Top Blockchain Applications Making Waves in Commercial Real Estate
Top Blockchain Applications Making Waves in Commercial Real Estate
The commercial real estate (CRE) industry is comprised of many different types of service providers, including property management, brokerage firms, banks, and other types of lenders. When a CRE transaction takes place, there are various operators involved, requiring extensive sharing of official property documents, and financial information which need to be validated. The requirements for validating all information across all parties slows down the speed of each transaction, which can take weeks and months to complete. Many CRE firms have turned to blockchain to speed up execution times, decrease error and increase transparency in each transaction.
What Is Blockchain?
Blockchain technology is a way to store and transfer information in an encrypted manner by distributing data instead of copying it in a central location. Blockchain does so through a cloud, peer-to-peer network that eliminates the need for a third party, which ultimately reduces transaction fees. A digital ledger is then created and updated with each financial transaction in blocks.
There are plenty of benefits to making transactions and transferring data using blockchain as the technology is not controlled by one central entity, such as a central bank. This means that breaching these blocks is extremely difficult, maintaining the sanctity and transparency of its transactions and data.
Blockchain is the backbone of cryptocurrencies such as Bitcoin, which offer speedy and low-cost ways of sending and receiving money.
Faster Transactions
One of the most exciting ways blockchain is disrupting the CRE world is in the form of smart contracts. The industry currently relies on an inefficient system of old-school verification of property ownership by conducting research to ensure the property belongs to the party who is selling it.
Blockchain can reduce the speed in which the chain of custody regarding CRE properties takes place as a property’s title would be stored on a public ledger. This would remove the need for another central repository, thus reducing transaction, state, city and legal costs. The same principle would apply for leases that would be recorded via blockchain.
More Transparent Deals
Blockchain can also ensure that real estates assets are more liquid and the terms of the agreement are fully understood by both sides as every piece of data regarding a property would be stored publicly. This includes data surrounding former owners, construction done on the property, past maintenance costs and records regarding former inspections.
Having all this information available would give the investor a more comprehensive idea of the property they are investing in. Blockchain essentially ensures that everyone is on the same page and both sides are fully aware of what they’re getting into as every piece of information is out there for anyone to access.
Digital Paper Trail
Another challenge with the CRE industry is the fact that public records can be outdated, unreliable or not available. Following a property’s paper trail can be time-consuming and frustrating as a lot of this information is lost due to poor organizational skills from industry workers and legacy systems that lose data when updated.
With blockchain, every piece of information on a property would be available in the same place rather than in multiple physical and digital domains. Blockchain would also help to eliminate the type of fraud that sometimes exist in the industry as deeds and titles can be counterfeited easily.
Buying Property With Cryptocurrencies
As previously mentioned, Bitcoin is a cryptocurrency that relies on blockchain to complete financial transactions online in a matter of seconds. Some investors and real estate firms have started adding Bitcoin to the industry, including Ivan Pacheco, who bought a two-bedroom condominium in Florida for $275,000 in Bitcoin.
In the residential space, you can buy a condo on the Lower East Side of Manhattan with Bitcoin. Meanwhile, some apartments in New York City are allowing their tenants to pay for rent using Bitcoin. Cryptocurrencies have been historically volatile and they’ve been on the decline since peaking in December 2017, but some investors believe that the future of real estate will be closely tied with Bitcoin and other digital coins.
Nevertheless, blockchain’s role in the CRE industry is becoming more prevalent each day. The technology’s potential to speed up transactions with smart contracts, its ability to add transparency to a deed or title and the fact that it dramatically decreases the chance for fraud suggest that more investors will flocks towards firms that use blockchain for CRE transactions.
This article first appeared on RealAtom.
June 2018 News & Happenings
The Crypto Corner: The Candle That Can Make You Money
Curious about cryptocurrency? Read my blog post that outlines it here...
The Crypto Candle is a genius, innovative candle that I think is about to take the world by storm. Perfect for as a gift for those who have everything, or the person in your life who has been wanting to break into the cryptocurrency space - or even for yourself, at a mere $45 with a chance to win over $7K, why not fill your home or office with infusions of Oakmoss, Sandalwood, and Amber-Patchouli? The concept is simple... it's an interactive experience for each recipient and kind of like getting a golden ticket. Burn your candle to make your token appear. Each token has a unique code printed on it; redeem your code to determine your winnings. 1/100 tokens may be redeemed for .01 Bitcoin, 1/2500 tokens may be redeemed for .5 Bitcoin, and 1/5000 tokens may be redeemed for 1 Bitcoin. The current value of 1 Bitcoin, at the time this post was published, is $7,347 US dollars.
The Crypto Corner: Cryptocurrency & Your Real Estate Transactions
Whether it's Bitcoin or another cryptocurrency such as Litecoin, Ethereum, Ripple, Zcash, Monero, or others, this is a new field for many - and while the opportunities to do well are ample, it can be a confusing place for those new to this kind of technology. I am always here to break new technology down to my clients, to ensure that you're armed with the necessary facts to make knowledgeable and well-informed decisions when it comes to investing with cryptocurrency. First and foremost, I want my clients to know all of their options in terms of their real estate transactions, and I want them to always feel incredibly confident in the choices they make regarding their investments.
Below are some questions that I am frequently asked...
What are the benefits of using cryptocurrency for my real estate transaction?
Cryptocurrency funnels through blockchain. The advantage of using it in real estate is that you don't want to have all your coins in one basket. You can make a lot of money investing in cryptocurrency and then purchase something tangible (such as real estate). When purchasing a home with cryptocurrency, it is similar to a cash transaction. You still have to show proof of funds, pay taxes, and record title the traditional way of purchasing homes. We have an escrow company set up with Bitpay, which will convert your cryptocurrency into cash. There is an extra fee you have to pay using Bitpay to convert the coins. Also, because you have to record title with the county recorder, it is not an anonymous transaction type.
Is it safe?
There is always a risk that the cryptocurrency market will go down while you are in the transaction. Should that happen, you need to have enough cryptocurrency or cash to make up the difference. That is shown in the proof of funds.
What is the difference between cryptocurrency and bitcoin?
Cryptocurrency relates to all crypto coins. Bitcoin is just one coin out of thousands, but is the most well known and the most popular coin at this time.
What is the first thing I need to do if I want to buy property with cryptocurrency?
You need to show Proof of Funds, like with any Real Estate Transaction.
Something that I find to be of interest to many and one reason why many are motivated to engage with crypto and are utilizing this in their real estate transactions is that cryptocurrency is not governed by any governments as of yet. Once this changes, and the government becomes involved, they will start tracking it and taxing it. For those not wanting the government to know what they have, and not wanting to pay tax on it... cryptocurrency is a golden opportunity area.