Oh, you here about the staircase?
Yeah, it’s a beauty. Unfortunately, I already sold the staircase. (Sorry; not sorry.)
I bought a bit of an apartment building in Tallinn, instead. Yeah. Just a bit. (The best bit, obviously.) I own 8.297% of the apartment building and its cashflow. Maybe someday I’ll visit it….
The above scenario is complete fiction — today. But what about tomorrow?
Could average, everyday people buy fractional amounts of commercial real estate, anywhere in the world, their purchases executed on the blockchain? What might happen?
What Happens When We Put Real Estate on Etheruem?
I’m not an Ethereum developer. Far from it. I am, however, an obsessive, imaginative fan.
And I heart real estate.
Specifically, I’ve embraced commercial real estate investing through Fundrise. Fundrise introduced something novel a few years ago: crowdfunding direct investment in commercial real estate.
Fundrise sells shares in specific projects. In recent years they’ve expanded to more traditional REIT-like format and IRA options, both a boon for individual investors. (I bought into two Washington D.C. buildings.)
Result: smaller investors reap the rewards of commercial real estate. An investor can literally shape the block where she lives even if she alone doesn’t have the funds to for the entire project. This gives smaller investors an on-ramp to projects with greater returns, with less proportional risk.
Fundrise isn’t on the blockchain. What if it were? Some ideas:
- Shares could be converted to tokens, offering greater liquidity to investors in a real estate marketplace
- Smart contracts would control tokens, e.g., automatically distributing returns according to the agreed terms, including, perhaps, micropayments
- Tokens could be purchased in any amount — not for specific property purchases (like a single staircase) but fractional ownership (just as you can own fractional amounts of a bitcoin)
- Records of these transactions on the blockchain would be transparent and auditable
- Oh, and, perhaps most exciting: tokens could be traded cross-border, as the example at the start (selling tokenized property in one location for investment in another)
What would be needed?
Plug-n-Play Protocols
Just as I got excited about Fundrise a few years ago, I’m currently enthusiastic about Blocksquare.io (ICO going on now!)
Blocksquare aims to “offer tokenized local commercial real estate deals to anyone with an internet connection”
Ethereum will be the technological backbone of the project. Services like Fundrise could use Blocksquare’s API to offer another investment vertical.
This is exciting to fans of real estate and/or blockchain because:
- it has the potential to create a new category in commercial real estate, similar to new travel categories made possible by Airbnb and Uber
- could open up brand new markets for smaller, non-institutional investors (democratizing access, and creating more investment opportunities)
- could be a boon to places in dire need of capital investment and basic modernization, with participatory access available thanks to tokenization
Do I want to own a single staircase in another country? Probably not. But, I’m betting a lot of people would be interested in owning a portion of Paris or a slice of Sicily.
I’m excited for Blocksquare’s ambitions and look forward to watching it.
Disclosure: I invest with Fundrise and am participating in the Blocksquare ICO. This post is unpaid.