Is Crypto the New Way Forward in Commercial Real Estate Investing?

Does Blockchain Have the Potential to Alter the Business World Around Us?

Cryptocurrency made waves in the world of investing over the last decade, and blockchain technology is taking place of traditional investment transactions. The future of blockchain is near. Blockchain can be implemented in a variety of industries, including commercial real estate. The professionals at Lumicre are taking a dive into the world of cryptocurrencies and applying the principles of blockchain technology to the many components of CRE investments. Join us as we share the basics and explore the benefits of blockchain.

IBM defines Blockchain as a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.

An asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, reducing risk and cutting costs for all involved.

Each block is connected to the ones before and after in an irreversible chain — A Blockchain

The blocks that make up a blockchain are always accessible in real-time and record exactly how much data is stored in each block and at what time that block was created. Each block is given its respected number in line of the blockchain. For example: block 1, block 2, block 3, and etc. This is known as the block height. Thus, why we refer to it as a blockchain. Users can look up a specific block to gather historical data for analytical purposes further fueling their confidence knowing the information projected is 100% error-free.

A Brief History

In 2008, during the economic crash of the United States and the global financial crisis, a new asset was created known as Bitcoin. This new asset sparked a revolution among governments, financial markets, and our everyday lives.

In 2009, the Bitcoin network went live, introducing a brand new technology, blockchain. On top of that, this newfound technology was found to be censorship resistant, as well as resistant to any manipulation by a single party. Cryptocurrencies are extraordinary in how they can be exchanged in U.S. dollars, pounds, Euros, and Yen. A central bank or country does not control cryptocurrency.

Therefore, it makes it different from most currencies controlled by a nation. If you are confused here is a crash course for those who need it. After my recent interview with an expert in blockchain technology, I was given his thoughts on how the use of blockchain technology can be proven beneficial to commercial real estate as well as a thorough rundown on what exactly a blockchain is.

Benefits of Blockchain in Commercial Real Estate

Less Third Party Involvement

An important step of commercial real estate transactions is escrow. Escrow facilitates a full-proof guarantee that the funds promised in good faith are valid during the handoff of title from seller to buyer. Hence, an escrow account protects all parties involved in a transaction. The funds are dispersed when all terms and conditions are met and when the money is determined non-fraudulent.

Implementing blockchain eliminates escrow processes causing an enhanced transaction speed through the utilization of the peer-to-peer network. In essence, a peer-to-peer network handles the direct exchange of an asset with no central authority, leading to decentralization. In latent terms, the public records produced from every transaction can’t be altered.

In the typical world of real estate, all transactions take time. It takes time to inform each party as each part of the deal slowly advances through the process.

In the world of cryptocurrency, all records update automatically and involved parties remain up-to-date in real-time.

No Need To Wait

Blockchain eliminates the need for in-person commercial real estate transactions. It is typical for the professionals in the commercial real estate industry to be constantly on the move. Historically, it is required to be present for transactions, which in turn can slow down the process. The added layer of security allows investors to sign contracts and send money from anywhere in the world.

With the implementation of b blockchain in commercial real estate, the investor’s presence is no longer necessary for a third party to approve your transaction. Along with the instant finality aspect that blockchain offers, international transactions are made quicker and more efficient, thus reducing the risk that’s currently in place.

Foreign Investing Made Easier & Less Costly

International Investors often find investing abroad costly and slow. When considering a banking calendar, transactions do not process on weekends and most holidays year around. Whilst paying an expedited cost, it can still yield a few days for funds to be processed.

As any business person knows, time is money. The longer you wait for your transaction to go through, the longer it takes for you to begin working to turn a profit on your new investment.

Blockchain allows for transactions to happen instantly from anywhere around the globe.

Another benefit to the implementation of blockchain technology in commercial real estate is the averted risk in relation to currency exchange rates. Blockchain greatly improves investors’ outcomes in countries with lower valued currencies to break through markets with high-value currencies giving them a swinging chance of turning a profit.

Get A Goodnight Sleep With Total Security

The intricacies of commercial real estate transactions are typically not disclosed, keeping the curtain drawn to the commercial real estate world as a whole. Though cryptocurrency allows users to conduct private transactions at a higher rate, it is standard practice to make everything public. Allowing the public to lift the veil of secrecy provides greater understanding to those in the commercial real estate industry, further granting access to key trends. This leads to better practices and overall effective decision-making.

Young entrepreneurs can learn the ins and outs of the industry by seeing what is going on. As far as data breaches are concerned, total security from blockchain is the future. One of the more exciting features of blockchain technology is that it cannot be hacked. This technology is decentralized, which means there’s no single point of access for hackers. Funds and confidential information are protected against hackers in the event of an attempted breach, which is not possible.

Micro-Investing Made Easy

In recent years, micro-investing has grown in popularity. Instead of one large entity funding an entire commercial real estate purchase, a group of individuals can work together to fund a purchase, allowing for a much lower barrier of entry to investing. The problem with these micro-investments is the cost of transferring money.

With multiple small transactions, transaction fees add up. Cryptocurrency lowers those fees to almost nothing, leading to a much higher return on the investment. Many companies are implementing the use of Micro-investing through crypto-based apps.

Lumicre helps investors successfully secure their desired properties and expand their portfolios. Our expert staff has great experience successfully closing deals on all asset types and meeting our client’s unique needs. Contact us today to see how we can help close your next deal.