How Realland will accelerate co-owned real estate investment with digital tokenization

Throughout our Realland project development, we have been involved in real estate & blockchain. At the same time, we have observed several trends in the general way that people interact with products and services. By combining this insight into a vision of what the global real estate industry might look like in the future, we decided to start Realland.

What are three of the most important trends in society that we’ve incorporated into the vision of Realland?

1. People are starting to care less about ownership

People’s diminishing attitude of needing to own and control things is making room for the enjoyment of access and having fewer things to stress about. We all know examples of companies that are being built on this change.

Some people go even further and aim to be completely flexible in terms of where they live and work. It may not even be the same place or even the same continent. we have worked with developers that work from a beachside location in the Philippines.

2. People are wising up and gaining awareness

The free (digital) flow of information is increasingly making people question what is happening around them. The vulnerability of financial institutions and organizations fuelled by profit incentives should make you wonder how this could possibly affect you in the future.

3. Blockchain revolution

Blockchain has hit the world by storm over the last years, leading to a boom (and bust) in blockchain-based crypto projects. People often use blockchain and cryptocurrencies to describe the same thing. However, when looking deeper, it is evident that this is not the case. The blockchain is the underlying and enabling technology for cryptocurrencies but the use of this technology is so much more.

Blockchain technology and real estate are truly a match made in heaven. For example, blockchain technology can be used to securely record the ownership of a property or land titles, to hash and attach key documents (such as deeds and valuation reports) to a property, and to develop a smart contract that executes rental agreements. The benefits are security and transparency for all, speed and efficiency because lesser intermediaries are needed for transactions.

Then there’s the impact of the reasons mentioned above on real estate investing.

There are numerous projects that are based on providing access rather than ownership. Think of access to cars, tools, holiday homes, etc.

When we zoom in on property investing, we see hundreds of companies that were founded over the last five years. For instance: Fundrise, RealtyShares, and PropertyPartner to name a few. All these companies are offering investors an easy way to invest in commercial real estate.

So we see changing attitudes, more knowledge in the crowd, lesser trust in ‘old established’ institutions, disruptive new technologies, and an array of new companies…

We asked ourselves these questions two years ago: “What will be next? How can we offer a service with a focus on real estate that will give people financial independence, more flexibility, and ultimately more (financial) freedom?”

The answer is, as you may have already guessed. Realland will make investing and trading in real estate as easy as trading shares on the stock market or buying Bitcoin on Binance.com.

But why should you invest in real estate through Realland instead of alternative ways?

Realland will give property investors the following real benefits:

• Liquidity — this is one of the core features of Realland. Normally it takes a long time to sell real estate. We aim to change that! How? We will do this by operating an exchange with a large volume driven by a large pool of global investors. Imagine if you can sell your real estate investment as quickly and easily as selling shares?
• Part sale — tokenized real estate will make it possible to just sell part of your building.
• Access — the ‘average’ real estate investor will not have access to invest in larger or more iconic real estate as they are too expensive. Part ownership will make it possible for investors to co-own a high-end high-priced piece of real estate.
• Diversity — one of the key rules of real estate investing is that you have to buy at 10+ units to spread your risk. This is not possible for most. But spreading over a range of different fractions (from a pool of different property providers) will be easy to do through Realland
• Transparency and security — all transactions are recorded in the blockchain and therefore easy to verify the transaction history
• Professional Asset Management — all the buildings that are listed on the Exchange will be managed by Property Managers (RLD holders). These Property Managers take care of all maintenance and tenant-related manners. It is important that investment properties are managed as investment properties and not as your home.

What is Realland and how does it work?

Realland is an Exchange where supply and demand meet for shares/fractions in real estate. All the shares that can be traded on Realland are backed by real estate assets. This could be a hotel, an apartment block, an office tower, or other forms of income-generating real estate.

So how does Realland work for an investor step by step?

1. Realland aggregates the buildings of lots and lots of property providers.
2. These buildings are subject to a thorough due diligence process.
3. After approval, the buildings will be split into units. For example, a $ 10.000.000 apartment block could be split into 100 units of $ 100.000 or 100.000 units of $ 100. All these fractions will be unique and recorded on to the blockchain.
4. Now the building is listed on the Realland exchange.
5. Interested investors can check out the order book, price history, and location within the exchange. For more in-depth information, the exchange will link to a detailed website page that provides lots of information and documentation (also hashed in the blockchain) about the property, its owner, and the property manager, and last but not least the financial performance of the city or location property is located, nearby places, reviews, virtual tours, etc.
6. Investors can place an order containing the number of tokens to buy and the price they are prepared to pay.
7. Investors will be notified of a successful trade and they can see the purchased units (tokens) in their Investor Dashboard on the Realland Exchange.

So far, we have only talked about the major benefits for property investors brought by the Realland exchange.

But what about the property providers/owners? Why would they want to be part of the Realland exchange?

That’s a very good question. Every functioning exchange needs to have benefits for both the supply and demand sides for it to work well. We’ve kept this in mind since the very beginning.

Firstly, we see the following parties qualifying as potential property providers for the Realland Exchange:

1. Existing property (crowd) investment websites.
2. Family offices
3. Traditional property funds
4. Tokenized property providers
5. REIT structures
6. Private property owners

Why would these property providers work with Realland?

• Access — imagine you have a $100.000.000 apartment block for sale in Dubi. The sale process will go through specialized brokers that work with a limited number of potential buyers as the deal size is big. Therefore, you can assume that the ultimate sales price will be close to the actual market value (the market is smallish). Now, imagine this apartment block is for sale in 100.000 units (tokens) of $1000. It is entirely possible that the investor is prepared to pay a small amount for the mere fact that they can invest in (and instantly diversify) such a high-ticket investment. Perhaps the investors will pay $1050 instead of $1000. The difference, $50, is what we call an ‘access fee’, the extra price an investor is willing to pay to have access to the investment. This ‘access fee’ will imply $5.000.000 in additional revenues for the property managers.
• Liquidity — the tokens of the above-mentioned property will be available for trading on the Exchange. A well functioning exchange means that the trades are done quickly. Quick trades imply a major benefit for the token owners because they know that if they must sell for whichever reason they can do so quickly. Investors will be prepared to pay a fee over the token value if they know they can sell it quickly for near market price.
• Part Sale — unitize ownership will give property owners the option to only sell that part of the property or portfolio that is needed. This solution is not available to them at the moment.
• Speed — selling property in units through an exchange that does not require intermediaries like attorneys or notaries will go a lot faster.
• Fewer intermediaries — the property owner only needs to deal with the Property Manager to sell the property.

Industry-wide benefits

We covered benefits for the demand and supply side of the property exchange. They're also more industry-wide benefits of moving real estate trading on to the blockchain.

The estimated global real estate value is somewhere between $217–250 Trillion. Currently, about 1%, let’s say $2.5 T ($2.500 billion) is traded annually and zero % of this trade volume is traded over the blockchain.

There are two enormous opportunities here:

1. Move property trading on to the blockchain (digitizing assets)
2. Increase the globally traded volume through compelling new and disruptive propositions such as a liquid exchange

The future is bright

The purpose of this article was to share with you what our thoughts are on real estate, real estate trading, and the key demographic/contextual changes that are likely to accelerate the need and demand for propositions such as Realland, since the millennial group is growing older affecting ages above and below.

Adrienne G
CSO, Realalnd