The Future Of Cryptocurrency In Commercial Real Estate
Cryptocurrency is opening new doors in the commercial real estate industry, changing the way commercial properties are sold and transferred. Whether this promises a better future is up for debate. But one thing is for sure its becoming increasingly possible to influence existing trends, challenges and security threats.
If youre considering using crypto in a commercial real estate transaction, contact our real estate attorney team today. Our experts will ensure your transaction still meets all necessary legal requirements while protecting you from liability or security risks.
The Future Of Real Estate Investing Is Fractional
Tokenizing real estate has become the focus of many institutions in 2018, and is likely to continue into the future as Ethereum offers a way to add improved levels of liquidity to a notoriously illiquid industry .
Fractional ownership democratizes access to real estate investment, and therefore distributes and minimizes the risks and labor involved with owning property. And RealToken makes it even simpler!
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This information is not an offer to invest in any token, Fund or other opportunity and is provided for information only. Performance results are shown net of all fees, costs, and expenses associated with the token. Should an investor choose to redeem a token through RealT or on a secondary market, other processing fees may be assessed that are not factored into the returns presented. Past performance does not guarantee future results. Returns are calculated based on the rental payments distributed throughout the year and the appreciation in value of the underlying property. The appreciation in value is based on the difference between purchase price and annual property reappraisals. Individual investor returns may vary based on the timing of their investments and redemptions.
So Should You Buy Crypto Or Real Estate
If you are deciding to invest your money in either crypto or real estate, the decision is simple.
Investing in real estate provides you with a tangible asset that will generate a reliable source of income each month in addition to appreciation. There are also numerous tax benefits and incentives associated with real estate and you have the opportunity to utilize leverage to increase your returns. Real estate is also independent of the stock market, so it is a great way to diversify your portfolio and mitigate your overall risk.
Crypto, on the other hand, is more of a speculative guess than an investment based on fundamentals. The price is highly volatile, and there is a chance any investor could lose all or some of their money. It doesnt pays any dividends and the only way to make money off of it is via capital appreciation.
Real estate has significantly less risk, will give you more consistent returns, and will provide you with a tangible asset. In almost every case, real estate is the better investment, but it couldnt hurt to diversify with both in your portfolio.
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Malta Permanent Residence Program
Investment options to apply for permanent residence:
1. Minimum investment in real estate 270,000
or 10,000 per year a property lease
2. Minimum investment in government bonds 250,000
3. Contribution to a Maltese non-governmental organization 2,000
The investor must fulfill both points to qualify for permanent residence. The holding period for real estate and bonds is five years.
In addition to this, it is important to remember about:
1. Administration fee 40,000
2. Government contribution 28,000 or 58,000
3. Proof of presence of assets of at least 500,000 is also required
Get advice on obtaining second citizenship from Migronis experts!
Apart from the crypto-friendly legal environment, Malta also offers social and political security, a high standard of living, tax planning opportunities, no residency requirements, and visa-free travel in the Schengen area.
How Is Blockchain Affecting Real Estate Today
In short, blockchain is the technology that underpins the cryptocurrency system. It provides a time-stamped series of immutable, recorded data that is managed by a cluster of computers rather than one single entity. Each of these blocks of data is secured and bound to each other using cryptographic principles, hence the name blockchain. This makes falsifying data incredibly difficult.
The blockchain network has no central authority, which is what makes it so unique compared to the central banking system.
Blockchain information is open for anyone and everyone to see, making it a very transparent way to share data for those involved.
Lets use a simple example. You want to buy an airline ticket. In order to do so, you use a credit card and pay a processing fee for their facilitating the transaction. Blockchains are a way for the airline and the passenger to save money, as it allows the entire ticketing process to be conducted directly between the two entities. The airline ticket is a block, which is added to a ticket blockchain. The blockchain is a unique, independently verified record that has been time stamped for added measure.
Today, blockchain is at the intersection of commercial real estate and FinTech, particularly as it pertains to allowing for fractionalized ownership of real estate through crowdfunding.
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Real Estate For Crypto Investors
As a crypto investor, have you thought about diversifying into real estate? Tokenized real estate gives the benefits of blockchain tech with the tangibility of real-world assets.
HoneyBricks is on a mission to unlock the potential of real estate investing. We are rebuilding the real estate investment experience, making buying, earning income, and selling income-producing real estate instant, low cost, and enjoyable.
Are you already investing in crypto? Even as a cryptocurrency or blockchain investor, you may be curious about adding real estate to your investment portfolio.
The good news for crypto investors is that you can use a blockchain-based solution to gain real estate exposure, or you can take a more traditional approach to real estate investingâbut first you need to know some real estate basics.
Cryptocurrency and real estate are undeniably two very different asset classes, each with different investment characteristics. As a crypto investor interested in real estate, you have several investment alternatives, and may be able to leverage the differences between crypto and real estate to your portfolioâs advantage.
Keep scrolling to learn more about real estate for crypto investors.
In this article:
The Pros And Cons Of Investing In Crypto
First, lets give a a brief over view of crypto. Cryptocurrencies are digital currencies that are intended to be used to purchase goods and services. Some individuals, however, also invest in them in order to trade for a profit.
While there are countless coins out there, the most well-known crypto is Bitcoin, which was created in 2009 by Satoshi Nakamoto, a pseudonym for the person or group behind the coin. Bitcoins are produced by mining, which involves computer software solving complex mathematical problems. Once the problem is solved the miner is rewarded with Bitcoin.
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Why Invest In Real Estate
Real estate can enhance the risk-and-return profile of an investors portfolio, offering competitive risk-adjusted returns. In general, the real estate market is one of low volatility, especially compared to equities and bonds.
Real estate is also attractive when compared with more traditional sources of income return. This asset class typically trades at a yield premium to U.S. Treasuries and is especially attractive in an environment where Treasury rates are low.
What Drives The Need For Digital In The Real Estate Sector
Commercial real estate transaction costs are already unnecessarily high. Each transaction, for example, requires a title search. Every new owner will need to pay the same fee, as did all owners previously, to do a historical inventory of ownership records to confirm there is no cloud on title. Ten, twenty years from now, all records related to a property could theoretically be digitized and encrypted into blockchain, thereby reducing transaction costs by making the entire chain of title more readily available to users in a single data set eliminating the repetitive research currently necessary to insure title.
In fact, all property records could be digitized in this same manner. Consider the construction of a new building: all of the architectural documents, all engineering plans, all appliance manuals and more could be recorded into the blockchain. Therefore, if one or several owners want or need access to those materials, theyll be readily available. This will reduce transaction time and costs, thereby opening the doors to a broader set of investors.
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But Firstly What Is Cryptocurrency
A cryptocurrency is a decentralized, peer-to-peer currency that is available in digital format. You must have heard of many companies that use their currencies to make payments to their employees all over the world. That is an example of cryptocurrency. It had gained sudden popularity some years back because of the instant growth in its value. These currencies can be used for direct and private transactions in the place of cash. The cryptocurrency market is large, it consists of thousands of currencies such as Ethereum and XRP, but the most famous of all is Bitcoin.
The transactions made by cryptocurrencies essentially need to be recorded on a decentralized ledger which is known as the Blockchain.
Even though Blockchain is a public database of transactions, your private information is secured by cryptography, which is a process devised to prevent fraud.
A Revolution In Property Investment
Blockchain has the potential to completely upend how property investments are made in the future. For example, commercial real estate has notoriously high barriers to entry. Not only are the capital requirements high, but not all investors have the same access to information. We see this every day, with some investors getting access to off-market transactions ahead of others, which limits the pool of investment opportunities for the masses .
Commercial real estate is also inherently illiquid. Shares of real estate cannot be bought and sold as seamlessly as other securities that trade on the open market.
Blockchain provides a solution to challenges such as these. For example, blockchain provides a decentralized system in which all data that is stored inside a blockchain is available to others who are part of the network. It is not owned by any one single entity, thereby increasing transparency. Moreover, blockchain data is immutable and cannot be tampered with, making this a highly secure way of transacting.
There are a few ways we could see this creating a revolution in property investment. The first pertains to real estate crowdfunding: with data more widely available, and with blockchains security, more owners would be open to investing in crowd-funded real estate deals. This lowers the barrier to entry for those who may not otherwise have the capital needed to invest alone.
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Improved Property Search Procedures
The current procedures for searching and leasing properties in the CRE industry can be significantly improved by the influence of cryptocurrency and blockchain technology. Brokers, tenants, buyers and other players in the CRE industry currently use multiple listing services to share and access property listing information. Besides being subscription based and not easily accessible3, this system makes it more difficult to find suitable properties. Additionally, the accuracy of the information listed is often at the discretion and preference of the brokers. As a result, there may be inaccurate, incomplete or fragmented information included in the listings 4,5.
With a blockchain based MLS, information from all listings can be integrated into a single decentralized system. With this, the inaccuracy and incomplete data entry due to human error can be avoided, as property owners and brokers can have more control over their data. This system will also lead to increased trust and reliability6. The overall benefit of this blockchain based MLS is translated into improvements on the details of property location and address, the age and state of the property, tenant details, rental rates, and even ownership history 7.
The Most Practical Ways To Use Your Crypto
There are many ways to make use of Bitcoin for everyday items. The popularity of cryptocurrency as a new, peer-to-peer payment method has been touching new highs every day. Many favorable investors are betting big on cryptocurrency to become a mainstream asset. From parking spots to high-end mansions, everything soon will be bought via virtual currency.
So Bitcoin can be used for almost any purchase you want to make. In a real and virtual world. Some companies include third party to exchange cryptocurrency into dollars and cash. The others accept Bitcoin as it is. This payment method is extremely cheap and near-instant.
Real estate properties are no exception to the rule. Exchanging bitcoin for a home is becoming highly popular among online brokers .
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How To Buy A House With Your Bitcoin
So, can you use digital currency to buy real estate?
The answer is definitely yes.
According to the US famous magazine Business Insider, only in 2018 50 luxury apartments were sold for cryptocurrency. To date, many real estate developers sell their properties for cryptocurrency.
The New York Times mentions that some crypto investors buy as much as 10 real estates at a blow!
Why Is Blockchain Changing Real Estate
There are several reasons why blockchain is changing real estate, many of which weve described above. For example, blockchain is making commercial real estate transactions decentralized and more transparent through the use of highly secure, immutable data. Artificial intelligence is shaping commercial real estate in many ways, and blockchain is one such example.
Smart contracts are one way blockchain is changing real estate, and as noted already, have many benefits. The most obvious benefit is that they help to cut out the middlemen associated with transactions . They also help to speed up real estate transactions by allowing self-signature as certain milestones are achieved. Blockchain also allows for the fractionalization of real estate assets, thereby increasing the pool of potential investors who may be inclined to own a portion of a property or portfolio alongside others.
It is worth noting, however, that blockchain remains highly unregulated. There are pros and cons to this lack of blockchain regulation. On one hand, it speeds up transactions by reducing government bureaucracy and third-party interference. On the other hand, it gives some investors pause given the customary oversight involved in commercial real estate transactions .
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How Will Blockchain Change Real Estate Investing
There has been a lot of chatter about cryptocurrency in recent years, with terms like Bitcoin making real estate and financial headlines. Most people still do not understand the basics of cryptocurrency. Indeed, it is a somewhat opaque and foreign concept. Fewer still understand how cryptocurrency will change real estate investing in the future.
In short, think of cryptocurrency as an alternative type of currency. It is a digital, or virtual, form of currency that can be traded just as you would use dollars, pounds, euros, or yen.
Yet unlike these other forms of currency, which have some physical representation , cryptocurrency is entirely digital and only exist in electronic form. Public and private keys similar to identification numbers are used to trade cryptocurrency between individuals and to prevent counterfeiting.
One of the unique features of cryptocurrency is that it is essentially unregulated. There is no central bank or other agency that can issue or print cryptocurrency. The decentralized nature of cryptocurrency means that it can be utilized without any form of government control or interference, which is one of its primary appeals to those who use it.
In this article, we take a look at how cryptocurrency is increasingly being utilized in the real estate sector and how this trend might evolve moving forward.
Why Is Real Estate Considered To Be An Inflation Hedge
Home prices tend to rise along with inflation. This is because homebuilders’ costs rise with inflation, which must be passed on to buyers of new homes. Existing homes, too, rise with inflation though. If you hold a fixed-rate mortgage, as inflation rises, your fixed monthly payments become effectively more affordable. Moreover, if you are a landlord, you can increase the rent to keep up with inflation.
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What Makes Cryptocurrency And The Blockchain Appealing In Real Estate
As a real estate professional with 15 years of experience, Karayaneva was frustrated with the traditional real estate transaction, which is time-consuming and rife with fraud potential. She wanted something better, safer and faster for all parties involved. At first, though, she didnt think this kind of fintech was the answer.
In fact, three years ago, I was interviewed by reporters and told them it was not possible to achieve this type of transaction within the next 10 to 20 years, she says.
Karayaneva says she is surprised by how fast the technology has come along. Making the homebuying experience a process complete in a couple of clicks is a big feat.
The Tampa condo deal is one example of the ease and speed at which a real estate deal can be settled with the use of the blockchain and NFTs. Karayaneva says it was completed through Propys new NFT Marketplace, which provides all participants in the transaction with the ability to view the process in real time.
Smith believes that transactions completed on the blockchain move so quickly because of the lack of credit and background checks. Unlike traditional funding, cryptocurrency does not use these processes to purchase assets.
They only look at your collateral. It opens up a whole new world of buyers, she adds. You are no longer being judged on credit score or background checks.
The Tampa condo sale was completed using a form of stablecoin called USDC, whose value is tied to the U.S. dollar, to limit the risk.
