Most people assume they need several thousand or even hundreds of thousands of dollars to invest in real estate. Traditionally, this was always true. In addition, people who funded real estate needed to keep their money tied up for a long time. However, there is a new trend to empower more liquid, fractional real estate ownership with cryptocurrency.
Fractional Ownership In Real Estate With Crypto Currency
How does digital currency empower fractional ownership of real estate? It might help to consider one of the first examples of a real estate developer that used blockchain and their own digital currency to fund a large development. This development was considered somewhat risky because development would take time. Because of this, the developers had trouble getting traditional finance companies to tie up funds until the project was completed. As an alternative, they used a digital currency system to allow small investors to buy in by the square foot.
The value for each square foot was the average value of the entire development. For instance, a square foot of the parking lot might not have been worth as much as a square foot inside of an apartment unit. Also, some parts of the project would be completed faster, making them worth more at an earlier date. Using an average made the investment system simpler.
When the project began, buying it was cheap because the property only had a value as high as the land was valued. As the project progressed, the value of average square feet increased, and so did the values of the tokens that represented a square-foot investment. The currency also rose in value because the project became less risky as each state in development was completed.
Even better, investors could buy in or sell out at will during the course of the project. The blockchain tech that was used to power this digital currency also tracked of the progress of development, so investors had a very transparent look at the way the project progressed. They could see construction and inspection reports and even photos of various stages of the project by accessing the blockchain.
Benefits Of Using Crypto Currency For Fractional Ownership In Real Estate
The developer in the example above had an easier time raising funds when they didn’t have to require a large, minimum investment. The system allowed them to accept many smaller investments instead. Since investors could buy and sell their digital currency at any time, the developers also did not need to require a long-term commitment. Finally, they also used the technology to keep records of their progress, so investors could see exactly what the developer was doing with their money.
Crypto could be used for fractional real estate ownership in other situations besides development. It could be used for partners in investment deals or even for two or more people who want to share ownership in a house that they live in. This would make owning, selling, and buying into real estate much simpler, more transparent, and accessible.
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