Real Estate Asset Ledger
The cleverly acronymed Real Estate Asset Ledger (REAL) is important, because it’s one of the first instances ever of a seamless platform for investing cryptocurrency in real estate. Blockchain solutions have been nibbling around the edges of the real estate market for a while. That’s still a big deal. We’ve reported on it.
But involvement has been limited. We’ve noted limited applications of blockchain tech to specific real estate issues like listing databases or mortgage payments. There’s been no large-scale attempt to buy into the real estate market as a whole.
Meet REAL. REAL is interested in the big show: making it possible to invest in and even purchase real estate with cryptocurrency. That’s new.
In fact, it’s new two ways. Not only is it, y’know, using a completely new form of money, it’s doing it in a way that’s still drawing open-mouth stares from Realtors and commentators alike when it’s being done with normal dead-tree/president money. That would be low-equity investment.
TL;DR on low-equity investment, or to use REAL’s term, “real estate crowdfunding,” goes like this. Instead of a single party owning a given piece of real estate and selling it to another via a structured series of payments secured with collateral (or “mortgage”; you may have heard of it) a group of investors, not necessarily connected, buy shares in real estate like any other investment and profit from any rise in value.
REAL is a real estate crowdfunding platform.
It lists properties interested in being crowdfunded, accepts investments in REAL Tokens, its in-house cryptocurrency, and pays out in Ether, a more widely used cryptocurrency, to be spent on cars and sandwiches and things.
So the REAL offer is twofold: cryptocurrency and crowdfunding. Rad. Who cares?
REAL’s argument for cryptocurrency is pretty much the same as NAR’s, as explained here: real estate requires investment, and cryptocurrency is a giant pile of value no other investment space has seriously leveraged yet.
Investors with limited options get a huge chance to profit, real estate gets committed investors – win-win.
Their argument for crowdfunding, however, goes a step beyond. I have previously waxed lyrical on the benefits of distributed risk. That’s always been the problem with mortgages as a financial tool: failure sucks, hard, for everyone. Having multiple investors rather than a single mortgage means a bunch of people benefit when things go well, and one person isn’t left holding the bag when things don’t. That provides means to forego conventional foreclosure, since all investors, occupants included, have a vested interest in the property getting more valuable and don’t lose everything if things go south.
That’s good news both for the P&L sheet and the soul. Due respect to our Dickens villain readership, most real estate professionals don’t actually like making people homeless.
REAL identifies a plus that didn’t occur to me, because, for once in my digital life, I wasn’t thinking in terms of blockchain. Crypto plus crowdfunding equals international.
Being peer to peer, cryptocurrency values are determined between people directly.
They don’t care about borders. There’s no difference between an American REAL Token and a Chinese one. Real estate crowdfunding alone was worth $3.5 billion last year. Forbes estimates the global crowdfunding industry as a whole at $300 billion by 2025. That’s a lotta tokens.
What’s to come
Whether REAL’s model is the best way to take advantage of that is an open question. What isn’t is that both crowdfunding and cryptocurrency will be a part of the real estate market in the coming years. Plan accordingly.