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For $ 21,000, you can now buy a fraction of a student building, The Hub, in South Carolina. In return for your investment, you will receive a digital token that represents your share of the property's property fund.
It is part of a joint effort by Convexity Properties, a Chicago-based real estate investment firm and Harbor, the all-in-one tokenisation platform.
This real estate tokenization opens up the market to investors who may not be able to afford full ownership or even the high lows of traditional real estate investment funds (REITs).
In 2018, an asset management company, Elevated Returns, sold tokenised shares in a luxury hotel in Aspen, Colorado. Investors received "Aspen coins" to denote their partial participation in the project. The crowdfunding campaign, via Indiegogo, began on 8 August 2018 and ended on 1 October 2018, raising $ 18 million.
However, only accredited US investors could participate in the sale with a minimum investment of $ 10,000. "Accredited investors" are individuals with "earned income of more than $ 200,000 in each of the previous two years" or with net assets of over $ 1 million.
These experimental projects indicate a possible new future in real estate investment and blockchain technology. But how close are we to the realization of tokenized real estate? Block Explorer plunges deeper into the various projects in their space, tracks their progress and outlines the opportunities available.
Why put real estate on the Blockchain?
The real estate sector has some huge problems.
Here are some of the biggest, according to a new report, Top ten problems affecting the real estate sector 2018-2019 from The Counselors of Real Estate (CRE):
1. The increase in the interest rate on housing loans and the general political uncertainties make the purchase of an increasingly less attractive home.
2. The new immigration laws and the consequences of urban infrastructure are more likely to contribute to the further increase in prices of newly constructed real estate.
3. The boom in e-commerce makes it impossible for many retailers to run a business venture, so the demand for commercial real estate is declining.
Furthermore, disruptive technologies are completely remodeling the industry. Like another research paper called Emerging trends in real estate (for the United States and Canada in 2019) PricewaterhouseCoopers emphasizes that investments in technologies related to real estate will accelerate drastically.
It could reach $ 5.2 billion in 2018, which is significantly higher than $ 1.3 billion paid in the field in 2014. And blockchain technologies are named among the 13 real estate destroyers.
And it's not surprising. Distributed accounting technologies can potentially fill a lot of holes in the industry. Firstly, it could help to create a completely transparent real estate register. Secondly, it can create buying opportunities for financially limited investors through fractional ownership.
The biggest real estate blockchain projects right now
Numerous blockchain startups have poured into space, promising easy access to real estate investments to anyone curious to enter. And not just to accredited investors. Among the most notable are:
Atlant offers Ethereum-based peer-to-peer rentals and tokenised property properties. However, although the prototype has existed since September 2017 and the public beta of the product was launched in October 2018, there is still a lot of work to do. The company is still struggling to acquire all the necessary licenses and there is not much clarity about the timing.
Blockimmo strives to facilitate "an accessible and lean real estate market" through actions of tokenized real estate properties. Their recent big news is the approval of the business model by the Swiss Financial Market Supervisory Authority (FINMA). He also launched a testnet with two examples of properties.
The real properties will presumably be available on the platform in 2019. It all looks very promising. However, when you dig deeper into the current company's website, it seems clear that the team has a long way to go.
Some disturbing discrepancies can be found in the "frequently asked questions" section. He says that "the real estate properties presented are carefully maintained by our team of experts", but the current number of employees is four and three of them are developers. So, those are probably not a big measure when it comes to real estate appraisal. But let's give it some time.
jointer.io is another startup in the field. With an attractive motto "using blockchain and AI to democratize commercial real estate", they want to go a step further and offer symbolized real estate not as a form of investment in a property but as an index, combining different properties.
It sounds great, but so far the website is not much about progress and has not yet been launched. A pop-up ad that says "50 investors saw this offer" when someone is trying to verify what the company has to offer is also quite sketchy.
Meridio also promises to "democratize real estate", boasting minimum investment requirements, reduced transaction costs and greater liquidity. It invites you to "browse properties", but to do so you need to register on the platform. We requested access, although at the time of writing there were no feedback from the team (see below). And the progress of the project, judging from its corporate blog, has not been very obvious recently.
Brickblock is one of the first players in the tokenized real estate sector and seems to be on the right track with legal links, partnerships and general progress. It is still unclear whether the project really meant to expose an investor to the possibilities of owning a fraction of a property. During the writing of this piece, we tried to register on the platform and there were some road blocks (despite the claims that it will only take 15 minutes to register).
The connection to the verification application did not arrive via text message as promised, the verification code to start the ID confirmation chat did not work (screen below). But overall it looks like a great start with a real prospect of getting somewhere.
What are the prospects for Real Estate Tokenized?
Although the real "democratization" of real estate and the ease of investing in tokenised resources could solve many problems, there is still a long way to go in many respects.
Above all because of numerous regulatory issues related to the tokenisation of real estate, particularly if we are talking about the global availability of such assets.
For now, it will be difficult to usurp traditional securitized real estate investment funds (REITs). Realty Income Corp., offers REIT investments in retail stores and currently trades at around $ 62 per share with monthly dividends of around 0.3% – 0.4%. Simon Property Group also pays quarterly dividends of 1% -1.3% and the price of approximately $ 164 per share at the time of writing.
I can buy it with a couple of clicks using the mobile application of my bank without legal complications and even my taxes are paid automatically from the profits received.
There is no doubt that the tokenised resources are the future and could be much cheaper and even possibly more profitable for the owners. However, there is still a long way to go. So we hope that an infinite number of enthusiasts invading space have enough energy and determination to understand it. I keep my fingers crossed.
And what do you think of tokenised real estate investment? How long will it take to get there? Go ahead and share your thoughts in the comments section below.
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