Perhaps you’ve seen or even jumped on board with innovations such as cryptocurrency, bitcoin, and blockchain. Blockchain, mainly, is one technology that several real estate experts are paying attention to due to its potential to revolutionize the way real estate transactions are performed.
While that potential is currently theoretical, broad-minded investors must learn about blockchain’s affordances and start thinking about how you could use it to your advantage. Let’s talk about what blockchain is and why it is described as a game-changer for West Chester real estate investors.
In layman’s terms, a blockchain is a digitized ledger or shared database. This is distinct from other databases since it is built on decentralized access. Distributed across various computers, blockchain data is unalterable and accessible to everybody. Because it cannot be changed, blockchain data is viewed as more trustworthy. Although commonly confused with bitcoin or cryptocurrency, blockchain is a secure system for recording and distributing digital information.
How It Works
The blockchain process starts when a transaction or record is requested. This request is released to nodes or computers connected to a network. Using algorithms, the request is processed by the nodes and then verified. Once this transpires, the ledger is updated with a new block of data added to the blockchain and closed. Once closed, it cannot be deleted or amended in any way.
Implications for Real Estate Investing
The most vital aspect of blockchain for real estate investors is it lowers the need for trust between a buyer and a seller. Using unalterable information, a buyer could quickly prove their available funds, while a seller could instantly prove their property ownership.
Without the need for additional verification, blockchain holds the potential to eliminate some of the most time-consuming and expensive parts of buying properties, from the title company to your real estate attorney. It could also make investing in real estate more accessible and your holdings more liquid. This could be accomplished through the use of smart contracts and tokenization:
- Smart Contracts. Smart contracts are lines of code that are stored on a blockchain. When specified terms and conditions are met, they automatically execute a transaction. For illustration, if your financial profile was stored on a blockchain, your mortgage lender could have quick access to everything they required to make a decision about your loan application. At that moment, a smart contract could be issued to automatically transfer property ownership once the funds are released. This transaction would be shared with all participants, who could then track the status of the process at any time. Smart contracts could also be utilized for leasing West Chester rental property, thereby removing the need for background checks, security deposits, and more.
- Tokenization. In real estate, tokens could be defined as digital certificates of an ownership interest. Tokenization arises when property owners want to raise funds by offering shares in their property ownership. Although identical to a real estate investment trust (REIT), tokenized real estate is more direct and flexible. Individuals can buy an interest in a property for far less than owning an entire property and sell their token fast and simply for cash. This makes tokenization far more liquid than other types of real estate investments.
As demonstrated, blockchain, smart contracts, and tokenization have the potential to greatly alter the way that real estate is bought, sold, and owned someday. Not only could it be possible to keep unalterable records of all transactions, but it could also help speed up contracts and leases, reduce fraud, and decrease the cost of investing in and leasing rental property.
Nevertheless, most of the potential of blockchain is years away from being fully realized. But savvy investors should start to think about ways to use this developing technology in future investing activities.
Are you wanting to upgrade your real estate investing process now? Real Property Management Varanasi can help! Our excellent digital tools can help rental real estate investors like you optimize both your time and your cash flows. Contact us online today to find out more.
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