One of the most exciting things about technology right now is the coming of Web 3.0, a new era of the Internet that uses blockchain technology to change how information is stored, shared, and owned. Some skeptics think that a less centralized internet is bad for privacy and even security. Those of us who are excited about the Web3 era, on the other hand, think that it will lead to a truly democratic web that fights identity theft with encrypted wallets, gives everyone the right to free speech, and gives users a voice on their favorite networks.
No matter how you feel about Web3, it can be hard to understand what it has to do with the real estate market. Even though at first glance, there might not be a clear link between something as abstract as bitcoin and something as concrete as a house, Web3 is set to have huge effects on how we buy and invest in real estate. Here are five of the best things that Web3 has to offer a real estate investor who thinks ahead.
The NFT Shows the Way
In the U.S., owning real estate is more popular than ever, and in many places, the demand is higher than the supply. Web3 lets even more investors into the market, including those who don’t have enough money for a down payment or who don’t have time to wait for a mortgage or the end of a liquidation process. They do this by using unique digital tiles called “non-fungible tokens” to make transactions (NFTs).
Since they were first used to buy digital music and art, NFTs have become very useful tools with a wide range of uses. ButterflyMX says that $690 million worth of real estate was turned into tokens in 2020, and that number jumped to $14.3 billion in 2021.
A legal framework and proprietary technology that lets NFTs stand in for property owners have also been made. This lets purchase records and legal documents be stored on the blockchain together. Triple-ledger accounting is used in these systems. This records the buyer and seller of a property and gets signatures from both parties.
This is a very simple and effective way to show who owns what.
What used to be a hard job that could take weeks can now be done in less than a minute. In the process, it cuts costs and makes it easier than ever for people to buy property.
DeFi breaks the rules.
By linking smart contracts, oracles, and blockchains, decentralized finance (DeFi) avoids the cumbersome processes of traditional banks and makes investing easier. Instead of people making financial decisions, automated workflows do it. A smart contract keeps track of the money coming in and going out and adapts to changes in the market. Mortgages can be arranged quickly and without much trouble.
When properties are owned by more than one person, NFTs can be used to get loans from lending platforms. However, investors will need to stay up-to-date on the rules, which may change as this type of investment grows in popularity. They should also hire a lawyer who knows a lot about blockchain technology to help them with these kinds of deals.
Younger generations of potential buyers who have grown up online and use the internet as their main shopping place will probably find it easy to buy real estate online with DeFi, cryptocurrency, or fiat currency. This group is also a good example of a new type of investor who is strong and willing to take big risks in hopes of getting even bigger returns. DeFi’s ability to make transactions quick and clear will help them stand out in this space.
How to Invest in Real Estate for Everyone
Some people might feel uneasy about relying on DeFi, but brave realtors see the potential of this system’s speed and openness.
By turning real estate into tokens, investors can use real assets to make portfolios that are easy to liquidate on a blockchain. It also gives people with less money a chance to invest in web3 real estate app development. This is because tokenizing assets, like property, in this case, lets people invest in small amounts. As explained by 101 Blockchains, fractional ownership tokenization is like a “crowdfunding platform for real estate,” and as of early 2022, it had fewer regulatory issues than Entire Asset (EA) tokenization.
A person who might never be able to afford a $250,000 apartment as an investment property might be able to afford a fraction of that amount. This would give him or her a fraction of ownership of the apartment, which he or she could trade at any time for an equal fraction of another property. One AI platform lets many investors buy a small share of rental properties that are already set up for as little as $50 each.
With this quick process, homeowners can also use NFTs to sell some of their home equity to other people so that those people can invest in the property’s potential to go up in value.
Believe In Bitcoin
Some people are hesitant to use bitcoin and other cryptocurrencies because there is a lot of debate about them. But people who see their potential are coming up with new ways to use cryptocurrencies to change the way they do business. For example, United Wholesale Mortgage just started a pilot program that will let its customers use cryptocurrency, starting with bitcoin but possibly also with Ethereum.
There are also now plans for 30-year crypto mortgages that are based on bitcoin. Some fintech companies deal with the problem of fluctuating prices by basing the interest rate on the ratio of the value of the cryptocurrency to the loan amount. If the ratio falls below a certain percentage, like 65%, a margin call is made. If it goes down to 30%, the assets are sold, and their value is kept in USD.
Also, it’s important to remember that transactions involving cryptocurrencies don’t have to be done entirely in cryptocurrencies. Even though some transactions can be done entirely with cryptocurrency, investors and sellers may want to use or receive cash for part of the payment. It’s important to know that government agencies and third parties who are part of a deal may want to be paid in cash.
A Place Where Everyone Is Equal
As soon as NFTs could be used to represent real estate properties, it was inevitable that a booming market for transactions based on NFTs would appear. This would allow people who already own property to sell a portion of it to free up money, which they could then use to invest elsewhere. This market has all of the forms you need to make an NFT for a property.
In the same way, people who choose to invest can get a small share of the increase in the value of the properties they buy. This is a new way for people with a wide range of incomes to build up a portfolio of real estate. So, bring on Web3: smart real estate investors are ready and willing to try out this exciting, modern way of doing business.