The use of blockchain technology is changing how several industries function. Thanks to its immutability and decentralized properties, it is changing how many sectors look. Let’s investigate how Blockchain will transform the real estate industry.
Blockchain is a revolutionary technology that has already started to transform numerous sectors all around the world. One of the sectors that Blockchain will irrevocably disrupt is real estate. All facets of conventional real estate may be affected by Blockchain. Real estate blockchain could affect rights, deals, and much more. This blog will discuss how this technology can change the real estate industry.
IMPORTANT PROBLEMS FOR REAL ESTATE INVESTORS
RealWealth Investment Counselors frequently communicate with real estate teams in various national markets. Two of our Investment Counselors, Aristotle Kumpis and Joe Torre, talk about specific difficulties that investors should be aware of and how to manage the next year successfully.
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A recovering economy
Only time will tell how the global epidemic will affect our lives long after it has passed. One thing is certain: COVID-19 has made us abandon our daily routines and adopt new ones.
Will the change to a permanent virtual office and people’s preference for staying at home for entertainment cause a decline in the need for commercial and retail real estate? Whether social isolation and fewer individuals in public settings will be necessary for the future is a large open topic. To accommodate these activities securely, places like airplanes, eateries, theatres, offices, government buildings, concert venues, sports venues, etc., may need larger rooms (and probably more money).
Other economic indicators frequently lag behind the real estate market. The recovery phase of the economy does expect to last for several years. As a result, COVID-19 will have longer-lasting implications on the real estate sector.
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A recovering economy
Additionally, the Coronavirus has greatly increased financial uncertainties. Multiple industries’ marketplaces have been and will continue to be impacted by the many people still without jobs for years to come.
Our economy’s core sectors remain in chaos. Travel via air, retail, building, leisure, and hospitality saw significant income declines. Over the coming years, it does anticipate that these industries will gradually, and possibly only partially, recover.
After the COVID-19 pandemic, some occupations might never reappear in the labor market. New works do create to satisfy the demands of post-pandemic existence. But during the coming ten years, we’ll need to figure out how to adjust to our “new normal.”
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A recovering economy
It has been challenging to calculate the cost of debt due to the instability of the capital markets over the past three months. Because interest rates are so low, underwriting, valuation criteria, and premiums for taking on economic risk are crucial in figuring out how much it will cost to borrow money.
The federal government’s financial assistance to people and businesses has lessened some of the short-term effects of the Coronavirus. It’s challenging to predict a long-term solution, though, given the sharp increase in late payments and loan defaults. What will risk looking like, and how much will it cost in the future?
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Purchasing Property in a Seller’s Market
Even while the number of new homes has increased, there is still a supply shortage. Because everything sells more quickly in a seller’s market, inventory is scarce. While new construction is possible, it can take 6 to 9 months to complete. Investors looking for rehabilitated properties will face competition from buyers on the market.
In a seller’s market, purchasing investment property might be challenging. However, there are certain advantages to buying in a seller’s market.
Aristotle Kumpis, a RealWealth Investment Counselor, shares his knowledge on the advantages of buying real estate in a seller’s market and the pitfalls to avoid.
There is a decent possibility that whatever you purchase will continue to increase in value (at least for a while). Owning a home in such a market is advantageous since homes gain weight from a seller’s market. Finally, a seller’s market is always an excellent time if you’re considering selling.
In a seller’s market, common pitfalls for investors to avoid include feeling pressured to make a hasty purchase owing to a shortage of inventory and overpaying for a property and or purchasing a home that could be the better investment.
Savvy real estate investors are aware of the ebb and flow of the market. Even though it could be a seller’s market right now, the market will eventually balance out.
5. Significant Public & Private Debt
Over the past six months, the U.S. national debt has climbed by more than USD 3 trillion (or $210,000 per taxpayer). Less investment activity and a burden on savings accounts result from increased debt.
Debt on student loans has almost hit $1.7 trillion, surpassing the $1 trillion in total credit card debt. Regarding student loan debt, millennials are the most heavily burdened. Since COVID-19, total personal debt has surpassed $20.5 trillion and continues to rise.
Long-term sustainability of the national debt growth rate is not possible. High levels of debt impact numerous economic indicators. Debt overload results in increased interest rates and less funding for crucial infrastructure and commercial real estate initiatives.
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A shortage of affordable housing
Affordable housing is severely lacking across the country. According to the National Low-Income Housing Coalition, there are currently 7.2 million fewer extremely low-income households with access to affordable rental housing than there should be (incomes at or below the poverty level). The available housing shortage also contributes to the affordability dilemma by driving up rentals and property prices.
Areas Transforming as Blockchain Technology Is Adopted in Real Estate
The real estate sector may leverage blockchain technology to its advantage in several different ways. Below are a few typical areas that are updated with blockchain deployment.
Real Estate Use of Blockchain Technology
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Real Estate Search
To find any property information, brokers, owners, tenants, and purchasers go to multiple listing services like Zillow.
These platforms have expensive subscription prices. Additionally, they frequently present inaccurate, out-of-date, or partially distorted property data. This worsens process inefficiencies and often leads to disagreements.
However, all may be avoided by utilizing real estate software built on the Blockchain.
Data can be decentralized and shared by everyone in a P2P network with the help of a blockchain-based application. Additionally, it gives brokers a chance to receive more data monitoring options, ultimately lowering associated expenses.
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Financial analysis and exercise of due diligence
Before purchasing or renting any property, extensive effort is spent on due diligence tasks in the real estate industry. Several intermediaries are involved in checking property paperwork to avoid any future legal, technical, or financial concerns.
All property information is now on paper, which anyone may readily alter or corrupt.
However, Blockchain technology can also improve this niche in real estate app development.
All property-related documents can be digitally kept in platforms powered by Blockchain so anyone can view them, but they cannot be changed. This will automate, speed up, and improve the accuracy of the financial review and due diligence processes.
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Documents and Payments
Blockchain greatly affects real estate, particularly in files and payments.
Currently, the process is time-consuming, difficult, and expensive due to the substantial documentation and the use of third-party intermediaries. And when mortgages or overseas transactions are involved, this effect becomes more noticeable.
Blockchain, a novel real estate technology, may potentially speed the filing process and bring innovation to real estate procedures by providing certified credentials for properties.
The arrival of cryptocurrencies can also make it easier to use multiple currencies in various locations. In addition to expediting the payment procedure, it can even reduce the applicable taxes and fees.
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Property Administration
Property administration is a complicated process in the traditional real estate market, especially when several stakeholders are involved.
Either offline manual paperwork is used to administer the property, or some independent software is employed. As a result, the information continues to be restricted to a specific database or individual.
However, the future of real estate could change as Blockchain plays a bigger role in property transactions.
From signing lease agreements to managing cash flow and submitting maintenance requests, a blockchain-based property management system that leverages smart contracts for real estate can streamline the entire process.
A smart contract can automatically establish lease payments between a landlord and a tenant. The smart contract can give a seamless experience to both parties by automatically transferring the security deposit back to the tenant’s account after the lease expires.
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Management of Deeds
Deed management is another area where you can observe how Blockchain affects the real estate software market.
Property titles are currently on paper. As a result, there is a greater possibility of mistakes and fraud situations. The American Land Title Association has disclosed that 25% of all titles are found to be flawed during the transaction process.
Any flaw renders it illegal to continue the deed management procedure until the problem has been fixed. Due to this, property owners need to pay expensive legal fees to guarantee the integrity and accuracy of their property titles.
With the use of blockchain technology in the real estate sector, as immutable digital records, this problem may be readily handled, making the entire process transparent and secure.
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Investing in real estate
Using the ideas of tokenization and fractional ownership, a blockchain-based real estate platform can also simplify the investing process. Most organizations are still determining how to tokenize real estate, while some are doing it on a greater scale.
Tokenization is how the property’s owner can distribute digital tokens to individuals who own a stake. Using Blockchain, they can keep track of their investments, with each transaction immutable and time-stamped.
By leveraging blockchain technology to tokenize real estate, it may lower the fraud risk currently in the sector.
The traditional real estate industry will change due to fractional ownership. Small investors can benefit from ROI without having to wait months or years if unconnected parties work together to share and eliminate the risks attached to ownership of a valuable tangible asset. Eventually, make a trade in real estate assets possible across international borders.
While this would have given you a general understanding of the countless possibilities presented by blockchain technology in the real estate sector, let’s look at some examples to help you grasp it.
Final Reflections
Blockchain technology has the power to revolutionize the real estate industry. In addition to other advantages, it can guarantee quicker transaction completion. By utilizing blockchain technology, Our Blockchain real estate development company can increase transparency, get rid of the middleman, and save a tonne of cash. Future blockchain applications in real estate may increase in number as the technology becomes more and more mainstream. It has the potential to take the real estate market to new heights with the correct application.
