An Answer to the How of Real Estate Investment
In our previous article, we’ve mentioned three reasons why real estate is a valuable source of investment. Yet the high capital needed to get started has inhibited many from dabbling into the market. With the introduction of blockchain technology, however, real estate has become an optimal choice for budding investors.
What Can Blockchain Do For Real Estate?
Blockchain technology is alternatively known as distributed ledger technology and as its name suggests, it is a technology that allows a single ledger to be spread across multiple peers in a network, with each peer having a copy of the complete ledger with real-time updates.
Currently, the real estate market is fragmented with properties listed sporadically across the web. To buy a house involves multiple personnel and remains largely a paper-driven process despite the advancement in technology. Contracts need to be signed, and ensured that it tallies with local state laws, and all that is not discounting the absence of real-time data due to the sheer number of middle-men involved. Such cumbersome processes require a quick, accessible and transparent solution and what better solution to offer than blockchain technology?
Two years ago in October, Deloitte published a report that investigated the potential impact blockchain technology can make on the commercial real estate market. In that report, Deloitte identified three key areas that blockchain technology can optimize about the current market conditions:
- It can improve the property search process by creating a blockchain-based platform for owners and realtors to list their real estate on, thereby enabling a blockchain-based multi-listing service that prevents the sporadic distribution of information on multiple sites. The providence of real-time data also enables wiser management choices.
- It can expedite any pre-lease or deal due diligence and its financial evaluation by allowing any personnel involved to create their own digital identity on the blockchain-based platform. These identities can then be verified by authorized advisers or financial consultants etc. to prevent identity fraud. With a digitized system, processes such as underwriting or financial evaluation can be performed swiftly due to the consolidation of client information (i.e. tenant profile, financial and legal status) through a digital identity that is transparent to all.
- It can optimize cumbersome processes of managing ongoing lease agreements, property management and cash flows etc. through smart contracts. The current real estate rental processes remain largely dependent on paper with numerous payment and service transactions executed and recorded on a regular basis by external personnel such as auditors and financial regulatory authorities. While the multiple levels of checking ensures security, it is also time-consuming and laborious. Herein enters smart contract that are autonomous self-executing contracts that can enable transparency and convenience without sacrificing security.
That’s Not All!
Another feature introduced through blockchain technology is asset tokenization. One inhibiting factor that prevent investors from investing in real estate is the sheer amount of capital needed to get started. With asset tokenization, however, the cost of owning real estate is lowered as fractionalized ownership is possible. Instead of an investor pouring capital to wholly invest in a house for instance, the house can be digitized as tokens on the blockchain with multiple investors chiming in as token holders. This greatly reduces the initial capital cost for investment with an additional benefit of higher liquidity.
With greater transparency and lower costs, the barrier of entry to investments in the real estate industry has been greatly lowered, enticing most property owners and realtors to list their real estate on chain.
The next question that arises is this: Is there a blockchain-based platform out there that can facilitate the trade of real estate and ensure the information stored is secure and safe?
The Missing Piece of the Puzzle: An Asset-Tokenization Platform
Asset-tokenization platforms have been on the rise in recent years, and many have tapped into the real estate industry. Notable pioneers of the industry include companies such as Atlant and Equisafe that made history when it sold the first ever blockchain real estate in Europe for €6.5 Million .
Some other platforms, in contrast, have chosen to tread on the path less traveled and offer a diverse set of assets to be tokenized on their platform instead of focusing on a single asset. These types of platforms may be more suitable for investors looking to have a diversified portfolio.
For instance, Konrad, an upcoming asset tokenization platform, offers asset valuation, asset tokenization and trading services. With the ability to support multiple assets on its platform, ranging from raw material assets, real estate to IP, investors who choose to pile their treasures on Konrad may enjoy a greater diversity of assets compared to conventional platforms, which may be just what they are looking for in their portfolio.
To find out more about Konrad, check out its socials at:
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