Investing in real estate has long been one of my favorite tools to achieve financial freedom. Now, with blockchain technology crypto real estate investments could become even easier and more accessible to everyone.
But what are some crypto real estate investment opportunities out there? And how can you get started investing your cryptocurrency in real estate? I’ve compiled all of the information I found on this topic right here!
There are several crypto real estate investments available right now. The most well-known is RealT which offers fractional crypto real estate investing on the Ethereum blockchain. Another project is Meridio. They also harness the power of the Ethereum blockchain to tokenize real estate assets and offer those tokens to real estate crypto investors. Lastly, although it is still not accessible, Slice is a promising project as well.
What is crypto real estate investing?
Crypto real estate investing is the process of tokenizing real-world properties and offering them as fractional crypto investments to investors.
In other words, a real estate property is split up into a certain number of parts. For each of these parts, a crypto token is then created. The tokens are linked to the actual property through the use of smart contracts that execute rent payments and distribution to investors automatically.
Investing in real estate with crypto is as simple as purchasing and holding the real estate token in your crypto wallet. The token serves as proof of fractional ownership of a specific property.
Let’s look an example!
The property above is currently available on RealT as a crypto real estate investment.
As you can see, the asset price is $582,200 and the token price is $145.56. This is because the property as been split into 4,000 tokens, each token representing fractional ownership of the entire asset.
With 4,000 token the price per token can simply be calculated like this:
Property value / number of tokens = Token value
If we then have a look at the details of the listing page, we’ll also see the exact amount of rent one token will generate.
Again, this is simply the total rent divided by the number of tokens.
Why crypto real estate investing?
So, why should you care about this? Why should you invest in crypto real estate project? Let’s look at some of the benefits these type of projects have over traditional real estate investments.
One obvious advantage of crypto real estate assets is the ease-of-use. Buying or selling a crypto token (and thus a stake in a property LLC) does not require and contracts, lawyers, or regulators. It’s as simple as purchasing the token.
There are also no complications when receiving rent distributions from your crypto real estate investment since the returns are transferred directly to your wallet.
Another huge benefit is the complete transparency of transactions and ownership. Since all transactions on the Ethererum blockchain are completely visible to the public you can check every transaction detail on Etherscan:
Not only will you be able to view all transactions related to a specific token, but you’ll also see who (= which wallet) owns how much of each property. As a result, property ownership becomes much more transparent.
The single biggest advantage for retail investors is that crypto real estate assets allow for fractional ownership. That in itself is not surprising since traditional real estate syndications have made use of this concept as well. However, the level of entry has never been that low.
With most real estate syndication (= direct ownership of a property) you needed to invest a minimum of somewhere around $20,000 and upwards.
With fractional ownership in crypto real estate, the minimum investment simply is the price of one token which can be as low as $50.
Real estate is generally considered one of the least liquid asset classes on the market. If you invest in an individual property through syndication, you could expect to have your funds locked up anywhere from 3-10 years. Additionally, it is entirely in the syndicator’s power when to sell or refinance the property and return capital to the investors.
With tokenized real estate things are very different! Not only do most crypto syndicators offer to buy back the token at no extra cost, but you’ll also be able to sell your token on the open market.
As you’re reading this, crypto real estate tokens are being sold, bought, and swapped on decentralized exchanges like Uniswap.
How to invest in real estate with crypto
There are several ways to invest in real estate with the cryptocurrency of your choice. Most of them involve purchasing a token that represents fractional ownership of a property.
These tokens can be usually purchased with other digital assets such as Bitcoin, Ether, or various stablecoins.
Once the token is purchased it will appear in your crypto wallet.
This token serves as proof of ownership and thanks to the smart contract you signed when purchasing the token, you will have rent payments distributed directly to your wallet.
Crypto real estate investment projects
In this section, I’ll go through a few crypto real estate projects that I have personally tried out. Keep in mind that this entire industry is still fairly young, so there are some technical and legal hickups to be expected along the way.
That said, the three projects below are taking innovative approaches to make real estate investing available to all investors.
RealT is probably the biggest and most established player in the space. They offered their first investment property in early 2019 – a single-family home in Detroit.
Since then they have steadily expanded their portfolio to also include multi-family properties in the Detroit area. Although offers are still fairly limited and there is no great diversification in terms of property location, RealT is growing by leaps and bounds.
(Read: RealT Review 2020)
Meridio’s focus is commercial real estate, i.e. office buildings, storage spaces.
They have built their platform and investment structure on the Ethereum blockchain and use tokens to manage ownership and distributions.
In order to view their offerings, you’ll have to register and be approved by their team. But, usually, this will only take about 72h.
Slice is another syndicator solely offering commercial real estate as a crypto investment.
Although their marketplace is currently only available to pre-approved investors, their portfolio looks well diversified with returns far above market average.
Crypto real estate investments are coming, and they are coming fast. As the tokenization of real-world assets progresses, real estate will be one of the first industries to experience a major disruption.
This is due to the multitude of benefits crypto assets have over traditional property ownership. Tokens are simple to purchase and sell. They can be swapped for other tokens or be held in a crypto wallet and serve as proof of ownership. Smart contracts enable automated distributions to investors and reduce banking fees.
There are some interesting projects already competing to offer the most competitive returns of properties on the crypto real estate market. Among those are RealT, Meridio, and Slice.
Personally, I am very excited for the advent of tokenized real estate. Combining the inflation-proof returns of real estate with the power of blockchain technology will be a game changer.
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