Bringing Real Estate Investing to the masses with Blockchain

Bringing Real Estate Investing to the masses is the new trend in the real estate industry. Arrived Homes, a new startup where investors can buy a fraction of real estate for as little as $500, raised $37M from investors like Jeff Bezos and Marc Benioff. Roofstock, which recently raised $240M from Softbank, is working on a digital real estate platform potentially using blockchain in order to improve accessibility and liquity in rental real estate. Lofty.ai is fractionalizing rental properties using blockchain. And more recently MartelInvest.com launched the first tokenized Real Estate fund where investors can buy a fraction of an entire portfolio of professionally managed, cash flowing rental properties for as little as $50.

Why are these trends happening? The reason is that Real Estate is a huge asset class that has been relatively untouched by technology. With the current market trends more and more people want to invest in real estate for appreciation but also for cash flow. The recent trends in single family rentals make it difficult for consumers, including the millennials which is largest cohort, to come up with $30,000 or more in down payment. Some may not even qualify to get a mortgage and if they do their $30,000 will be invested in one rental property which is riskier than spreading that same investment in 300 fractions across multiple rental properties.

Another big factor pushing the growth of real estate tokenization is liquity. Real Estate has traditionally been very illiquid. In order to get some funds out, you can either get a loan against the equity of the property or sell the property. Neither one of these is particularly fast or appealing to landlords.

What are the traditional choices out there for these new investors? They could put their savings into a syndication. Syndications invest in large value add projects with the objective of selling the property at the profit in three to five years. These are managed by professional real estate investors with a solid track record. Due to the type of projects these syndications seek, they require a large minimum investment and the funds might be locked in for up to five years.

A variance on syndications are crowdfunding platforms like Fundrise. These platforms offer syndication projects with a lower minimum investment requirement. Crowdfunding platforms started emerging when the JOBS act was signed in 2012 with the objective of democratizing real estate investing.

Investors looking for liquidity and low investment minimums could also buy into REITs which can be purchased on the stock markets just like any other stock, but that’s not nearly as exciting as owning a fraction of an actual piece of real estate.

What does the future of real estate investing look like? As discussed, investors are looking for low minimum investment requirements, the ability to sell a fraction of their real estate investment, low risk profile by investing smaller amounts in multiple properties, appreciation, regular distribution of net cash flow, and a professional management team overseeing their investment.

The future is in blockchain technology. For many years, blockchain was a solution looking for a problem. These experiments, many failures but also some successes, have shown the strengths and weaknesses of the technology. Before we go any further I need to clarify the difference between crypto currencies and blockchain. Often people equate crypto currency with blockchain but it is not the same. Blockchain is a technology that records every transaction in a public ledger. It has several security features to ensure that every transaction is correctly recorded and publicly visible. Crypto currencies like Bitcoin or Ethereum use blockchain technology to record their transactions securely. If Paul pays Simon 100 Bitcoins the blockchain records it and Simon can see that he now has 100 Bitcoins in his digital wallet. Blockchain can also be used to securely manage other types of transactions like Security Tokens.

MartelInvest is the first Real Estate Fund using blockchain to enable the purchase of a share of a professionally managed, cash flowing, single family rental portfolio. While MartelInvest is selling shares of a rental portfolio, Arrived homes and lofty.ai are selling fractions of a company which owns a single house which means thousands of companies each owning one house. Each company having thousands of investors making decisions about the property. If you want to diversify you need to actively purchase multiple fractions of each of these properties.

MartelInvest will issue one million security tokens. Each token represents a share of the MartelInvest Real Estate fund. Each token will initially cost $50. When you buy your tokens, the transaction will be recorded in the blockchain, and MartelInvest tokens will appear in your digital wallet along with any other digital assets you might own already.

On a regular basis, MartelInvest will send your share of the cash flow directly in your digital wallet. These distributions will be in the form of a stable coin pegged to the US dollar like USDC or USDT. These stable coins can be transferred to your bank account any time you want. Unlike syndication, crowdfunding and other types of investments, you can see your investment right in your digital wallet.

The MartelInvest security tokens can eventually be sold to other investors on open exchanges like ATS. Having it on the blockchain means that other investors can confirm your ownership, and the transfer is securely recorded on the blockchain. There are no trust issues and the transaction is secured.

It's an exciting time in Real Estate investing. This is just the beginning of a new era for those wanting to minimize risk and diversify investments with a low cost of admission in one of the best investment vehicles, real estate. 

Feel free to contact me if you have any questions.