Unlocking Passive Income and Capital Appreciation Through Tokenized Real Estate
Investing in Real estate is the most powerful way to build wealth and passive income. Real estate uniquely provides the ability to invest in cash flow producing properties as well as capture capital appreciation as the value goes up.
With real estate you can forecast accurately what type of cash flow you can receive from a property due to accessible market data that allows you to understand property transactions, rental history, and current trends. With a wide variety of types of real estate along with different classes, an investor can decide whether or not they want to put their money into Residential, Multi-family, or commercial properties.
There was a time when you had to be very rich to consider investing in multi-family or Commercial, that’s because you had to be cash rich and put down at least 30–40% to get in the door, on top of that you needed the right connections to get access to the best properties, it was very much a game for the wealthy.
JOBS act
The JOBS act of 2012 changed the game in real estate domestically by providing opportunity for real estate crowdfunding. Hundreds of companies popped up overnight offering fractional real estate investing opportunities with everything from residential, multi-family, to commercial properties. There were still certain restrictions, and in most cases, it was only accredited investors that had access to these properties, but the barriers to entry were lowered slightly for locals.
Although the jobs act did help provide more access to domestic investors, especially as it pertains to crowdfunding and certain exemptions with regulation A and D, the barriers to entry still remained as high as ever for the rest of the globe.
Cross-border real estate investing has still been nearly impossible for those that don’t have an army of lawyers, real estate agents, and bankers that they can call on to assist them in purchasing US real estate abroad. Even if they had all of that they would still need to open a bank account and have some type of VISA just to get their foot in the door.
Tokenized real estate
The complexity of buying real estate abroad is real, and it deters good investors from even getting started in the process. What the JOBS act of 2012 did for domestic real estate investing is what tokenized real estate is going to do for cross-border investing globally. Tokenizing assets in the blockchain will create a digital ecosystem for people to trade ownership through Ethereum.
“What the JOBS act of 2012 did for domestic real estate investing is what tokenized real estate is going to do for cross-border investing globally”
The tokenization of US real estate assets makes these investments accessible and affordable to International investors. Realty Tokens are a new ERC-20 Ethereum Smart-Contracts governed security token protocol for real estate. Because the Ethereum market cap is over $50 billion there are plenty of buyers and sellers trading ERC-20 compliant tokens. Having a standard process built on the ERC-20 ETH platform will allow security tokens to seamlessly be traded among crypto traders.
Because the Returns token embeds compliance at the token level it allows for decentralized trading on any platform that supports ERC-20 tokens. This creates liquidity as this opens up many different exchanges for investors to trade on. The key to trade is liquidity, if it’s difficult to both buy or sale, then it’s not going to be liquid, it’s not going to convert to cryptocurrency (value) very easily. Because the block chain leaves a digital footprint with each transaction, it becomes impossible to change or corrupt data, making the blockchain immutable. The blockchain creates more transparency without using expensive middlemen and third parties throughout the process.
To better illustrate how this will impact global investors meet our fictional character Bayani from the Philippines.
Meet Bayani from the Philippines
In this example Bayani is a Filipino investor interested in commercial real estate in the US. He isn’t rich but has been able to save the equivalent of 100k USD over the years and has enough income to pay for an additional mortgage up to 400k. His dream is to own commercial real estate in California that is cash-flow positive with an 8–10% cap rate and would appreciate over time. He found out rather quickly that he could not find an ideal commercial property for 500k, not to mention that high of a cap rate, so he settled with a retail property that needs some touching up for the same price.
Bayani went to his local bank to get financing for his investment but was rejected due to the International nature of the investment, his local bank didn’t want to take on the risk. His second option was to try to get a loan from a US bank. He learned quickly that he needed a VISA and the loan would require a 50% down payment since he is an International investor with no credit history and considered a high-risk applicant.
To make matters worse the interest rate on the loan would be 10% because of the perceived risk of default. Bayani in reality has great credit history in his home Country, but that history has no credibility to US financial institutions, and he has never had an interest rate even close to 10%, it was a slap in the face.
Since he didn’t have a VISA getting a loan through a US bank was a dead-end option, he also doesn’t have enough cash for the 50% cash down requirement. He debated pulling some equity out of his current home to make this deal happen, but that would require more leverage than he was comfortable with, and he was only scratching the surface in the amount of fees and hassle that he would go through to make this purchase.
Bayani decided against investing in US real estate because the costs and risks were too high, not to mention the fact that even if he did qualify for the loan it would still take on average 6–12 months for it to finalize, assuming it funds in the first place. After it funded he then would need to touch up the property and have it maintained by a property management company which would eat into his bottom line.
To say that Bayani was frustrated was an understatement, and he let several of his close friends know about his failure to invest in US real estate abroad and how he would never make that attempt again. One of his close friends asked him if he had heard of real estate tokenization, and proceeded to explain how it works and what is required.
His friend heard about real estate tokenization from the founder of RealtyReturns.io while attending a slush conference in Shanghai earlier that year. At the conference he learned that people could buy fractional real estate with Ethereum instead of cash.
This process would making cross-border investments seamless and simple providing opportunities for income producing properties and capital appreciation with an investment as low as 2 ETH. His friend told him that he could take his ETH and invest directly into residential, multi-family or commercial fractional real estate opportunities in the US. Better yet, with such a low minimum he could really diversify his 100k between many properties.
RealtyReturns
The RealtyReturns security token democratizes real estate investing for people around the globe. It’s the key that unlocks passive income and capital appreciation to millions around the globe that are building their net worth and planning for the future. Investors around the globe that have ETH cryptocurrency 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.
Democratizing global access to investment grade commercial real estate using the blockchain. Visit RealtyReturns.io and join our Telegram group https://t.me/realtyreturnsglobal
Trevor Whiting
VP, Investor Relations
RealtyReturns
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.
