What Real Estate Investment Looks Like on the Block Chain
More than just capital, investing in real estate requires a black-belt in BS-fu, which of course is the art of cutting through red tape. It takes a posse of attorneys, title insurance agents, escrow officers, mortgage brokers and other clowns in thick 1980’s ties to secure a piece of property. For foreign investors… invite the entire circus. The bureaucratic hoops are ever changing and the potential pitfalls aplenty.
Fortunately, the pressures of innovation are putting pressure on these antique financial structures. According to a recent piece in CrowdFundInsider, blockchain technology may change the financial landscape for better and forever.
…technology may reduce, or eliminate the need for, intermediaries. This decentralization takes on three forms: the decentralization of decision-making, risk-taking, or record-keeping.Crowdfund Insider
There are already many examples emerging of decentralization including payments and settlement, capital markets, trade finance, and lending.
Current examples of financial decentralization include two specific models:
Distributed ledger technology (DLT or blockchain) which enables the decentralization of record-keeping. It does so by removing the need for a central ledger in which to record financial transactions. Various levels of decentralisation of record-keeping are possible. These vary from “permissionless” or public systems that are open to all users, to “permissioned” or private systems where a more limited consortium of users are able to read and/or write to a ledger. This includes tokenization of assets.
Online peer-to-peer (P2P), or user-matching, platforms allow users (e.g. creditors and borrowers) to interact directly and decentralize their risk-taking and decision making, yet avoid the sort of search costs that might otherwise be incurred in the absence of a centralized intermediary (e.g. bank or insurance company). As a consequence, lending activities may migrate away from financial intermediaries.
According to the FSB, decentralization innovation may benefit financial stability – leading to greater competition while reducing systemic risk.
The question left on the minds of investors around the world is then: “when can I get a piece and how can I keep it?”
An earlier Crowdfund Insider article explains
Ethereum based RealT’s operates by utilizing a Delaware series limited liability structure where each series is treated as if it were a separate legal entity. According to the company, each series is represented by RealTokens and acts as a bridge between a token-owning individual and a piece of real estate property.Crowdfund Insider – New Tokenization Platform RealT Targets Real Estate Investments, Starts with Detroit
RealT says it has plans to open its platform to individuals who wish to access the value of their own real estate assets through tokenization.
RealTokens were released for international purchase earlier this month. As BitCoin and other cryptocurrencies continue to jockey for positioning in their volatile asset class, projects like RealT demonstrate the impact that blockchain technology makes on traditional investments like real property.
For more on blockchain technology in real estate or to view RealT’s current marketplace, check out realt.co.