Tokenized Real Estate

Circumventing The Housing Crisis By Using Blockchains In Real Estate

From the mists of the ancient past all the way to the present, there has always been one real-world asset that has stood above all others: land ownership. For thousands of years, land ownership was only attainable by nobles, warlords, and kings, but this changed with the liberalization of economies. The ability to own and develop your own parcel became available to anyone who could afford it.

As economies modernized, the real estate field became available to working and middle-class workers, leading to skyrocketing levels of wealth for much of the developed world’s population. Unfortunately, the accumulated mistakes of the past half-century combined with novel economic forces are quickly reverting us back to a system where only the very rich can afford property while ordinary people are forced to rent perpetually.

Thankfully, technological solutions are emerging that can help those in the know circumvent the institutional and economic barriers that are being erected to prevent you from owning property. To understand how these technologies work to fix the problem, we need first to understand what’s going on and why it impacts you as a crypto investor. Let’s dig in:

Real Estate Woes

While housing prices should be falling drastically thanks to a nearly unprecedented 8% interest rate on mortgages, many markets barely saw a blip in prices since the 2021 peak. While every area has its own peculiarities, the primary reason for this comes down to a lack of supply.

The fact is, new housing is not really being built, and what new housing is being built is expensive and often geared towards higher-income buyers. Builders are suffering from supply and labor problems, making building new homes a far more expensive proposition than it was three or four years ago.

These problems are self-reinforcing: as new buyers are priced out of the market, they choose to continue renting or live with family members. With fewer new buyers on the market, builders are forced to build housing for those wealthy few who can afford to buy in the current conditions.

This doesn’t just impact the buyer’s market, either. As fewer people move out of apartments and into new homes, the supply of apartments also diminishes, leading to higher rents and even more people pushed out of the housing market entirely.

While higher rents are not ideal for their occupants, they do present an upside for those people and entities that own them. It may be one of the best times in history to own rental properties, which crypto investors should keep in mind.

What Makes Real Estate So Valuable An Asset For Crypto Investors?

For the successful crypto investor, it can be easy to dismiss the value of an asset that is tied to a physical location and comes with an enormous book of rules. Cryptocurrencies and other valuable blockchain assets are highly liquid and almost entirely unregulated. The only requirement for making money is a reliable internet connection.

Real estate does provide some advantages over crypto. Real estate is highly stable and, outside of extreme circumstances, is likely to only increase in value for years on end. It also provides avenues for passive income – you don’t need to sell portions of the property to get usable cash like with crypto. Instead, you get a regular supply of it every month.

Real estate is not likely to suddenly jump in value, however, and it’s a highly illiquid asset, as transactions can take months or even years. Choosing between the stability and income provided by real estate and the liquidity of crypto has been difficult for many investors for years. Thankfully, technology has come up with a better answer.

Technological Solutions With RealT

The Decentralized Finance (DeFi) marketplace has been hard at work bridging the gap between digital and real-world assets for the last half-decade. Companies in the space have developed a system where the value of real-world assets can be digitized in the form of tokens, which online buyers can buy and sell like any other digital asset.

One of these companies, RealT, has applied this formula to real estate, creating the first iteration of crypto housing. RealT’s real estate tokenization scheme allows investors to buy percentages of real estate holdings that the company manages.

Each token corresponds to a percentage of the property’s value and shifts in price in line with the rest of the property, meaning a 5% increase in property value over a year leads to a 5% increase in the token’s value. The blockchain developed for these transactions also allows token owners access to rental income, so a percentage of each month’s rent is funneled to each token owner in proportion to the percentage they own.

RealT’s token also solves the liquidity problem that makes real estate so onerous to a typical crypto investor. Tokens can be bought and sold in as little as 24 hours, meaning crypto investors can easily jump back into the fray if a bear market suddenly turns around overnight.

Investing in real estate comes with increasingly difficult hurdles: the high upfront capital required, high mortgage rates, and once bought, you’re stuck with it come what may. By utilizing RealT’s digitized real estate, you can circumvent the current housing crisis and enjoy all the benefits of holding real estate with none of its drawbacks.