Business Logic: Crypto Cash Flow
RealtyReturns.io combines the worlds of income producing real estate and blockchain technology. Our objective is to radically reduce the friction associated with foreign direct investment in quality overseas real estate for international clients, while also connecting sellers, lenders and real estate operators with a new capital and liquidity source from investors demanding predictable returns in the form of “crypto cash flow”. Our blockchain-based, real estate-secured, income-producing security token product will enable an unprecedented degree of liquidity and cross-border access for real estate investors on both sides of the supply-demand equation.
Who is a likely user of our platform?
When our team was in Hong Kong in mid-2017 we had the pleasure of speaking with a man who goes by the name Bruce.
Bruce is 60 years old, and he is an IT professional who is hoping to retire within the next several years. Bruce bought 2 ETH along with a handful of other cryptocurrencies in early 2017, and has seen nice appreciation in his digital holdings. He has fun watching the cryptocurrency markets, but also worries about the price volatility. He wishes he could somehow invest the 2 ETH into something that would produce income — he doesn’t like having to simply hope for the best as the the token prices fluctuate on a daily basis.
Bruce believes in blockchain technology but he told us that he likes real estate more as an investment for his retirement because rental income is reliable, and he appreciate that real estate is tangible.
He said that if there were any way to trade his 2 ETH for income producing property, he would gladly make the trade. But of course, he knew that even if he could find someone who would sell him real estate for ETH, he could never actually afford to buy a property with only 2 ETH.
Since we had been discussing international trade between China and the US, Bruce also mentioned that he would be most pleased if he could purchase a quality American investment property rather than something in Hong Kong. But of course, he knew that was practically impossible — jumping through the hoops to actually buy real estate in the US would be incredibly challenging and costly for him — not to mention that he would have no way of managing the investment from overseas.
Bruce said the only negative he sees with real estate investing, is that buying and selling real property is generally a burdensome and costly process. In other words, real estate is not liquid, and Bruce said he worries about not being able to liquidate the investment quickly if he was in a pinch.
We already knew that blockchain will improve and disrupt the real estate industry, but our conversation with Bruce truly inspired the vision for RealtyReturns.
RealtyReturns will allow crypto holders like Bruce to invest in real estate deals for as little as 2 ETH. The investor will trade ETH for a real estate Security Token, which will be backed by a specific investment property. The wallet holding the Security Token will function as a passive ownership member of the specific purpose vehicle recorded on title as owner of the underlying property. The Security Token will produce income for the wallet that holds it based on the tokenized property’s rental income stream, and the Security Token will be transferable on any ERC-20 compliant exchange. As a result, Bruce will be able to invest in American real estate across the blockchain, and will also be able to liquidate his Security Token investment by selling it to a third party across an exchange.
What are net leased investments?
As a net leased investment specialist, I focus my commercial real estate brokerage practice on the sale of stabilized properties, which produce passive income in the form of rent paid by corporate operators on long term leases. Net leased investments (commonly referred to as “Triple Net” or “NNN” deals) are commercial investment properties with leases structured such that the tenant is responsible for all property maintenance, as well as the cost of all real estate taxes and insurance. The investor (ie, the owner of the fee simple property, ground leased land interest, or leasehold interest) simply collects rent from the tenant on a recurring basis, and pays the cost of any debt instruments collateralized against the property. Net leased investments are typically retail, industrial, and medical/office properties. In valuing net leased investments, buyers typically focus on the income the deal produces, desirability of the underlying real estate (location, parcel size, demographics, strategic positioning, etc), financial strength of the tenant or lease guarantor, length of the lease term, and structure of the rent payments over the term. Quality net leased properties are understood to produce a reliable and accretive stream of income, while maintaining tangible and fundamental real estate value. In the American capital market, net leased commercial real estate is the cornerstone of many private and institutional equity portfolios, and is responsible for trillions of dollars worth of debt origination. In addition, “investment grade” net leased assets are often considered trophy properties, and are ideal for absentee or remote investors, because there is never any need to actually visit the site to perform property maintenance.
ROBERT LOEBL, CCIM
Commercial real estate broker, economics geek, San Francisco Bay Area native.
Democratizing global access to investment grade commercial real estate using the blockchain. Visit RealtyReturns.io
