Real estate is one of the most common types of investment today. After all, just owning a home and renting it represents a permanent passive income that’s really compelling. It is, in fact, one of the most profitable types of investments out there.
Even people who don’t rent houses sometimes invest in the real estate market, usually by flipping them. For those who don’t know, flipping a house means buying a property, refurbishing it, and selling it for a profit. The market for this has grown exponentially over the last decade, and many have grown rich doing that.
A Market Entry
The problem faced by new entrants is the amount of capital needed to get in the market. Buying a single house is a dream for many, and buying several to rent or flip requires millions of dollars. After all, your new house acquisition can be anything in the range of $300,000 or slightly less.
Luckily for would-be investors, blockchain aims to change the real estate market by making investment easier than ever. By using crypto tokens, the market can open its doors to minor investors, allowing everyone to invest in it.
The basis for this comes from the different types of crypto assets. While cryptocurrencies, such as Bitcoin, are the best-known ones, the blockchain hosts two other types: Utility coins and security tokens. Utility coins can be traded for services or goods from companies. Security tokens, meanwhile, represent shares in companies and the opportunity to reap earnings from an investment.
It is with security tokens, or a version of them, that the real estate market is changing. Using the blockchain technology, real estate properties can be converted into proof-of-asset tokens that work just as other crypto assets do. By hosting the rights to a property in the blockchain, you can spread its ownership among several people transparently.
And there’s more to that. One of the main features in the blockchain are smart contracts: automatically enforced contracts that need no external input. The blockchain holds records of their terms, and all transactions regarding them happen automatically through it.
A smart contract allows two or more parties to agree on how to distribute the earnings from a given project. All income from that project goes straight to the blockchain, where it is automatically and transparently distributed among parties. All of this without the input of lawyers or accountants or any intermediaries, since the blockchain would act as all of them.
This new paradigm opens several doors. Several people could chip in and buy a new property to flip with certainty that earnings will be fairly distributed. Just as well, joint ownership of a flat would give all of its owners their share of rent money automatically. Even already existing industries, such as time-shares, can be made fairer and more transparent by hosting them on the blockchain.
The Blockchain Frontier
The blockchain allows for trading of any assets to be a quick, painless experience where third parties are not needed. By hosting assets on the blockchain, you could buy or sell properties as easily as you can buy things at a supermarket. No need for paperwork, agents, or anything other than an agreement on it.
While this might look small, it’s actually a huge thing. If we trade our properties as we do other goods, the owners market will grow as more people jump in. The ease in real estate trading could well help smaller or newer players join, and more people would own properties. In a world with too many people and too few homes, diversifying the market could only help those in need.
The added speed when buying or selling properties would greatly help those looking for a home. Just as well, this speed would trickle down to the renter’s market, making all real estate transactions faster. This would also make it easier to sell one’s assets, as many of the current hoops would disappear. One could even sell only part of a property, turning it into a joint ownership one.
Then, the disappearance of many of the middlemen would make the market more accessible. If a prospective owner doesn’t have to pay brokers, lawyers, and notaries, the price of the final transaction goes down. This makes it easier for everyone to own a house, thus helping with housing crisis over the world.
Last, but not least, the virtual nature of the blockchain means distances would be rendered meaningless. One could as easily invest in one’s own hometown as one could invest in properties in Paris or London. Even local prices wouldn’t matter, as you could buy as big or small a percentage of a property as you can afford. By allowing this diversity, smaller markets could flourish, as bigger ones grow more and more crowded.
The blockchain can be used for even more things. The situations presented thus far will most likely happen in the future, but they’re hardly its only uses. More groundbreaking uses surface each day, some of which could change both the market and how we go about it.
For example, the blockchain could enforce security access to certain buildings. By recording everyone who goes in and out in a public, impossible to manipulate way, we could have trustable security ledgers. Or people thinking of investing in a locale could obtain real, verifiable data about it without needing extensive studies.
As we enter the blockchain era we can look forward to new paradigms that will shake up our markets. Blockchain is already revolutionizing banking and transactions, and now we’re looking into other uses of the technology. With its secure, quick transactions, it is only a perfect fit for the real estate market.
The possible uses of blockchain for real estate are still barely being looked into, but the future looks promising. As time goes on, we’ll find more and more uses that suit the security and automation of the technology. And there is a certainty that blockchain will help us build a larger, safer, better, and more convenient platforms for crypto assets management.
About Stevan Mcgrath,
Stevan, is a Bitcoin and cryptocurrency enthusiast, passionate about the potential these tools and blockchain technology bring to the world and writes consistently for CoinReview. He has been following development of blockchain for several years. To know his work and more details you can follow him on Twitter, Linkedin, Facebook.
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