How the Blockchain Technology Security Is Changing the Luxury Real Estate Market
Investing in luxury goods has always been a synonym of financial wealth, but limited to a lucky few. In this sense, you usually would not recommend a high-end condominium project as a smart investment to one of your smaller clients.
Thanks to blockchain technology, however, this is a real possibility now.
As you probably know, diversifying your investments is one of the basic principles of financial stability. And taking advantage of the opportunity to invest in real estate properties with small initial investments can change your clients’ financial journey.
In this article, we will show you how blockchain technology has revolutionized the real estate market, specifically how you can use it in your favor as a real estate broker and power your clients portfolios. portfolio.
Blockchain for Newcomers
If you have been following the financial markets, including banking, cryptocurrencies or high-profit investments, you probably heard about blockchain. But… What is blockchain technology?
In a nutshell, blockchain is a database technology used to store information. It records data into blocks that are linked together within a chain, hence… blockchain. Whenever new information and data comes in, it is saved in a new block.
Assets can be tangible, like fiat money or a house, or they can be intangible, like copyrights or intellectual property. Despite its nature, virtually every asset in the world can be bought, sold, traded, and tracked within a blockchain network, thus eliminating any potential fraud, increasing transparency, and reducing costs and risks for all parties involved in the process.
Blockchain in Real Estate & It’s Multiple Benefits
Since blockchain technology was implemented in ‘real world’ products, real estate became the biggest type of asset where tokenization can provide extra value. (There are about $230 trillion in total real estate assets.)
In case you are wondering, real estate tokenization is fragmenting a property into a number of digital tokens of equal value. One of the many benefits it has brought about is the reduction of minimum investment needed to enter the market. Thanks to tokenization, ticket sizes can be reduced to as little as $100.
Another example of how this technology has completely changed the model is real estate crowdfunding, which led to the democratization of the whole market. By using smart contracts within the blockchain technology, investors can reach an exceptionally high level of security in all of their transactions, and liquidity in their investments.
As a matter of fact, liquidity was one of the problems real estate could not solve, especially for big development projects, which at times are on the market for sale for long periods of time.
But since crypto tokens can be sold whenever and wherever the investor wants, this leads to limitless possibilities. This way, projects can achieve their capital goals faster, easier, and with lower costs than doing it with the traditional crowdfunding method.
With respect to waiting times, blockchain accelerates almost every process in real estate. As previously stated, information is stored in blocks to keep a record of every owner and transaction, and they will also contain valuable property or deal data, such as land registry, technical information, title deeds, ownership information, etc.
Blockchain Technology Security: Is It Actually Safe?
This is probably the most relevant question, and the short answer is: Yes, blockchain technology security does work and it really improves the overall real estate investment ecosystem.
But, how does it work? Put simply, through the implementation of smart contracts.
Smart contracts are an unparalleled type of document designed within the blockchain system and do not require third parties’ intervention. They are the equivalent to the traditional paper contracts but, since all information is stored in a blockchain, it prevents any potential modification, improving transparency and security in all transactions.
In general, smart contracts are coded with a set of specifications and rules to be automatically executed and followed at certain points in the process. This way, there is no room for any misinterpretation usually present in traditional operations.
Let’s put crowdfunded real as an example. Once the actual fundraising is complete, the smart contract will issue all the property tokens and divide them among all the investors, granting them full and immediate ownership of every token.
During the project’s development process, investors can also check the status and keep track of its evolution. Once it is finished, the smart contract will automatically send the earnings share to all parties, including brokers, financial advisors, and other people involved in the transaction.
Is It Smart for Brokers to Include Tokenized Real Estate in Their Services Portfolio?
As blockchain technology’s presence continues to grow in the real estate industry, potentially eliminating all intermediaries, many wonder what the future looks like for brokers and other real estate players.
In that regard, people still will need someone experienced they can trust before making an investment decision, even in an environment where tokenization, and everything it entails, is the rule and not the exception.
Our platform allows brokers to offer all-size projects to all their client base without the need of a massive amount of money to invest. They can be part owners of a 5-star hotel in South Florida without moving from their homes.
This is more of a matter of when than if. So, if you don’t want to be left behind, you should include tokenized real estate crowdfunding projects in your portfolio.