Blockchain Technology – The Future of Real Estate Investing
Executive Summary
- Tokenization is an independent way of buying and holding assets without having to deal with banks, transfer times and, with real estate as a stable long-term investment, fluctuations in the marketplace.
- As a hard asset with intrinsic and appreciable value, real estate preserves the wealth you invest in it while generating continuous revenue for you for the lifetime of that property, or until your lease ends.
- Blockchain opens up the ability to buy, trade and sell assets while receiving those funds almost instantaneously from anywhere in the world.
- Anything and everything is recorded on the blockchain and this data is immutable, so investors can have peace of mind knowing everything that is happening step by step.
- The benefits of real estate and blockchain combine to create stable, cash-flowing assets that are more efficient, liquid and transparent.
Blockchain technology and Cryptocurrencies have been changing the way but we have been buying, selling and trading public and private assets over the last decade. But, more recently there has been an uptick in using this technology for real estate investments and assets.
The first piece of tokenized real estate was introduced in 2018 with the AspenCoin for the Regis Hotel, which prompted other real estate entities to take a serious look at whether blockchain works with these hard assets and if there is really a demand in the market for tokenizing real estate.
Currently, companies like InvestaX and Digishares are working to tokenize private real estate assets, but what have they figured out that other real estate investors haven’t yet? What benefits does tokenization offer for real estate investing?
What is Tokenization?
With so much buzz around cryptocurrencies and NFTs in the market right now, you may have some concerns or confusion on what blockchain and tokenization is; that’s what we aim to clarify in this article and debunk any misleading information. The process of tokenizing an asset may seem intimidating, though it does take time and legal fees (for the issuer), but it really isn’t once the fund or asset is set up and you understand what it does for you as the investor.
The process of tokenizing an asset is not as complicated as it may seem. Think of it as buying a stock in the sense that you own a certain amount, or stake, in the investment. You were not in charge of the breakdown of company stocks but can buy a portion depending on how much you would like to invest – just like tokenized products.
To tokenize an asset just means that you divide portions of shares on the physical asset and distribute the portions as “tokens,” or digital representations of your investment. The money that equates to one token is the same as buying one portion of stock. You can buy as many or as few as you want; the portion you buy represents how much you’ve invested in the asset and gives you the cash flow of that asset in correlation to your stake.
Tokenization is an independent way of buying and holding assets without having to deal with banks, transfer times and, with real estate as a stable long-term investment, fluctuations in the marketplace.
Benefits of Real Estate
Real estate has been around for hundreds of years and has held its ground as a premium way to store wealth. So, how does adding blockchain technology to real estate benefit investors and issuers? First, let’s take a look at the general advantages of real estate assets before understanding what the blockchain does for investing.
If you are looking for long-term cash-flowing assets to invest your money in, real estate is the proven way to go. As a hard asset with intrinsic and appreciable value, real estate preserves the wealth you invest in it while generating continuous revenue for you for the lifetime of that property, or until your lease ends.
The benefits of owning real estate include:
- Consistent income with regular cash flow
- Generates wealth and preserves wealth
- Hard asset the security of tangible value
- You can buy more with borrowed money is Leverage
- A hedge against inflation
- A unique tax advantages – tax-efficient
- Historically stable asset – slow to rise and slow to fall
Now, for a more in-depth look into why real estate is the superior asset, we recommend reading The Advantages Of Commercial Real Estate Investing . But for the sake of this article knowing these advantages exist, let’s continue on to how the blockchain can enhance these assets.
Benefits of Blockchain
Knowing the basics of tokenizing real estate, we can apply those to transacting with blockchain technology for real estate investments. Blockchain opens up the ability to buy, trade and sell assets while receiving those funds almost instantaneously from anywhere in the world.
You can receive your investment in USD, Euros, Yen and more, depending on the platform you trade from. No matter where you are in the world, you can accept the medium of what you paid. So, even if you paid for a USD investment on the blockchain, you will receive the same amount (as it compares to the currency exchange rate you bought the asset for) in your preferred currency almost instantaneously.
There is no need to wait for long transfer times. Instead, you (the investor) receive your asset almost instantaneously once you complete your purchase and the issuer (seller) receives the revenue from the sale right away. Unlike actual banks and money transferring apps like Venmo and Paypal that can make you wait up to 5 days for a payment.
When combining blockchain technology with real estate, investors are able to:
- Transact from anywhere in the world
- Receive cash flow and interest payments anywhere in the world
- Buy real estate and other assets anywhere in the world
- Access your money any time at any place
Blockchain allows investors to be more in control of their own wealth and cash-flowing assets without hassle from banks. Tokenizing assets privates and decentralizes ownership of your assets that you buy, sell or trade on the blockchain. You are in charge of your money; you are your own banker.
The value of the assets you buy or trade will be held in a secure digital wallet and exponentially reduce the wait times for receiving payments, even when your investment is halfway around the world.
Investors can trust the blockchain to record any changes or additions to it as well, giving full transparency to what is happening with the asset in real time.
Adapting Technology and New Legislation
Since 2008 when Satoshi Nakamoto released his whitepaper on Bitcoin and transacting with blockchain, there has been growing popularity to create and extend assets on blockchain.
The Web3 functionality of blockchain-enabled investments creates complete transparency with investors because anyone privy to an offering on the blockchain can trace every move an issuer makes and who else is involved. Anything and everything is recorded on the blockchain and this data is immutable, so investors can have peace of mind knowing everything that is happening step by step.
Smart Contracts also enable an efficient method of executing an Offering Memorandum (OM) with the terms and conditions of a deal. You can access the Smart Contract through a secure online portal then read and sign the agreement immediately, rather than going back and forth through the mail or in-person meetings to discuss and sign documents.
Seen as blockchain technology and cryptocurrencies have been sweeping the nations somewhat recently, the legislation that dictates the tradability of assets for blockchain-based platforms is fairly new and still under works today.
Current barriers to entry for real estate organizations to use blockchain technology depend on what types of investors they want on their deals and where in the world they want to issue their deals. For instance, Regulation 506 (c) set by the Securities and Exchange Commission (SEC) allows a company to transact with foreigh investors but all investors must be accredited.
However, when conducting transactions in a marketplace such as Invest On Main, the regulations and stipulations of all deals will be provided to investors from the company or syndication. Invest on Main also offers resources to educate investors on not only the different types of real estate offered on our platform but also on how these blockchain transactions take place with step-by-step guides.
Why Real Estate Is Meant For Blockchain
Though there are not thousands of use-cases yet for blockchain-based real estate transactions, there are solid examples of success for tokenizing these assets and turning profits. The benefits of real estate and blockchain combine to create stable, cash-flowing assets that are more efficient, liquid and transparent.
The main reason that real estate has not been more accepted in the blockchain space is due to lack of understanding and education. This is why Invest On Main (IOM) has made it our mission to provide all of the necessary tools and teachings for investors to learn about real estate and blockchain. IOM is the easiest to use and most comprehensive capital raising Tokenization platform/marketplace whole product solution for real estate sponsors and investors.
Invest On Main is an easy-to-use real estate capital matching App for both real estate sponsors (issuers) and investors. It is designed to make real estate investing easier, faster and as frictionless as possible.
Invest On Main will bring real estate fund sponsors and investors together to provide easy access to high quality real estate and other alternative investments designed with the users in mind.
Invest On Main moves real estate investing from the Paper Stage to the Digital Age. Using blockchain technology real estate ownership is transformed into easier access and liquidity.
*Note: Note: Invest On Main LLC (collectively investonmain.com) have made every attempt to ensure the accuracy and reliability of the information provided. Invest On Main cannot not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained herein. The information herein is not considered legally binding legal advice, tax guidance, or financial counsel.
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About the author
Michael Flight
Michael Flight was named the Godfather of Blockchain Real Estate by Forbes Crypto. Michael achieved that distinction by co-founding Liberty Real Estate Fund, the World’s First Net Lease Security Token Fund, creating the Blockchain Real Estate Summit. More recently co-founding Invest On Main (IOM.ai) the Real Estate & Alternative Asset marketplace of the future and AcceleratedLaw a faster, cheaper way to create and tokenize securities offerings!
Michael is a real estate entrepreneur and real estate tokenization pioneer who is an expert in retail real estate investment, redevelopment and real estate on the blockchain. He started his commercial real estate career in 1985, and then co-founded Concordia Realty Corporation in 1990, which continues to partner with some of the world’s most well-known banks, insurance companies, hedge funds and institutional investors in many successful investments.
DISCLOSURES, LEGAL AND TAX COUNSEL: Invest On Main LLC. (collectively InvestOnMain.com) and their affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or undertaking. Invest On Main LLC highly encourages individuals and investors to seek the counsel of a qualified attorney as well as seek the counsel of a tax professional or Certified Public Accountant (CPA) to determine if there are any potential tax liabilities or consequences as the result of anything contained herein. NO GUARANTEE: All users of this website should understand there are NO GUARANTEES of any success, outcome or profitability of any transaction or undertaking, expressed or implied by Invest On Main LLC or any of its members, shareholders, officers or affiliates and will NOT be liable for any financial or other losses or damages incurred as a result of any undertaking. Go HERE to view complete DISCLOSURES.
