Idea: BestUse – analyze real estate through the lens of local zoning and code to determine best use, and identify underused properties
MVP: The process of identifying promising opportunities in real estate is largely a manual one today. Real estate investors and agents scour listings and property records to determine where opportunities to convert an old office into multifamily housing might exist, for example. BestUse would automate this process by using machine learning to compare zoning laws and potential uses to identify underutilized properties. A minimum viable product would involve targeting a particular metro area to analyze local zoning and building rules there in detail.
Market: BestUse has a likely path to market very similar to HiddenLevers (my current concern). The advantage of selling high value software in a niche market is that initial clients can be acquired very quickly after alpha release – the moment HiddenLevers portfolio stress testing worked in a minimal way for a professional audience, client acquisition amongst investment advisors began. With BestUse, real estate investors might quickly embrace a technology that enables them to identify “diamonds-in-the-rough”, properties currently languishing in a sub-optimal use.
The downside with this approach – the total addressable market tends to be limited: if real estate investors are willing to spend four to five figures per year for this capability, the total addressable market might be in the billion dollar range – enough to build a viable business, but not enough for a highly scalable growth path.
Idea Score (0-10 scale, up to 2 points per question): 6 points
Feasibility of MVP / Market Entry: 2
An MVP for BestUse would require a non-trivial initial effort to acquire needed real estate data and to plug in the appropriate analytics on local real estate codes. Actual market entry would likely follow a pattern similar to that for other niche analytics products – get in the hands of paying beta customers and iterate. This is a proven model with much lower risk than launching b2c oriented products.
Revenue Market Size or Eyeballs: 1
If the market is confined to analytics tools used by the commercial real estate industry, then the total addressable market is likely to be subscale (no unicorns here). A high margin $10M revenue business is possible, but getting past this to the next level is a key concern. Since the same sort of analytics is used in commercial real estate appraisal (an $8 billion market), adding this and related capabilities might push the scale a bit – but it’s not clear how to get to a $10B addressable market.
In a Growing Market? 0.5
The real industry is very mature, with growth rates unlikely to exceed the overall economy.
Difficulty, Barriers to Entry, and Competition 1.5
BestUse requires a combination of knowledge of real estate investing with technical modeling capabilities, providing a modest barrier to entry. The need to analyze zoning rules further raises the bar here.
Startups have started to appear in this space – Skyline is using similar analytics to partner invest in properties, an approach which might lead to greater overall market potential. Bowery Valuation is focused on automating real estate appraisals, a naturally related market.
Riding Hype or a Trend? 1
Applying advanced analytics and machine learning to any niche generates interest at the moment – but this is not a particularly innovative or new use case.