3 Reasons Real Estate Backed Digital Assets Are In High Demand With Investors
August 2020 marked a record month for digital asset trading volume, with trading up 163.24% on the month and 11,235% for the year. September saw a strong follow up with gains across the digital asset ecosystem. Tokenized markets are seeing early demand skyrocket, with many markets such as Overstock and tZROP shares seeing millions in total trading volume.
This data indicates that cryptocurrency and digital assets are becoming increasingly popular. Our focus at Vertalo is on connecting this technology to ownership of real world assets. We’re seeing accredited investors flood into digital markets at unprecedented rates. Investors are seeking digital versions of regulated, asset-backed securities. To date, we’ve only seen a few US-compliant issuances of digital asset tokens. Cash flowing commercial real estate is one of the most promising markets for this technology, and we’re seeing a spike in interest from real estate clients. As Vertalo, we talk to real estate investors every day, and at Vertalo Real Estate, there is definitive interest developing around trading fractions of real estate interests online.
Here’s the top 3 reasons that Real Estate backed digital assets are in demand:
1. Passive Income Through Dividends
Investors are always looking for low risk investments that produce passive income. Cash flowing commercial real estate provides a stable and reliable source of passive income which is based on US dollars or FIAT currency. While new technology like “proof-of-stake” offers a passive income solution, these assets are still based entirely on cryptocurrency markets. Digital asset investors are currently lacking reliable, stable, and tangible sources of passive income.
Real estate is a proven source of passive income, and it is not correlated within the massive volatility seen in cryptocurrency markets. Real estate assets are typically valued by the income approach, along with a number of other measurable factors, unlike a speculative cryptocurrency. Furthermore, online markets are a promising new way for global investors to enter profitable real estate investments. Traditionally, real estate is bought and sold in private markets with low accessibility. Offering shares online and allowing the fractionalization of ownership interests promises to revolutionize the process of investing in private real estate assets and reduce barriers to entry of high investment minimums.
2. Reduced Risk For Investing Gains
We’ve seen massive gains in the cryptocurrency markets over the past several years. Cryptocurrency investors have very limited options when it comes to making low risk digital asset investments. Real estate-backed digital assets create a promising low-risk safe haven for investors to make long term investments with their profits from cryptocurrency. Creating more accessibility for the average investor to invest in private real estate markets creates a new paradigm in online investing, offering risk profiles that are very different from public stock markets or cryptocurrency markets.
3. Global Market & Liquidity For Real Estate Investments
Digital markets are global. For the first time, investors can view private real estate investments online and buy or sell shares from anywhere at any time. This is very attractive to investors and accredited investors are joining regulated trading systems at an unprecedented rate. The challenge is that investors have limited options for real estate investments at the current time as inventory is limited. Despite the limited options, there is high demand for viable real estate investments in the digital asset markets. The early issuers are seeing gains in the form of liquidity premiums on their assets. This creates value for all partners and shareholders in the process.
Liquidity premiums follow the theory that investors are willing to invest at higher valuations on liquid investments versus typical commercial real estate investments that require longer hold periods which can go as long as 15 to 20 years. As such, the secondary market liquidity is a true value-add for real estate investments.
Real Estate Is Going Digital….What Now?
New investors are seeking attractive digital investment opportunities. The lack of supply is the biggest issue for real estate backed digital assets. We’re seeing major demand among Broker-Dealers, Capital Advisors, funds and Investors who are looking for high quality real estate investments that are compatible with the Digital Securities Ecosystem. Our goal is to make sure that real estate backed digital assets markets can be integrated seamlessly into the real estate investment process. We make the investment management process easier for issuers and investors alike.
