Blockchain technology in real estate is fundamentally new, therefore bringing about monumental changes into the real estate industry. Before looking at the impact of blockchain technology in real estate, let’s answer a common question: What is blockchain technology?
What Is Blockchain Technology?
For about a decade now, cryptocurrency and Bitcoin technology have been in the news and the center of discussions. Bitcoin technology came about in 2008, after the historical US financial crisis. To answer the question “What is blockchain technology?”, it makes sense to start with understanding bitcoin technology as it is the most popular use of the technology.
Bitcoin technology was the first mainstream cryptocurrency. It’s described as a peer to peer electronic cash system. What this means is that payments can be made online from one person to another without any kind of financial institution (a bank or a financial regulator) in between.
So, what is blockchain technology and how does it come into play into bitcoin technology? Blockchain technology essentially takes the place of the intermediary who would traditionally handle financial transactions (checking for their authenticity and upholding the integrity of the process). All of the transactions involving bitcoin technology are recorded on a public, digital, decentralized ledger. As a new transaction occurs, it is recorded as a “block” and added to the chain of previous blocks. Every person who has access to the blockchain technology can see the change in the common digital history. In this way, fraud is limited through transparency. Financial transactions are protected, especially from an intermediary, who, as the US witnessed in the 2008 financial crisis, isn’t always to be trusted.
Blockchain Technology in Real Estate
While blockchain technology in real estate has yet to become common practice, there are many benefits that can’t be overlooked of using this technology in real estate investing.
Blockchain Technology in Real Estate = Upgraded Online Real Estate Markets
With blockchain technology in real estate, online real estate markets and platforms are no longer simply a means of connecting real estate buyers to sellers. The online real estate market can be converted into something more like a stock market. So, rather than just allowing buyers to find sellers and vice versa, online real estate markets will be able to fully handle real estate transactions online.
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Blockchain Technology in Real Estate= No Real Estate Intermediary
Income property investors know that in order to purchase or sell investment properties, more than one real estate intermediary is needed. These can be real estate brokers, real estate agents, lawyers, lenders, and banks. Blockchain technology in real estate is able to perform the job of each of these. From listing investment properties to handling all of the payments for real estate transactions, to even taking care of legal documents, blockchain technology becomes the ultimate real estate intermediary.
Why is getting rid of every real estate intermediary a positive aspect of blockchain technology in real estate? There are a few reasons, and experienced as well as beginner real estate investors will attest to them:
- Blockchain technology in real estate can save real estate investors money by cutting out every real estate intermediary: No more commission costs or closing costs for banks.
- Not having to look for trustworthy real estate brokers or lawyers as well as not having to wait for them to process paperwork will save real estate investors a lot of time.
- What saves income property investors both time and money? Avoiding real estate investment scams which, unfortunately, happen more often than you might think through the real estate intermediary.
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Blockchain Technology in Real Estate = Illiquid Investments Become Liquid Investments
Investment properties are generally viewed as illiquid investments, as selling them doesn’t happen overnight. On the other hand, cryptocurrency, bitcoin technology, and the like are considered liquid investments. Liquid investments can be easily sold or traded for cash without losing any of their value, unlike illiquid investments. Blockchain technology in real estate allows investment properties to be readily sold, converting them from illiquid investments to liquid investments. Changing real estate investments from illiquid investments to liquid investments could give real estate investing an upper hand on other types of investing, like stock investing.
Blockchain Technology in Real Estate = Fractional Ownership of Real Estate Investments
Blockchain technology in real estate opens up the doors of real estate investing to the masses. Traditionally, real estate investing requires large sums of money to purchase investment properties, even with a mortgage. With blockchain technology, fractional ownership of real estate investments can become more common. Real estate investors would be able to buy and sell fractions of investment properties as they pleased with blockchain technology in real estate. Fractional ownership of real estate investments has a few benefits in itself:
- Real estate investors can avoid rental property management through fractional ownership of real estate investments. This means not worrying about upkeep and maintenance of investment properties or dealing with the issues of tenants. This can save money for real estate investors.
- Rather than using investment properties as collateral for a loan, income property investors can use fractional ownership to fund real estate investments.
- It’s even possible that real estate investors can still enjoy their own investment properties if they outline it clearly in any agreement for fractional ownership.
Blockchain Technology in Real Estate = Secure Real Estate Transactions and Assets
Blockchain technology in real estate investing leads to full transparency in online real estate markets because it is decentralized. Any information on the blockchain is available to every real estate buyer and seller. This technology brings trust and security, allowing real estate investors to move forward in transactions with confidence. This kind of transparency will lessen any attempts at fraud for sure.
Blockchain technology in real estate investing seems to be the future of the industry. As it is optimized even further, more and more people are bound to get on board with this technology as it has so many benefits that other industries are already thriving on. With new companies taking advantage of blockchain technology in real estate, it’s a good idea to know exactly what this means for the future of real estate investing.