Blockchain technology comes to real estate investments
An innovation from ‘Crypto Valley’ in Zug, Switzerland, is generating a buzz: blockimmo is a real estate transaction platform based on blockchain technology. The company enables joint real estate investments through crowd sales, thereby lowering the barrier to entering this attractive investment class. The platform is easy to use and offers maximum investor protection.
The real estate transaction platform blockimmo has been online since December 2018. Investors can invest in properties with small amounts starting at roughly CHF 1,000. On the other side of the transaction, property owners can garner best prices for the sale of their real estate. ‘I’m very proud to have launched a secure blockchain product for both private consumers and professional investors with blockimmo,’ says founder and Managing Director, Bastiaan Don.
Advantages for investors
blockimmo offers investors a simple way to invest in a lucrative and exclusive market. Blockchain investing utilises the concept of a digital wallet: at blockimmo, an investor takes part in a crowd sale of a property using their own personal wallet. blockimmo currently supports all major wallets, both on desktop and mobile as well as the two established hardware wallet providers Ledger and Trezor. The investors can decide how much they wish to invest in a property and follow the progress of the crowd sale live. Once the sale has been formalised, the investors receives their shares in the form of tokens in their wallet. The tokens represent shares of the underlying real estate.
After the successful sale, investors enjoy a regular stream of revenue from the properties and their increasing value. ‘There is no minimum investment on our platform, but we find that investments upwards of roughly CHF 1,000 make the most sense,’ says Bastiaan Don. Moreover, investors can sell their investment at any time and without brokerage services — either through peer-to-peer sales (via the bulletin board) on the blockimmo platform or directly through a regulated exchange.
Beyond high liquidity, this blockchain-based technology also offers high flexibility to investors — another advantage over existing real estate transaction platforms in the ‘conventional world’, where joint owners of a property generally have to be entered in the land register. Furthermore, in conventional arrangements, the other joint owners have a legal right of pre-emption, which greatly increases the potential for conflict — to say nothing of the high legal complexity and lack of investor protection.
Maximum investor protection
blockimmo, by contrast, offers the highest possible investor protection. First, the rights of ownership to the properties are represented by tokens at blockimmo. Second, the underlying real estate properties on which the investments are based are held in an investment fund in Liechtenstein. Each property is secured through a separate, closed sub-fund. Last but not least, there is just one, unique token category for each property. The various properties in the blockimmo ecosystem are thus not mixed up with each other. ‘It was a demanding and challenging project. Nevertheless, we have managed to ensure the highest investor protection while providing a simple and user-friendly structure,’ says Marcel Hostettler, lawyer and partner at the law firm MME and former FINMA employee. He lauds the partnership between Bastiaan Don and his developers, as well as Bank Frick: ‘This was an assemblage of absolute pros who came together to create something great.’
The Zug-based law firm MME, an established player on the blockchain scene, and Liechtenstein-based Bank Frick are supporting Bastiaan Don with the launch of the platform. ‘With the first regulated, token-based real estate investment fund in the world, Bastiaan has set an important milestone in the development of blockchain technology. The implementation of projects like blockimmo demonstrates the expertise of Bank Frick. in the field of digital business models and products, as well our innovative drive,’ says Raphael Haldner, Director of Funds & Products at the family-run bank.
To ensure the greatest possible security for investors and sellers alike, the blockimmo platform (build on the Ethereum Blockchain) was also thoroughly put through its paces by the IT security firms New Alchemy and Hosho as well as the Public Bug Bounty Program via HackerOne prior to going live.
Advantages for sellers
One advantage for real estate sellers is that the sale at a pre-determined price takes place entirely without brokers and can thus be carried out at a lower cost. In the process, the property is transferred to blockchain through a smart contact and tokenised. The seller can set their own preferred sale parameters. Through a dashboard, the seller can monitor the investor situation at all times during the crowd sale. As soon as the sale formalities have been concluded, the seller receives the proceeds of the sale, either in cash or Ether, as preferred.
As both the sellers and the buyers are able to dispense with legal and regulatory matters, blockimmo also offers other salient advantages. This makes the real estate market considerably more attractive and transparent for both parties. And because there are no middlemen, investors profit from lower costs.
Partial sales and bidding process
Starting in the first quarter of 2019 at the latest, blockimmo will also offer other trading options that have been difficult or impossible to conduct until now. Examples include the partial sale of properties and crowd sales by auction. In the latter case, the investors can personally decide what the property is worth to them. This also benefits the property seller: with the investors setting their own price for a property, the seller is guaranteed to achieve the best possible price above their own minimum demand. ‘This represents a novelty in the real estate sale process unseen on the market to date,’ says Bastiaan Don.
All of blockimmo’s product offerings comply with existing regulations. blockimmo is initially focussing on commercial properties in Switzerland. The first investment opportunities are planned for the first quarter of 2019. Plots, projects and residential properties will be added later. ‘In the immediate future, we plan to expand in the EU; we have already had some enquiries,’ says the blockchain pioneer. In order to get the platform off the ground as quickly as possible as well as demonstrate its viability, he is also promptly selling 20% of the company itself via blockimmo. Bastiaan Don: ‘If anyone decides to invest in blockimmo, they will be doing so by using the product in which they are becoming a shareholder.’
The land register in the 21st century
To give a public boost to the concept of a blockchain-based land register and one day transform the current system of land ownership administration, blockimmo is also helping public agencies such as the land register offices gain familiarity with blockchain technology. blockimmo is cultivating political contacts to raise awareness of the technical and financial advantages and explain how the transition to the world of blockchain can proceed.
Bastiaan Don: ‘We explain, for example, that the properties we tokenise are already designated with the precise E-GRID number directly in the blockchain. This is already a known quantity in Switzerland and they are already entered as such in their own, centralised land register. Synchronising the systems would be a first step towards a land register on the Blockchain’, envisions the blockimmo founder.