Who does not want to be rich? Nobody, right but only few manage to build wealth. Did you know why? Rich people knows the secrets of building wealth which is why they invest in assets they grow in value overtime, commonly known as appreciating assets.
Real estate is one of the favorite investments and is the main reason behind most multi-millionaires and billionaire’s success. Real estate industry in general and real estate investing is going through a paradigm shift after the advent of blockchain technology.
One of the biggest downsides to real estate investing is that it is only accessible to rich people as it requires a sizable investment. Then there are liquidity issues and exorbitantly high fees that deter middle class and lower middle class to dip their toes in real estate investing. Slow transaction speeds and complicated layered processes makes matters worse.
Blockchain technology is here to resolve all these issues and kickstart a revolution in blockchain industry. What was initially developed as a model for managing and securing cryptocurrency transaction went on to become one of the most disruptive technology worlds has ever seen. It is basically a public, decentralized digital ledger which is used to record transaction in real time. It simplifies and secures multiple transactions.
In this article, you will learn about seven ways in which blockchain will transform real estate investing.
1. No Middlemen Involvement
Blockchain technology will throw the long, slow, and painful real estate transaction process out of the window and make real estate investing more accessible for everyone. Thanks to its ability to automate systems and reduce human involvement, you can easily streamline the process without compromising on the security aspect.
This means that there would be fewer intermediaries involved in processing real estate transaction, which will accelerate the process just like mobile app development process. You might be able to process real estate transaction without lawyers, brokers, banks, appraisers and third parties. Due to this, we might see more and more people invest in real estate as the barrier to entry will be lower than what it used to be in the past as investors can now directly deal with motivated sellers.
2. Tokenization
As mentioned before, only rich people had access to lucrative real estate properties in the past but blockchain is here to change that. By tokenizing ownership of real estate assets, it will give investing opportunities to middle class population. It breaks down the real estate asset into tokens and stores them. The owner of the real estate property can sell these tokens via secondary trading methods. As a result of this, people can buy smaller shares of large real estate properties, which they cannot afford to own. This can prove to be a game changer for real estate industry.
3. Lower Costs
When there are no intermediaries involved in a real estate transaction, the cost will come down. Both buyers and sellers do not have to worry about paying these middlemen anymore and can reap the benefits of reduced costs. Whether it is loan fees, transfer fee, inspection costs, registration fees or commissions, you do not have to pay any of these. What is more, you don’t even have to pay taxes and underwriting costs depending on the region you live in and want to buy real estate property in. This can be a godsend for real estate investors who don’t want to pay those hefty fees.
4. Improved Liquidity
Gone are the days when you must wait for months and in some cases, even for years to sell your real estate property. With tokenization, investors can easily sell and buy a portion or complete real estate property and get immediate cash in return. This give them more room to invest in other real estate properties as well and put an end to liquidity issues. Tokenization makes real estate much more liquid as it flows from one hand to another more quickly and efficiently. This will be a huge departure from slow and lethargic real estate process we have in place and can serve as a breath of fresh air for the real estate industry.
5. Accurate Land Titles
Even in today’s digital age, land registration is still handled manually. This increases the chances of errors. That is the reason why we see error in land title reports. This also increases the risk of fraud and misinformation. By moving all the real estate documentation into a central ledger, you can minimize the risk of fraud and run complex title searches. This will create more accurate and cost-effective land titles with no risk of fraudulent transactions.
6. Smart Contracts
With blockchain implementation in real estate industry, traditional contracts will become obsolete and will be replaced by smart contracts. Smart contracts are executed automatically with specific instruction written in code. These contracts are stored in blockchain, so they are also secured. The code is written in easy to understand programming language that uses if-then-else statements. This allows you to automate rent payments as well as all other real estate relationships.
7. Better Investor Tenant Relationships
One of the biggest advantages of implementing smart contracts is that tenant can not skip rent payments. Even when they do so, it only means that they do not have the financial resources to pay the rent. This eases investor-tenant relationship and removes tension from the relationship. If the tenant refuses to pay the rent, you can begin the eviction process.
Conclusion
Since blockchain removes all the hurdles that prevents people from investing in real estate, it will create new opportunities, applications and use cases. With middle class population having access to lucrative real estate investing opportunities, it can shrink wealth inequality gap. It is important for real estate industry to leverage blockchain technology and reshape the future of real estate. With the right education, training, and implementation, you can reap real benefits of blockchain technology.
How will blockchain impact real estate industry in your opinion? Let us know in the comments section below.
