“Blockchain” is no longer a completely foreign concept to most investors. Already, worldwide spending on blockchain solutions could reach nearly $12 billion this year.
Almost 3% of people worldwide are using blockchain, and now large corporations are already integrating it into their infrastructures for industries that include food, retail, insurance, government services, banking and finance, healthcare, property, and beyond.
Businesses recognize that blockchain, sometimes referred to as Distributed Ledger Technology, is the wave of the future. With blockchain, businesses are able to cut costs; improve security; protect privacy; and make real estate transactions more transparent, efficient, and reliable. For investors, tokenized real estate is also a way to diversify your investment portfolio and increase your liquidity.
But what do blockchain and real estate tokenization specifically mean for real estate transactions and investing?
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What Is Blockchain in Real Estate?
Blockchain-enabled real estate allows investors and sellers to buy and sell commercial real estate (CRE) in smaller chunks or pieces using cryptocurrency. These real estate investment transactions are then bundled and processed in “blocks”, which are encrypted and connected as part of a blockchain using Distributed Ledger Technology.
So, blockchain in real estate is just a way to track, record, and connect real estate information in a decentralized ledger. Since it's decentralized, no one entity has control over the end-to-end system, nor of the individual real estate transactions which are stored as blocks of data and are referred to as security tokens associated with a real estate asset. These blockchain-based real estate assets can be saved or traded (purchased or sold) using cryptocurrency.
What Are the Benefits of Blockchain in Real Estate?
Blockchain-enabled real estate takes the traditional real estate industry and turns it on its head, with a way to completely rethink how technology interacts with tangible properties while more efficiently connecting buyers, sellers, intermediaries and real estate transactions.
Below are some of the benefits of blockchain-enabled real estate.
Speed
Blockchain-enabled real estate directly connects buyers and sellers online in real-time, which empowers real estate trading across marketplaces and platforms.
Liquidity
Blockchain technology allows investors to rethink how to invest in real estate, often making investments more liquid and more accessible for trading, so it's more along the lines of how buying and selling stocks work (depending upon the terms of the investment smart contract).
Efficiency
Real estate professionals will increasingly rely on the efficiency of real estate transactions via smart contracts to support underlying real estate industry transactions, processes, and operations.
Fractionalization
With blockchain-enabled real estate, builders and developers have access to a broader investor pool with the opportunity to obtain international investment / investors. Ownership of the blockchain-supported real estate is split into shares/units and purchasers are issued securities tokens . Automating the fractional ownership of real estate opens the door for a greater range of potential investors, as well as opportunities for international investment.
Global
Blockchain real estate gives both developers and investors unprecedented access to global real estate investment assets while providing transparency, security, and increased liquidity based on the blockchain’s innovative technology and smart contracts.
Opportunities
Blockchain-enabled real estate provides greater access to a range of primary and secondary real estate investment opportunities beyond just real estate property investment. With the growing number of real estate investment opportunities, investors can benefit from a broader array of opportunities. Just be sure to do your homework.
Savings
Blockchain and Distributed Ledger Technology will increasingly reduce real estate processing costs through automation. With blockchain technology and smart contracts, buyers, sellers and intemediaries can more easily audit contracts, handle payment disputes, verify ownership, process rent payments, and more cost-effectively handle real estate industry transactions..
Tokenization
Blockchain-enabled real estate allows property owners to turn real estate assets into security tokens, which in turn can then be purchased, sold and processed as part of the cryptocurrency marketplaces and exchanges.
Transparency
With the improved data accessibility as part of blockchain technology, buyers and sellers can benefit from increased visibility and transparency to better manage their investment decisions.
What Is Tokenized Real Estate?
Tokenized real estate is sometimes likened to crowdfunding. You can break the value of your real estate asset into smaller units so that the barrier of entry (investment) is lower. So instead of one big investor, you might have 100 smaller investors. You're still getting the same level of funding but from a larger base of investors.
To take that idea over into the realm of real estate tokenization, you might have real estate that's worth $10 million, so if you chunk it out into 1,000 tokens that are each worth $10,000. You're breaking up real estate to make it more accessible as a lower-cost investment for smaller-scale investors. This level of accessibility and transparency is important because real estate is one of the world's largest asset classes, but the barriers to entry traditionally have precluded widespread real estate investment/ownership.
Real estate is typically a lucrative investment, particularly as a scarce, tangible asset. With blockchain tokenization, real estate investment is no longer out of reach. So, investors can buy in at a fraction of the cost typically required to invest in real estate. Plus it's an online transaction enabled by smart contracts that can be processed 24/7.
What Are Some Uses for Blockchain in Real Estate?
Blockchain is already integrating into many aspects of industry and society. Here are just a few of the ways that blockchain technology is effective as a solution in areas related to real estate.
Asset Management and Real Estate Funds
With blockchain technology and smart contracts, you can track activities associated with tokenized real estate assets to include purchase transactions, ownership rights, legal terms, rules, and history.
Financing
With blockchain, we can simplify and stream-line the process of getting financing. You could crowdsource finance options from multiple loan sources, which would improve transparency and increase the potential return on investment.
Investor and Tenant Identity
Blockchain makes it faster, easier, and more cost-effective to verify identities with security as a primary consideration. With blockchain encryption, you can more securely share identity related documentation, along with your credit history, proof of insurance, and other required legal documents. The blockchain serves as a single, immutable “source of truth.”
Loan and Mortgage Securitization
Blochchain will help you secure a mortgage or loan faster and easier than ever before, with the involved parties more easily verifying the property owners and streamlining real-time payment settlement. With Blockchain-enabled smart contracts, you can programmatically track property history, ownership rights, and other rules put in place for property owners and purchasers.
Land and Property Registries, Sales, and Reassignment
Blockchain will digitize the outdated paper deed process, which makes the real estate transaction faster and more cost-effective for real estate agents and property owners.
Payments and Leasing
With smart contracts, you can automate and streamline rental fees and lease payments. You can also reward positive payment history, good credit, and streamline cash flows as part of blockchain-based real estate applications and payments.
Property Development and Construction
Blockchain can simplify processes for materials and labor procurement and subcontracting, so you can more easily manage suppliers and achieve better quality and higher performance levels even for large, cumbersome construction projects. Builders/developers can more easily manage contracts and payment terms with blockchain-based smart contracts while managing the digitization of legal documents, key deliverable dates, and performance obligations..
Property Management
Blockchain can help streamline the job of property managers by expediting rent payments, providing tenants, vendors and suppliers with incentives and rewards for participation, feedback, timely delivery or payment. Thereby fostering a more engaged and proactive community, with more involved participants in every aspect of sustainable property development and growth..
Real-Time Accounting
Since it’s possible to have all the property ownership records and cash flows already on the blockchain, it's not a leap to put all that data to work as part of real-time accounting processes. It could be as simple as processing the financial statements, making statements on cash flows, and conducting real-time audits with oversight for compliance, regulations, and your investors.
How to Invest in Blockchain Real Estate?
With blockchain technology, you can invest in tokenized real estate by buying security tokens associated with a property. With tokenization, you can partially own a building or other commercial real estate property. With tokenized real estate, you're buying real estate that has the capability of being a more liquid commodity. Also, you can be a partial owner of real estate property/properties without the need to buy in at the multi-million-dollar level, while at the same time having great access to liquidity.
While there is no single place where you can or should buy into blockchain real estate, you should carefully consider your options and select the one that best synchronizes with the type of real estate that you want to buy, your investment goals, and the processes and procedures that you'd prefer to follow.
Future of Blockchain Real Estate
Blockchain-enabled real estate will increasingly become the way people invest in, purchase, and manage real estate transactions and will over time very likely affect all real estate transactions.
How Can EquityBrix Help You Get Started?
EquityBrix can help you grow your wealth through our fractional real estate investment platform. Our team marries the needs of investors and real estate developers by providing opportunities for above-market returns. EquityBrix is committed to creating high-yield investment offerings, and we can help guide you through the new era of real estate investing.
If you want more information about tokenized real estate investing go to EquityBrix or EquityBrix.com/Learn.
If you are looking to grow your wealth and diversify your investment portfolio by learning about innovative ways of investing in real estate go to EquityBrix, or contact us for more information, or sign-up for the EquityBrix Newsletter.
*Disclaimer: EquityBrix is not an investment adviser. This information is for educational purposes only and does not constitute investment or tax advice. It’s important to be informed and to make your own investment decisions or do so in consultation with a professional financial advisor. Under no circumstances should this material be used or considered as an offer to sell or a solicitation of any offer to buy an interest in any investment. Any such offer or solicitation will be made only by means of a written online prospectus relating to the particular investment.
FAQs
What is blockchain real estate?
Blockchain real estate allows you to buy and sell commercial real estate (CRE) in smaller chunks or pieces. The transactions are then bundled and processed in blocks, which are encrypted and connected as part of blockchain technology. So, the blockchain in real estate companies is just a way to connect the data in a decentralized ledger. Since it's decentralized, nobody has control over the individual chunks or tokens of the real estate project, but you can trade them as cryptocurrencies.
Is blockchain the next big thing in real estate?
Blockchain is growing in popularity as it relates to the commercial real estate (CRE) industry and investing. It's becoming more popular because blockchain technology lowers the barrier to entry, so real estate investors don't have to invest as large a chunk to still realize benefits from their real estate investment.
What are the benefits of using blockchain technology in real estate?
Blockchain technology makes it fast and easy to become a partial owner in a real estate project. With tokenization, the project is split into tokens. When you buy a fractional share of the property, you become a partial owner. As you invest in blockchain real estate, you're saving money and becoming part of what has become a global investor pool. You're also able to buy into one of the most illiquid assets.
What is a "token"?
In the most generic terms, a token could be anything that is meant to stand for or represent another object. In cryptocurrency, a token is a digital asset, but it can also be used to describe all cryptocurrencies that are not Ethereum or Bitcoin. Tokens make it possible to facilitate decentralized exchanges, but they are also something that is traded or stored. With a token, you could be a partial owner in commercial real estate.
