Market prices in the real estate industry are predicted to increase in 2019 as millennial demand rises. However, despite the rapid improvement the industry has been experiencing since the recession, it’s still plagued by issues that make investing in the sector less convenient than it should be. Blockchain could be an answer to several issues in the growing market of commercial real estate.

Drawbacks That Plague The Real Estate Industry

Three drawbacks are currently holding the real estate industry back. They include the issue of intermediaries, fraud and lack of affordable funding. It’s common practice for agents to take up to six percent of the total payment that is made on a real estate asset. Therefore an asset that costs around $400,000 has $23,000 in intermediary fees.

Interestingly, according to a report by the National Association of Realtors, up to 80 percent of homeowners are still using intermediaries something that is quite unfortunate.

Also, real estate assets are expensive, and their prices continue to rise with each passing year. It limits a larger amount of the population from investing in them.

Recent research conducted by CNBC indicates that an investment of $1 million is likely to buy around 270 square feet of prime property in New York. However, it’s a price tag that only 10 percent of U.S. residents can afford.

The industry is also rife with fraud globally. In 2016, the FBI released a statement that indicated that there was over 480 percent increase in the number of fraud cases associated with the real estate industry. The frauds included; online sale scams and title fraud.

The Solution The Blockchain Offers

With the blockchain being an immutable ledger that records transaction data, it offers many benefits including traceability, transparency, enhanced security and accessibility. All significant factors that aid the real estate industry.

Now there are blockchain platforms that are eliminating the need for intermediaries like agents and lawyers. Also, the ability to pay for a property using crypto can help bypass bank fees. Additionally, it cuts fees that are associated with escrow through smart contracts which can be customized according to the user’s needs.

The tokenized nature of crypto coins like Bitcoin and Ethereum also makes crowd ownership of the real estate possible. So, for the people that can’t afford the whole property, it’s possible to own a piece of it.

Finally, the blockchain will eliminate fraud in the industry by providing a way to authenticate property documents easily.

This post is credited to usethebitcoin

Blockchain startup Harbor has officially launched its security token compliance platform and is moving to offer digitized shares in a high-rise building located in in South Carolina.

Announced Tuesday at CoinDesk’s Consensus: Invest event, Harbor is now allowing investors to register to buy shares in apartment block called The Hub at Columbia, owned by the real-estate wing of DRW Holdings, Convexity Properties. There are 955 shares – represented by 955 tokens – available at a cost of $21,000 apiece.

The company, which raised $28 million earlier this year, develops ERC-20 tokens, an ethereum standard, for companies that want to put up equity or other forms of interest by way of a tokenized offering.

Harbor CEO Josh Stein told CoinDesk that the company’s platform allows it to track security token trading and investors’ real-world identity in real-time, ensuring that token sales are “compliant every time, everywhere.”

Offerings on Harbor’s security token platform operate similarly to a normal private placement sale, he explained. The key difference comes from the platform’s use of a blockchain protocol and structure, which allow companies to tap into a wider pool of investors.

Typically, an offering like Convexity’s might be sold to 10 or 20 investors, each of whom would have to contribute a significantly larger chunk of the total funding. Harbor’s platform makes it easier for anywhere from 100 to 2,000 accredited investors to participate, allowing each a $21,000 minimum stake, which is smaller than the norm.

The 2,000 investor limit is a regulatory one as well – companies with a higher number of investors must go public.

How it works

An interested investor can sign up on a dedicated website, where they’ll be redirected to Harbor to fill out a know-your-customer (KYC) form. The portal will require investors to share identifying information and upload a copy of a driver’s license, as well as upload documents proving income and assets for accreditation, Stein said, adding:

“The KYC happens in just a couple of minutes. The accreditation, verification of assets and income, takes … 1–3 days for an individual and 2–12 days for an entity and the reason why is you have to peel back the layers and [verify accreditation for individuals in the entity].”

Once an investor is approved, they can sign the documents purchasing the tokens electronically.

On the token side, an external security firm audits the smart contract and a “Big Four” accounting firm will monitor the payment flows, Stein said.

Unlike other private placement sales, investors can use bitcoin or ethereum to purchase tokens too. Harbor will escrow the cryptocurrencies without converting them unless necessary, allowing for refunds without requiring conversion fees, Stein added.

To that end, the company is working with BitGo to custody any crypto assets received.

The offering means that investors are able to participate in sales alongside major operators. In Convexity’s case, its parent company DRW owns a little more than 50 percent of the interest in The Hub.

Should investors wish to trade or sell their shares, they can do so after 90 days – another departure from traditional private placement sales, which locks them in for a greater period of time. Stein said, “You can pull your investment if you feel like it.”

He further likened the shift from traditional securities trading to the shift from writing letters to writing email. Using the internet to send messages proved to be far more efficient than writing and posting letters, he noted, saying:

“Now blockchain, like email, offers us a world that’s faster, cheaper and easier by an order of magnitude.”

This post is credited to coindesk