Crypto Real Estate – What It Is and How to Invest in It

May 31, 2022 09:39 AM ET
Crypto Real Estate – What It Is and How to Invest in It

In recent years, real estate values have been seeing constant growth, which some investors have flagged as a red flag. This is perhaps in reference to the situation in 2017, just before the real estate bubble caused a recession. However, the intrinsic value of a real estate cannot be ignored, especially because it incorporates land, a diminishing asset of which no more will ever be produced, yet its demand is ever rising. The problem is, traditionally, investing in real estate is reserved for high net-worth individuals who can afford the high property values and closing costs. Thanks to cryptocurrencies, these barriers to entry are slowly being broken down.  

Crypto meets real estate

Cryptocurrencies are built upon blockchain technology, which basically provides a public ledger for recording transaction data in a transparent and immutable manner. The applications of blockchain technology span far and wide, and it can be used in just about any industry, not the least of which includes real estate. 

Crypto real estate utilizes the numerous nodes that make up the blockchain to act as traditional escrow institutions. This means that transacting parties can easily exchange payments in crypto, records, legal contracts, and any other documents over the blockchain. This way, they cut out the numerous middlemen, saving them time as well as costs. 

Real estate as a blockchain-based token

Crypto real estate can be better understood when viewed as a token. Tokenization means the property is minted into a token, which represents someone’s ownership interest. For instance, let’s say two investors, Tim and Joe buy an office building. If they tokenize the property on a blockchain, they will each receive tokens that represent their ownership stake in the building. If they each own half of it, they will hold an equal number of tokens. If either of them invested more than their partner, the tokens they receive would reflect the difference. Whichever the case, these tokens are used as verifiable proof of ownership of the building. 

In tokenizing the asset, they can easily trade or liquidate their ownership stake. Where previously liquidating the asset would have involved a lengthy and costly sale process, selling their tokens would be akin to selling a cryptocurrency on a peer-to-peer transaction. 

Contributions of blockchain technology to real estate

  • Online marketplaces

Thanks to blockchain technology, real estate can now be traded online. Anyone interested in a property can easily access all pertinent information concerning the asset without fear of being manipulated. This will attract more participants to the industry, thanks to the ease of access.

  • Antiquating middlemen

The real estate industry is riddled with middlemen, who make the process of acquiring property all the more expensive and lengthier. Blockchain technology and crypto have thus far proven reliable as a method of exchange. This has set it up nicely as a superior form of escrow, where parties can exchange goods without fear of the other side’s trustworthiness. Buyers and sellers can easily exchange anything from legal documents to payments on the blockchain. What’s more, they won’t have to incur commissions and brokerage fees. 

  • Transforming real estate into a liquid asset

Traditionally, before liquidating a real estate asset, the owner would have to undergo a lengthy selling process. From marketing to the subsequent closing process, the whole process could easily take weeks, if not months. By tokenizing real estate, the tokens can be sold almost instantly.

  • Enabling fractional ownership

Previously, if one wanted to buy a real estate asset, they had to foot the cost of the whole building, which seldom comes cheap. By tokenizing the property, one can own a fraction of it, which serves to minimize the barriers to entry for investors. 

  • Real estate smart contracts

Through the use of the blockchain, transacting parties in a real estate deal can create and audit self-executing contracts. These smart contracts can ensure that payment is made only when the other party fulfills all their obligations as stipulated in the contract, which reduces the likelihood of payment disputes. 

How to invest in crypto real estate – popular platforms

Cherre

The Cherre landing page.

This is a platform through which potential property buyers can access data and statistics pertaining to the properties they’re interested in. This could include such statistics as prices, crime statistics, and POI, which can help them faster identify investment opportunities. 

Arabian Escapes

The Arabian Escapes start page.

Much like you can shop for clothes or groceries from the comfort of your own home, this platform enables you to browse through and purchase the hottest properties in Dubai. On it, you can access all the information regarding these properties, and once you’re settled, you can make payments in crypto and receive ownership documentation.

Crowdstreet

The Crowdstreet landing page.

This is a crowdfunding platform where you can contribute to large real estate projects with promising ROIs. On it, you can view the properties, and their financial documents, engage with the developers behind the deal, and make your offers. The funds you contribute go towards the development or renovation of the property, after which you’ll receive your dues, just like dividends from owning shares.

Milo

The Milo landing page.

This is a platform that offers you crypto-backed mortgages so you can invest in real estate. This way, you don’t have to liquidate your holdings in order to purchase properties. If you take out the mortgage, the good people at Milo take care of all closing requirements, title acquisitions, insurance, and appraisals on your behalf. The platform also allows you to set your own monthly and initial rates for paying back your mortgage.   

Summary

Real estate is one of the most profitable investment vehicles, thanks to rising property prices. However, it has traditionally been reserved for high net-worth individuals who can afford the high barriers to entry. Thanks to the tokenization of real estate, more and more people can access this space and afford to invest in it.


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