10 REASONS TO INVEST IN REAL ESTATE ON THE BLOCKCHAIN
In 2008, Satoshi Nakamoto published the whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System,” which explained how online payments could be sent directly from one party to another without going through a financial institution. That system is blockchain technology (or, simply put, a digital ledger).
What About Real Estate On The Blockchain?
During the cryptocurrency explosion of 2017, we asked the question: “What if you could combine all the benefits of wealth creation, inflation protection, and cash flowing income of real estate with the liquidity and ease of use worldwide presented by Bitcoin? What about Real Estate On The Blockchain?
Technology Is Disrupting and Enhancing Real Estate
It became apparent that technology would disrupt, but enhance the real estate investment world like it has impacted other industries for decades. So, we spent the next three years researching, designing, and building the ideal investment to get the best aspects of commercial real estate including wealth generation, inflation protection, tax benefits, the ability to leverage your investment, tangible value, and cash flow regular income with all the benefits of blockchain including security, transparency, cost efficiencies, worldwide distribution, liquidity (person-to-person & business-to-business trading, secondary exchanges) and immediate transfers.
To quote Peter Theil from his book Zero to One,
“Look at your industry and determine what you think is inevitable, but no one else sees it coming.”
What Are The Problems Of Owning Commercial Real Estate?
1. High Barriers to Entry
- It takes Specialized Knowledge to invest and manage with confidence
- Most quality properties cost in excess of $1 million
2. Concentration of Risk
- A single property creates a Lack of Diversification
- Buying one property puts “all your eggs in one basket”
3. Lack of Liquidity
- Your money is not available immediately which makes Commercial Real Estate Illiquid
- It takes Time, Effort, and Specialized Marketing to sell a property
4. Wall Street Wants You To Invest In In Risky Stocks And Bonds
- Investing in the Stock Market, unless you are an insider, is like gambling
- Real Estate is Main Street Investing—the best “Alternative Investment”
- Real Estate Investment Trusts (REITs) are not the best real estate investment: Dividends are taxed as ordinary income, highly correlated to stock market volatility, and massive overhead to run these companies
5. Foreign Ownership of US Real Estate
- It is extremely difficult to navigate the rules for persons and businesses outside the US
- Compliance with regulations like FIRPTA and FDAP to legally own US real estate
6. Time Commitment
- Real estate ownership is a full-time job
- You need a team of professionals and a system to stay competitive in the marketplace
What Are Common Problems With Bitcoin And Cryptocurrency Investments?
1. Is Cryptocurrency Speculation Backed By Only By Software Code?
- Pricing is based on its future potential and the anticipated applications
- The small total market size makes it susceptible to manipulation from larger investors
2. Cryptocurrency Does Not Produce Cash Flow
- An investor is hoping for appreciation
- Crypto was designed as a means of payment and store of value, not an investment
3. Cryptocurrency Is Not Tangible
- Based on an algorithmic and cryptographic software code
- Not backed by a hard asset, it has a lack of inherent value—Crypto Kitties are not real animals
4. Price and Market Volatility
- Wild swings in prices
- Smaller pools of investment and high liquidity contribute to market manipulation
5. Regulations and Taxes
- ICO (Initial Coin Offerings) don’t always comply with the alphabet soup regulatory agencies ASIC, ESMA, FCA, MAS, DFSA, SFCHK, SEBI and SEC
- Uncertainty on how crypto enterprises and investments will be taxed in the future
Is Real Estate A Good Investment?
Real estate is among the largest asset classes in the world, bigger than the stock and bond markets. However, the commercial real estate industry still suffers from significant barriers to entry, obstacles to investing in other countries, and an overall lack of liquidity.
Bitcoin and cryptocurrencies offer amazing potential and have shown the way using blockchain to execute transactions almost instantaneously, instead of in days. Blockchain also allows for smart contracts to automate investor income distributions for monthly and even daily payouts. However, cryptocurrencies have suffered from wild swings in valuation, lack of certainty, and protections from regulation.
This is where blockchain for real estate can bring out the best aspects of commercial real estate investment and cryptocurrencies.
What Makes Blockchain Real Estate Revolutionary?
Blockchain real estate investments utilizing tokenization and legally compliant, tradeable Security Tokens will unlock commercial real estate to create liquidity in a traditionally illiquid industry. It will also enable investors to receive income and build equity for token holders through property cash flows, loan principal pay-down, price appreciation, and the ability to utilize the ownership of the asset as collateral for other investments.
By digitizing real estate investments with Security Tokens that are governed by the transactional rules encoded in a Smart Contract on the blockchain, investors are given enhanced solutions that allow for diversification, transactional efficiency, low fees, online secondary market trading, fractional stakes, risk control, more transparency, and higher potential liquidity due to the fact that the instantaneously tradable blockchain real estate assets will be available to a worldwide investor pool.
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About the author
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.
*Note: Liberty Fund/Concordia Equity Partners (Concordia) have made every attempt to ensure the accuracy and reliability of the information provided. Concordia cannot not accept any responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained herein. The information herein considered legally-binding legal advice, tax guidance, or financial counsel.
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