Currently Reading

Arx’s Approach to Underwriting Deals With AI


Arx’s Approach to Underwriting Deals With AI

Born out of frustration with time-consuming, inefficient deal sourcing, Tomas Garcia started Arx with his brother to speed the underwriting process and increase housing inventory

By Layne Deakins, Associate Editor June 1, 2023
Data points in AI-generated digital community
Arx employs artificial intelligence to locate, evaluate, and underwrite potential building projects within seconds to speed acquisition and development. | Image: killykoon / stock.adobe.com
This article first appeared in the May/June 2023 issue of Pro Builder.
Tomas Garcia headshot
Tomas Garcia
Co-founder and CEO

Tomas Garcia left his job as an investment banking analyst with Goldman Sachs to fix and flip homes with his brother, Hernan. Those experiences inspired them to create Arx, a platform that uses artificial intelligence (AI) to allow real estate investors and developers to accurately source, evaluate, and underwrite land and building projects in mere seconds instead of weeks, months, or years. 

By saving time in the underwriting process, Arx also speeds acquisition and development, an aspect that Garcia hopes will boost housing supply and ultimately help resolve the industry’s widespread affordability crisis. He calls Arx’s AI system a “force multiplier” that doesn’t seek to eliminate the jobs of underwriters, but rather to heighten their success rate, reduce costs and time, and increase the number and quality of the deals they close.

PRO BUILDER: What is Arx and what does it accomplish in today’s real estate market?

Tomas Garcia: Arx is an AI-driven real estate analytics platform that underwrites the future potential of millions of properties in advance. It empowers developers, investors, real estate agents, and the brokers who work with them to source and evaluate optimal investment and development opportunities in seconds. 

It was born out of the frustration my brother and I experienced with the incredibly inefficient process of deal sourcing, which results in a lot of time wasted. 

We knew there had to be a more efficient solution, so we set about building this massive artificial intelligence system that can actually underwrite the market in advance and allow developers and investors to identify sites based on financial characteristics, enabling them to quickly zero in on properties that have a high probability of becoming profitable deals. 


PB: What are the capabilities and bandwidths of the AI system you’re using? 

TG: We have a lot of different datasets flowing into the system, including tax assessment data, building footprint, construction cost estimation, building permit data, parameterized zoning code information, topography, and more—basically, as many different datasets as you can think of that affect real estate.

The system currently supports for-sale new residential construction and infill development, from single-family to quadruplexes. Right now, we’re operating in Los Angeles and Seattle, with a near-term goal of serving the entire U.S. We want Arx to cover larger-scale assets and different investment strategies, and we’re currently in the process of incorporating rentals as well as renovation projects into the system.

PB: How much research can clients do and how accurate is the information they’re getting? Can you guarantee that accuracy?

TG: Accuracy is very important to us, and we're trying to make recommendations to people but in the language that they understand. For the system, the output, and the financial model, all of the assumptions are that the data is pre-populated based on algorithms, but users can fine tune them.

Let's say the system predicts that it will take five months to get through designs and approvals in a particular municipality, but you have an expediter that can get you through in three months. You can make that adjustment and everything updates for better accuracy.

In some cases, it takes years to do what our system does in seconds, so in this instance, AI is making employees more efficient and allowing companies to grow instead of being stuck in a quagmire of lost deals and lost time.

The best sort of barometer that we currently have is the feedback we’ve gotten back from our users. We're hearing from clients that the system is underwriting projects to within about 5% on all the assumptions of how they would underwrite their own. We're trying to stay within that 5%.

PB: How does AI actually help people be more productive versus replacing them? 

TG: We view our tool as a force multiplier not as a replacement for individuals. Depending on the size of the shop, there could be anywhere from two to 40 people focused on the specific problem our tool is targeted to help solve. 

In talking with them, we found they’re wasting up to 90% of their time because many of the deals they’re working on get killed before they come to fruition. 

A lot of companies can’t afford to hire more people just to get that 10% of deals that actually work. With Arx, however, the same number of employees can look at a lot more deals. In some cases, it takes years to do what our system does in seconds, so in this instance, AI is making employees more efficient and allowing companies to grow instead of being stuck in a quagmire of lost deals and lost time. 

PB: Why is this software particularly useful in today’s market? What inefficiencies is it bypassing or simplifying? 

TG: One of the main challenges we face across the country is very complex regulation that affects what you can build and, specifically, the profitability of what you can build. Our system is taking those regional regulations into account, so, for example, when we’re simulating new developments, we’re simulating the impacts of a transfer tax on the actual profitability of the project. 

Arx ultimately bridges that fundamental disconnect between market forces that builders want to capitalize on and the limitations local policy and regulation dictate. At its core, our system is helping real estate professionals thread that needle to figure out not just what they can be doing in a particular market, but what they should be doing there, as well. 


Written By

Layne Deakins is the associate editor for Pro Builder, PRODUCTS, and Custom Builder. She writes feature articles, contributes HorizonTV videos, manages social media accounts, and produces e-newsletters for all three brands. Layne is a 2021 graduate of Pennsylvania State University.

Related Stories

Business Management

Bridging the Gap Between Housing and Health Care

By addressing social determinants of human health, such as housing, Sameer Sood's FwdSlash is helping to make affordable shelter a value-based investment

Sponsored MARVIN 04 windows and doors
Windows + Doors

Why Pros and Homeowners Prefer Fiberglass to Vinyl

When it comes to selecting windows and doors for a project, builders and homeowners alike are in search of durable options—all without having to sacrifice on aesthetics


NAHB's Lake Coulson Weighs in on the Latest Housing Policy Initiatives

National Association of Home Builders' chief lobbyist discusses the Biden administration's efforts to boost housing supply and alleviate the affordability crisis


Top Articles


More in Category

COVID-19 may be easing its grip on the U.S. after a disastrous two years, but lingering supply chain disruptions have builders holding onto their pandemic business tactics

An archive of NHQA-winning companies that represent home building's best in Total Quality Management

Don’t let the current hype about single-family B2R communities obscure the need to create long-term sustainability and asset value


Create an account

By creating an account, you agree to Pro Builder's terms of service and privacy policy.

Daily Feed Newsletter

Get Pro Builder in your inbox

Each day, Pro Builder's editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Save the stories you care about

Lorem ipsum dolor sit amet lorem ipsum dolor sit amet lorem ipsum dolor sit amet.

The bookmark icon allows you to save any story to your account to read it later
Tap it once to save, and tap it again to unsave

It looks like you’re using an ad-blocker!

Pro Builder is an advertisting supported site and we noticed you have ad-blocking enabled in your browser. There are two ways you can keep reading:

Disable your ad-blocker
Disable now
Subscribe to Pro Builder
Already a member? Sign in
Become a Member

Subscribe to Pro Builder for unlimited access

Lorem ipsum dolor sit amet, consectetur adipisicing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.