10 Advantages of Investing in Real Estate Through Blockchain
Blockchain technology is aiming to disrupt IT in the same way that open source did decades ago. This borderless decentralized electronic ledger provide access to real estate investments to billions of people around the globe. No longer will people be able to blame high barriers of entry as the cause for not having access to some of the best real estate investments around the world. We are already seeing the impact blockchain is having on banking, legal, healthcare, politics, video, education, and now real estate.
Real estate is a 217 trillion-dollar market and it’s largely illiquid for 95% of the world today. In the past, you only had access to real estate if you were already rich, or had rich friends, meaning that most people weren’t able to benefit from the passive income and capital appreciation it provides. There are many advantages associated with investing in real estate through blockchain technology, and here are the top 10.
- Greater Accessibility
Real estate has been an investment vehicle of the wealthy for a very long time, they have known the power of passive income and capital appreciation. The problem is that it’s never been accessible to regular people, the barriers to entry have always been to high, especially when it comes to commercial real estate and multifamily housing. Some of the barriers are accessibility to the right sponsors and fund managers, financing, cash requirements, and accreditation. It use to be that you had to no someone who knew someone to get involved. Today platforms cut out the expensive middle man and provide global access for investors to browse properties and invest in shares of real estate using cryptocurrency.
- Cross-border transactions
Residential and Commercial Real estate investing abroad has always had great appeal to investors but many haven’t been able to enjoy the returns real estate provides due to not being able to find the right investment property, high cost of purchase, difficult transferring funds across border, Immigration laws and visa issues, financing, prohibitive U.S tax laws, exchange rates, and loss of home country benefits to name a few. Blockchain technology bypasses these major challenges and creates a smooth streamlined process through tokenization. With global access investors can truly diversify their portfolio based on geography, country, region, and economy. It opens up access to the US real estate market which has been steadily increasing in value since 1963.
One of the biggest drawbacks traditionally with investing in real estate is the illiquidity. You may want to take advantage of the cash-flow and capital appreciation but also want some liquidity for a rainy day. Blockchain technology through online real estate platforms has made this a reality. Through ERC-20 smart contracts on the Ethereum platform you can buy and sale real estate tokens through the exchange, creating more liquidity than ever before. Because the cryptocurrency market is in the hundreds of billions of dollars an exchange provides an easy accessible place to buy and sale with ETH. You can now reap the benefits of real estate ownership and have liquidity at the same time.
By tokenizing real estate assets on the blockchain it’s easier for property owners to offer a fraction of their asset to the masses, and it’s easier for the masses to invest in real estate around the globe, a win-win. Each security token represents a stake or share of the asset that has been divided into small portions making it affordable to the recent college graduate, single parent household, and retiree. This digital ledger on the blockchain contains the history of each real estate transaction time stamped and immutable. Platforms like RealtyReturns embed compliances at the token level and allows for decentralized trading of across any platform that supports ERC-20 tokens. This significantly increases liquidity in comparison to confining trade to a single centralized exchange. It gives the average investor an opportunity to convert their ETH into real estate and reap the rewards of income generating assets and capital appreciation, and stability for those that made a fortune in ETH that are seeking to protect their recent gains from the volatility of the crypto markets.
- Greater Diversification
Global real estate investing through blockchain not only allows you to diversify by region, but also allows you to spread your money into many different types of real estate whether it’s residential, multifamily, commercial, or cash flow properties. It also gives you the ability to invest in different classes of commercial real estate around the globe. Whether you are looking for brand new class A office space in a thriving community, a triple net lease retail property with little oversight, or a rehab class C project with significant capital appreciation, this type of diversification will be available. With a minimum investment of 2 ETH you can spread your money regionally into different classes of real estate. Some platforms offer commercial triple lease opportunities that are the Crème de la Crèmeof investments in real estate.
- Quicker Transactions
Real estate transactions are notorious for being slow in nature, it could take you at minimum six months to purchase an international property if you are lucky. One study finds that 56% of Chinese investors spend over 1 year finding their ideal US investment property according to Juwai Chinese Consumer International Travel Survey 2018. There are missed opportunities and lower returns when it takes that long to invest in real estate. Companies like RealtyReturns have an easy point-and-click user friendly interface allowing you to invest in real estate through cryptocurrency in a matter of seconds.
- Less fees
Investing in real estate internationally is going to cost you a lot of money in fee’s. A few that are worth mentioning are exchange fees, transfer fees, broker fees, attorney fees, taxes, and investment fees. It can be an expensive process that cuts into your bottom line, making it less appealing to invest abroad. Tokenization removes you from the process above and doesn’t require expensive third-party intermediaries to increase your costs. Less fees means that you get to bring in more income and improve your overall return.
- Lower Investment amount
In the past if you wanted to invest in real estate you would expect to spend thousands of dollars to get in the game and leverage yourself to the hilt. If you wanted to invest in commercial real estate that wasn’t even an option, as it’s one of the most expensive assets on the planet. With fractional real estate through blockchain technology It doesn’t matter what your income or social status is, you could be a single parent, college student, recent college grad, or starting your 1st career, if you have roughly $1,000 in ETH value you can have the opportunity to invest in fractional real estate abroad and enjoy the benefits of income producing properties as well as capital appreciation.
- Prevent fraud & human error
Millions of dollars are lost every year due to real estate fraud. And although it’s not common to experience real estate fraud, when it does happen it can bring down the house. A quick google search of real estate fraud or scams will give you a good sense for how much irreparable damage it can cause. Blockchain creates an immutable digital ledger that prevents fraud from happening in the first place. All transactions and records of the property are time stamped in the token preventing anyone from changing the facts. Changes and updates on the blockchain can only be accomplished by consensus between participants and new data can’t be erased.
Anyone that follows politics can understand and appreciate transparency, after all it keeps us honest, and it creates more trust; which ultimately benefits the economy as a whole. Stephen M. R. Covey wrote an entire book called “The Speed of Trust” where he makes the case for building trust as a means running a more productive and profitable business. The fact is that lack of trust creates friction, and friction slows transactions and delays productivity. Real estate tokens provide visibility into a digital ledger where all pertinent information is stored including income generated by the property.
If you enjoyed this post, please “clap” 50X in the bottom left corner so it will be shared with more people.
VP, Investor Relations
Experienced Sales Leader of over 14 years and has started offices in London, Toronto, and the US. He was VP of Investor Relations of RealtyMogul where was responsible for revenue growth, sales operations, and growth initiatives. Under his leadership, he developed a sales playbook that resulted in 2x growth.