5 Ways Cryptocurrency Will Change the World of Commercial Real Estate Cryptocurrency has infiltrated just about every industry on the planet, including commercial real estate, and that's a good thing.
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Cryptocurrency is the hottest topic of discussion in nearly every industry these days. But commercial real estate is one industry that could transform completely as blockchain technology gains an increasing amount of popularity.
Five years from now, commercial real estate will look very different than how it looks today. The blockchain-driven innovations in the industry are nearly endless.
Third parties will no longer be necessary
One of the defining features of the real estate industry is escrow. Escrow companies act as third parties to protect everyone involved in the transaction. They handle all the documents and money until the transaction is complete. Blockchain technology could eliminate the need for this system, making real estate transactions quicker and cheaper.
Blockchain technology runs on a peer-to-peer network, which means cryptocurrency transactions are recorded instantly on every user's computer. This creates multiple identical records, which cannot be altered. Every transaction becomes public.
Traditional real estate transactions required time to inform each party as each piece of the transaction advances. With cryptocurrency's automatically updated records, everyone involved is kept up-to-date in real-time. They can follow the progress of their transaction from anywhere in the world.
Transactions will be instant
Many people in the real estate industry are also frequent travelers. They have to check on their investment properties and visit new locations to check out new opportunities. Traditionally, many parts of the real estate process required those involved in the transaction to be physically present, which can slow things down.
However, blockchain technology could completely eliminate the need for being in-person for real estate transactions. The added security of the transaction could enable investors to sign contracts and transfer funds while being anywhere in the world.
Public transactions will eliminate secrecy from the industry
The public is able to see most cryptocurrency transactions. This is a huge change from the traditionally hidden transactions in the real estate world.
While some cryptocurrencies allow for private transactions, a public transaction is the standard. Private transactions require opting-in, and they often cost more. This will lead to a greater public understanding of what's happening in the real estate world because it's common for people to default to the standard.
A public record of transactions will enable those in the commercial real estate industry to be more informed about the trends, allowing for better decision-making. This is especially helpful for those early in their career. Young real estate entrepreneurs can learn the ins and outs of the industry by simply following what's going on.
Micro-investing will be more simple than ever
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 negligible amounts, leading to a much higher ROI on the investment.
The partnership between Bitbond and KlickOwn is an excellent example of how successful micro-investing through cryptocurrency can be. KlickOwn is a property investment platform that requires a minimum investment of just 10 euros. Bitbond is an online lending platform that began using tokenized bonds in early 2021. The partnership between the two companies makes it possible for KlickOwn investors to pay in cryptocurrency.
Wladimir Huber, KlickOwn CEO, commented on the benefits of the partnership, saying, "Thanks to these enormous cost savings, we are able to offer our investors higher returns. KlickOwn investors invest completely digitally and simply with us."
Total security is the future
One of the most exciting features of blockchain technology is that it can't be hacked. This technology is decentralized, which means there's no one point of access for hackers. For a hacker to access cryptocurrency funds, they'd have to simultaneously hack thousands of computers.
Not only are funds kept secure through blockchain technology, but sensitive information is also completely protected from hackers. Internet users have seen an increasing number of data breaches in recent years, so the security of cryptocurrency will make real estate investors rest much easier than during their digital transactions without blockchain tech.
International investing will become cheaper and easier
International transactions can be slow and expensive. Transferring funds can either take a few days or cost you a large chunk of cash to expedite. Even if you pay for the funds to be expedited, most banks are closed on weekends and holidays, slowing the process down even further. As any good 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. Cryptocurrency allows international transactions to occur instantly from any location.
Most international commercial real estate investing today involves some risk. In fact, in 2019, international investors began slowing down their rate of commercial real estate acquisitions in the US, in large part due to risks involved with currency exchange rates.
When both parties are using cryptocurrency, however, the risk of currency exchange can be side-stepped. This could make it much easier for investors located in countries with low-value currencies to enter markets in countries with high-value currencies. It gives investors another currency to deal with, strengthening their chances of coming out on top.