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The opinions expressed by the entrepreneur's contributors are their own.
Buying real estate is generally a safe and profitable way to invest. Making a profit from these investments is pretty straightforward: they can be rented out for recurring income, or they can be sold when their value increases.
“Real estate is a great investment for many reasons. You can take advantage of great returns, amazing tax breaks, and real estate to build your wealth, ”says noted real estate agent James Harris.
Compared to stocks, real estate offers better returns, has a tangible asset, practically always increases in value over time, and comes with many tax breaks.
Investing in real estate, however, is far from being easy. It has its limits. Thanks to modern technology, however, these restrictions are slowly being circumvented or reduced to insignificance. There are ways to make the real estate ownership process better than ever and more accessible to all.
Related: 5 Reasons Real Estate Is a Great Investment
Barriers to Investing in Real Estate
Geography is one of the biggest barriers to real estate investing. Many countries have laws prohibiting foreigners from owning real estate. For example, Thailand, Vietnam and Greece mostly prohibit non-citizens from owning land in their respective territories.
Some of their laws against foreign property can have loopholes. In Thailand, for example, foreigners can become owners of condominiums as long as their share does not exceed 40%. Foreigners can also buy entire buildings in Thailand, but the land on which the property is built will never be theirs.
These aspects do not make real estate investments too tempting. However, by tokenizing assets, foreigners can invest in real estate wherever they want. LABS Group, a startup that pioneered end-to-end real estate investing through “fractionation”, offers a setup that allows anyone to legally invest in global real estate.
It does this by allowing investors to receive tokenized assets, which are basically digital assets that represent real estate. The tokenized assets are held by local investors who can legally own local real estate on behalf of the investors. The assets can then be sold by the local investors as soon as the value rises, or they can be rented out. The tokenized asset investor then claims the profit or income from the sale or rental of the property.
"Friends have often asked me why I shouldn't invest in foreign real estate, as is very popular in Vancouver, Melbourne and London, for example," says Yuen Wong, CEO of the LABS Group, because you have to have knowledge of the local market and the legality material could prove to be too much. In addition, the middleman costs are high. "
This type of solution can be seen as disruptive to the real estate investment market. It makes it easier for anyone from anywhere to benefit from the profitable real estate markets in different countries.
It is also worth noting that tokenization of assets allows investors to reduce or even avoid transaction taxes and regulatory fees, which can be up to 20% of the total value of the asset acquired.
Related: 6 Benefits Of Real Estate Investing For Savvy Business Owners
Fractionation of investments
Real estate investments aren't cheap. In general, it is not intended for retail investors. Not many have hundreds of thousands or millions of dollars to buy homes, land, or luxury goods as investments.
However, with the concept of fractionation of investments, retail investors can pool funds to buy real estate as investments. Such a securities service promotes the idea of partial ownership.
The securities service enables small or private investors to get involved in the purchase of a million-dollar beachfront property, for example. The property can generate rental income or profit after being sold at a substantial premium. The partial investors then get their share of the income or profit based on the amount they invested or the investment.
“Thanks to small investments and partial ownership, people from different economic backgrounds can invest in the future if they have the discipline to save on every paycheck,” says Imran Tariq, contributor to the entrepreneur. "This method is a great way to use extra money for work instead of earning just under 2% money in a bank savings account."
Incidentally, the fractionation of investments does not only work for real estate. It can be applied to different types of investments. It is backed by blockchain technology to ensure that property claims cannot be challenged, and there is a secure way for investors to identify their stake in the investments and claim their stake in the income or profits.
A smart contract is essentially a self-executing contract that automatically documents relevant points or events in a transaction and executes the conditions agreed by the business partners. Its application may seem far-fetched in the real estate market, but it is one of the disruptive technologies that creates convenience or advantage for real estate investors.
Thanks to blockchain technology, smart contracts enable complete transparency in real estate investment transactions. “The combination of intelligent contracts with blockchain increases security, reliability and reliability. Terms can be verified by independent parties, ”writes Prashant Shah in an article on the development, benefits, risks and challenges of smart contracts.
Back to the idea of fractional investing in tokenized real estate, it's obvious how complicated the transactions can be. There are many details in the terms that need to be tracked as well as numbers that need to be calculated. It would be great if all of these details were stored in a tamper-evident contract (blockchain) and all sorts of calculations and procedures were automatically implemented once the smart contract terms are met.
Smart contracts have the potential to make all property-related transactions faster and more accurate. For example, the respective shares of partial investors can be calculated and paid out automatically in order to ensure fast and relatively error-free investment transactions.
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The future of real estate investing
Indeed, new technologies have changed the way people invest, especially in places where ecological and geopolitical situations are unfavorable.
Asset tokenization allows investors to earn income or profits from real estate located in countries where it is illegal for foreigners to own other assets. By fractionating investments, small or private investors can take advantage of tempting real estate or luxury investment opportunities in other countries. In addition, the use of smart contracts simplifies the complicated processes involved in real estate investments.
These technologies are only the tip of the iceberg when it comes to technical innovations that will soon be available to the real estate market and other industries. There will be more innovative and creative methods, products or solutions to look out for and they are designed to make investments more accessible, faster and even cheaper.