Daniel Kodsi, a 30-year veteran real estate developer, has raised capital to fund projects through the traditional route, institutional investors. But the old rules are being upended and enabling small developers and individual investors to participate in large-scale commercial real estate.
Crowdfunding is allowing mom and pop investors to invest in big projects that were once limited to institutions. The platform provides the means for small developers, who otherwise would be shut out of the big markets to raise capital, and also is attracting experienced real estate companies, which is boosting interest because investors perceive less risk and better returns with crowdfunding.
Blockchain also is playing a prominent role in the digitization of real-world assets. While a lot of people are still unfamiliar with how blockchain is used in the world of cryptocurrency, when it comes to real estate, it can bring security, clarity and efficiency to real estate transactions. One specific way blockchain can help the industry is through tokenization.
Tokenization refers to the usage of cryptocurrency for the division of a property, turning it into tradable shares or tokens that will be stored on a blockchain network. For developers, tokenization could allow for more freedom and flexibility to raise capital, investors can move their funds efficiently and property owners can manage their equity more effectively — especially in the case of selling fractional ownership where liquidity and transferability have always been an issue. The largest setback of real estate investments has always been liquidity. With blockchain technology and tokenization, there could possibly be secondary markets that trade these asset-backed currencies providing liquidity in real estate, which wasn’t possible in the past.
We recently started accepting cryptocurrency to purchase real estate. A lot of wealth has and will continue to be built in cryptocurrency so real estate developers will have to adapt to the future, although every day we find methods of converting crypto back to fiat currency (dollars, euros, etc.)
To see two more transformative technologies …