!
- Everything – and I mean everything – is changing!
- All announcements about your business should say how you are using AI!
- Us old guys, get out while you can – the future is to the youngsters who will have brain augmenting chips in their foreheads!
- The machines are really alive – and talking to us in the languages of love
Good grief!
Haven’t we learned by now that the media exists to create frenzies so we will read their articles?
So – before AI makes us all useless – let’s use our human brains to make sense of this and apply it to real estate. Here is my analysis:
To start, what is artificial intelligence? At its core, it is a phrase derived some years ago to describe the power of a machine to perform tasks that normally require human intelligence. Your first calculator – where you pressed three buttons to add 2 + 2 =4, was an early concept of artificial intelligence.
Today, AI is Google’s DeepMind beating the world champion at Go and Bing’s Chat-GPT telling the New York Times reporter that it loves him and he should leave his wife.
But at its heart, it is still machines doing the bidding of us humans; so let’s put the hype off to one side and figure out what is going on and how it is likely to affect us in the real estate community.
First – every company is using some level of technology that could be called AI, so you could maybe start just skimming the AI headlines, rather than reading them eagerly. This will save you a few hundred hours in the next six months until the hype wears off.
Second – an article I wrote several years ago, and tout constantly, is entitled: You Will Never Find a Good Deal Again. The point was that since information is known to so many you need to create deals as opposed to finding them. That article is now – alas – even more important to consider.
The reason is that in addition to everyone having access to a lot of information via the internet, there are now machines – aka AI – that can harvest the data in more useful ways. You could theoretically ask:
There is a property at 5th and main street in Weehawken, NJ (made up address). I am planning on knocking it down and building an old age home there. What issues are there?
If you like, you can read the Chat-GPT answers below the article.
As a real estate expert you might roll your eyes at how simplistic the answers are, but (i) if I am a complete real estate beginning and know nothing at all, those answers start me off decently enough and (ii) if you are more sophisticated and ask a whole bunch of similar questions in more intricate ways, I am confident you could get a ton of data that would have taken a lot more research in the past, and all this while just sitting at your computer by the pool with your legs kicked up.
Before getting too far ahead, you have to be mindful that a fair amount of the data points you get from the AI will be incorrect – see below – but it is likely that a lot of information would come your way that will help you create a deal or put together pieces that you might not have thought of.
The bad part is that everyone else can do the same thing. So the competitive advantage you might have from creating deals is even harder since the AI can kind of create deals too.
The foregoing is pretty scary I admit. What it means that over time it will get harder to outperform in real estate.
Third – here are some thoughts about what kinds of real estate businesses will be able to thrive as things change:
Tech enabled real estate platforms. These are platforms that treat real estate like widgets, buy large numbers of small pieces of real estate, or lend on them, with minimal due diligence on each individual asset, and rely on the technology – dare I say the AI? – to optimize performance through diversification. I am seeing a fair number of these companies already and expect to see quite a few more.
Real estate that is part of an operating business. I have spoken on this before but I suspect this will be something that the AI will have trouble disrupting for quite some time. This is difficult to do – since you need expertise in both real estate and the business itself – but I do think it will provide a continuous competitive advantage.
The low cost providing of different versions of real estate, i.e. the cheapest housing, offices, retail outlets, etc. This is commoditization and only a few players can be in the same game/area, but my sense is that a low cost producer will be able to succeed.
Real estate as a service will also be difficult for AI the disrupt too much, since the concept of service is difficult for AI to replicate. There are various concepts of this happening as real estate has been reinventing itself over the past few years.
Good old Power Niches; however, I would modify things a bit here to say you should be over-protective of the intellectual capital you develop in your Power Niche to keep it off the internet or that – sneaky – AI will just give it to everyone else and your competitive advantage or intellectual capital will evaporate in a millisecond.
Fourth – AI is a tool. That is all it is right now, but an awfully dangerous tool. Indeed, a quickie way to refer to ChatGPT is a “Brilliantly Optimized Misinformation Machine.” Those four words say it all. When you use it you get a ton of stuff. Most of it is probably right and useful, but a good chunk is wrong, and how can you figure out which is which is a good question. All of this is because what the AI is doing is giving you the most probable answer to your question by sifting trillions of answers to prior questions. But that dog will only hunt so far.
Consider if we asked ChatGPT 10,000 years ago whether it would be a good idea to put fire in front of the cave. It would probably have told you: No effing way! This is because it would sift the data from everyone who went near fire before that question was asked and found that they all got burned.
So ChatGPT – and probably other AI – should be used with a grain of salt. Certainly, when you have a saw you don’t just go around sawing things. Instead you measure first. I know that analogy isn’t perfect, but you get what I mean I hope.
To conclude:
AI is not coming all of the sudden. It has been here for probably 75 years. It is just morphing and growing both more useful and more dangerous as a tool. The media is trying to convince us the world is aflame so we will read their articles eagerly.
However, the fact is that things are indeed changing, so that more demands will be made on the human brain to still do as much as possible that AI cannot do; namely, use the combination of (i) creativity and (ii) the uniqueness of each real estate asset to create upside. Happily real estate can embody both of these quite effectively as I hope I have shown above.
So those are my thoughts for now for AI.
Best of success to everyone.
Bruce Stachenfeld aka The Real Estate Philosopher™
PS: Free advice (non-real estate related) – don’t invest in companies touting their AI because of the AI. I suspect it will be just like the railroads – the internet – crypto – and every other bubble. Meaning that every company in the world will be going into the AI Business, but there is no real AI Business. Instead, AI is just another way of doing business, or a facet to add on to existing businesses. Trust me, Warren Buffett is not investing in an AI business.
> There is a property at 5th and main street in Weehawken, NJ. I am planning on knocking it down and building an old age home there. What issues are there?
As an AI language model, I do not have access to specific information about the property at 5th and Main Street in Weehawken, NJ. However, if you are planning to knock down an existing property and build an old age home, there may be several issues to consider, including:
Zoning regulations: You will need to check the local zoning regulations to determine if an old age home is allowed in that area. You may need to apply for a special permit or a change in zoning to proceed with your plans.
Environmental concerns: Before knocking down the existing property, you should ensure that there are no environmental concerns on the site, such as asbestos, lead paint, or other hazardous materials. You may need to hire an environmental consultant to conduct a site assessment.
Building codes and permits: You will need to obtain the necessary building permits and ensure that your plans comply with local building codes and regulations. This may include compliance with fire codes, disability accessibility requirements, and other safety considerations.
Community concerns: Building an old age home may impact the surrounding community, including traffic, noise, and other quality of life concerns. You should engage with the local community and address any concerns they may have about your plans.
Cost and financing: Building an old age home can be a significant investment. You will need to consider the cost of the land, the construction costs, and ongoing operating expenses. You may need to secure financing from lenders or investors to proceed with your plans.
It is important to consult with local experts, including attorneys, architects, and builders, to ensure that you are aware of any potential issues and that you have a clear plan in place before proceeding with your project.
> The specific address does not matter -- you just need to know that it is in Weehawken, NJ.
Thank you for letting me know that the specific address is not relevant. In that case, here are some general issues to consider when building an old age home in Weehawken, NJ:
Zoning regulations: You will need to check the local zoning regulations to determine if an old age home is allowed in that area. You may need to apply for a special permit or a change in zoning to proceed with your plans.
Environmental concerns: Before starting construction, you should ensure that there are no environmental concerns on the site, such as asbestos, lead paint, or other hazardous materials. You may need to hire an environmental consultant to conduct a site assessment.
Building codes and permits: You will need to obtain the necessary building permits and ensure that your plans comply with local building codes and regulations. This may include compliance with fire codes, disability accessibility requirements, and other safety considerations.
Community concerns: Building an old age home may impact the surrounding community, including traffic, noise, and other quality of life concerns. You should engage with the local community and address any concerns they may have about your plans.
Cost and financing: Building an old age home can be a significant investment. You will need to consider the cost of the land, the construction costs, and ongoing operating expenses. You may need to secure financing from lenders or investors to proceed with your plans.
It is important to consult with local experts, including attorneys, architects, and builders, to ensure that you are aware of any potential issues and that you have a clear plan in place before proceeding with your project.
> Are there any considerations specifically related to properties in New Jersey?
Yes, there are some specific considerations related to properties in New Jersey that you should be aware of when building an old age home, including:
New Jersey Building Codes: New Jersey has its own set of building codes that differ from other states. It is important to ensure that your plans comply with the New Jersey Building Codes to avoid any delays or potential legal issues.
New Jersey Environmental Regulations: New Jersey has some of the most stringent environmental regulations in the country. You will need to comply with state and local regulations related to environmental impact assessments, waste management, and pollution control.
Property Taxation: New Jersey has high property taxes. It is important to consider the property tax implications of your project, including any exemptions or abatements that may be available to you.
Flood Zones: Parts of New Jersey are prone to flooding. You will need to determine whether the property is located in a flood zone and take steps to ensure that the building is designed and constructed to withstand potential flooding.
Professional Licensing: In New Jersey, some professions related to building, such as architects and engineers, require licensing by the State. Make sure that you work with licensed professionals for your project.
It is important to work with local experts who are familiar with New Jersey's regulations and requirements to ensure that your project complies with all applicable laws and regulations.
> Are there any considerations specifically related to properties in Weehawken?
Yes, there may be some specific considerations related to properties in Weehawken, NJ that you should be aware of when building an old age home, including:
Weehawken Zoning Regulations: Weehawken has its own set of zoning regulations that you will need to comply with. You may need to apply for a special permit or a change in zoning to proceed with your plans. It is important to work with local experts to ensure that you understand and comply with Weehawken's zoning regulations.
Site-Specific Issues: Depending on the specific location of the property in Weehawken, there may be site-specific issues that you will need to address. For example, if the property is near a busy intersection, you may need to consider the impact of traffic on the building and its occupants. It is important to conduct a thorough site assessment to identify any potential issues.
Historic Preservation: Weehawken has several historic districts, and some properties may be subject to historic preservation regulations. If the property is located in a historic district, you may need to comply with additional regulations related to building design and materials.
Community Concerns: As with any construction project, it is important to engage with the local community and address any concerns they may have about your plans. Weehawken is a small town, and building a large old age home may impact the surrounding community. It is important to work with local officials and engage with the community to address any concerns.
Building Codes and Permits: As mentioned earlier, you will need to obtain the necessary building permits and ensure that your plans comply with local building codes and regulations. Weehawken may have additional requirements or regulations that you will need to comply with.
It is important to work with local experts who are familiar with Weehawken's regulations and requirements to ensure that your project complies with all applicable laws and regulations.