The days of only the very elite investing in real estate are over because of the advancement of blockchain technology and smart contracts. Blockchain technology is aiming to disrupt real estate in the same way that open source did decades before to IT. This borderless decentralized electronic ledger will 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 making up almost 60% of all global wealth. It’s the largest source of wealth yet it’s largely illiquid for 99% 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 reasons to invest in real estate through blockchain technology, and here are the top 8.
1. Access to the best real estate
Real estate has been an investment vehicle of the wealthy for a very long time, this is because they understand 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 getting access to the right sponsors and fund managers, financing, cash requirements, high costs of purchase, difficulty transferring funds across the border, Obtaining a VISA, prohibitive tax laws, exchange rates, accreditation, and loss of home country benefits to name a few. It used to be that you had to know 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.
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. Your market for buyers is at a global scale rather than being subject to supply/demand factors domestically.
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.
This 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.
4. Greater Diversification
It turns out that International real estate investors are mostly interested in multi-family and commercial real estate investments which are almost impossible to invest in without fractional real estate investing through the blockchain. 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 Crème of investments in real estate.
5. Less Volatile than Equities
Because equities over the last few decades have outperformed real estate in returns it gets more hype and support from the investment community, and is deemed as a better growth option, but is it? According to new research “The rate of Return on Everything, 1870–2015” by Oscar Jordan, Katharina Knoll, Dmitry Kushinov, Moritz Schularick and Alan Taylor; real estate has actually outperformed equities since 1870. They discovered this controversial fact by gathering the largest data set in history to study stocks, bonds, and real estate over the last century to determine the rate of return on everything.
The confusion for people is that equities only recently have begun to earn more over real estate making people think it’s automatically a better investment– but when you look at the aggregate starting in 1870 real estate has the higher return. The research further explained that investing in real estate internationally not only provided diversification, but also a higher return.
“The ideal investor would like to hold an internationally diversified portfolio of real estate holdings, even more so than equities.”
The fact is that Real estate is less volatile than equities and isn’t correlated with its ups and downs. The value of equities is based more on speculation and what the herd mentality believes at any given moment. Where equities can be temporary and fleeting– meaning that companies can fail themselves into bankruptcy and do all of the time– real estate is a permanent scare resource that that we all depend on.
When you look at the overall value of US real estate it’s been steadily climbing since 1963 and doesn’t show signs of slowing down. One of the most critical economic indicators of the health of the economy is the GDP growth rate which in the US is expected to remain between 2–3%– which is ideal.
6. 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.
7. 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.
8. 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.
Platforms like RealtyReturns are democratizing US real estate investing by allowing cross-border investors to invest in tokenized real estate through ERC-20 compliant security tokens. The integration of the blockchain into the traditional real estate investing model provides asset-back token and liquidity to investors all across the globe.
Each token represents legal ownership in fractional real estate with access to income generating properties and capital appreciation. Investors around the globe that have ETH will be able to invest as little as 2 ETH into fractionalized US real estate through the RealtyReturns online marketplace, and bypass the working with banks, attorneys, brokers, title insurance companies, and escrow.
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.