9 Ways Blockchain Technology Could Disrupt the Real Estate Industry
The real estate industry has traditionally been slow to adopt new technologies, but “this time might be different” as blockchain technology is an enabling technology that some experts believe will have an impact on societal on par with the internet. Blockchain, the technology that powers cryptocurrencies like Bitcoin, is essentially a decentralized ledger that allows the rapid buying and selling of interests in real estate vis-a-vis “tokens” that are completely secure and transparent.
By utilizing blockchain technology in the real estate industry we can reduce the need for certain intermediaries, reducing cost while increasing the speed of transactions.
Here are 9 ways blockchain technology could disrupt the real estate industry:
Democratize access to ownership:
By transforming ownership into a series of tokens, the initial buy-in required can come precipitously down. For example, Bonfire recently sold 10,000 tokens of a $310,000 Single Family Rental. For $31 a token, one could own a pro rata share of the asset.
Improve speed:
Since ownership is recorded on the blockchain, one doesn’t need to go down to county assessor offices and deal with time-consuming entities like notaries and signatories. Ownership can be transferred in seconds as opposed to weeks.
Lower Transaction Costs:
If ownership is recorded on a tamper-proof blockchain, what is the need for costly third-party services like title insurance? Additionally, smart contracts can facilitate release of funds when criteria has been met, further reducing legal expenses.
Liquidity:
Tokenization enables real estate assets to be traded like stocks and facilitate liquidity to an asset class that has historically had very little liquidity.
Tokens can have real time metadata to be stored in each token:
Tokens built off smart contracts that have “metadata” embedded in them would provide token-holders with asset and market-level data that otherwise would be hard to find. A truly “smart” token would be consistently updated with real-time data on things like, what percentage of tenants have paid rent this month, current capital reserves, etc.
Transparency and security:
With blockchain technology, ownership is recorded on a public blockchain. There is an immutable and permanent record of token ownership which provides both increased transparency and security for buyers and sellers.
Make property management more efficient:
Blockchain technology can automate property management tasks, such as rent collection, maintenance requests, and the returning of deposits, further reducing the workload for property managers and providing a more streamlined experience for tenants
Enable international buyers to access domestic real estate:
Historically, there aren’t simple ways for international investors to access markets like the US due to the need for large lump sums. Tokenization reduces the minimum investment required and facilities access to new asset types and geographies that have never been available before.
New form of capital in the capital stack:
Tokenization of real estate can crowdsource capital from all over the world and enable accredited and unaccredited investors to pool resources together, creating a new form of equity or mezzanine financing for developers or sponsors.
Conclusion:
In conclusion, the potential for blockchain technology to disrupt the real estate industry is significant. From streamlining transactions, reducing costs,increasing transparency and security, and democratizing access, the benefits of blockchain in real estate are clear.
Bonfire’s mission is to enable anyone who wants to own real estate to get on the property ownership ladder. Join our waitlist to stay informed about the latest developments in blockchain technology and its impact on the real estate industry.