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America’s commercial real estate market might have a savior — tokenization.
The idea that empty commercial buildings can be converted to residential isn’t new, but it is exceptionally more complex than merely moving in some beds and turning on the WiFi. Mostly, it’s too pricey.
However, two real estate agents with experience trading real estate with cryptocurrency were able to explain to the Inman New York audience how tokenization could very well be the answer to funding extensive commercial renovations.
Piper Moretti founded and leads The Crypto Realty Group in Los Angeles and Shelly Vincent is the vice president of operations and employing broker for HomeSmart in Colorado. The pair assured the audience that they were not tech mavens, nor do they “know a single line of code.” What they do know is how to distill esoteric concepts like tokens, smart contracts and blockchain into 15 minutes of solid, encouraging wisdom.
“You may be wondering, we’re from two different states, two different companies. What do we have in common here?” said Vincent. “We both love technology. We love moving forward with real estate technologies.”
They are also two of the few real estate agents nationwide who have bought and sold real estate using cryptocurrency, a concept that still seems like inside baseball, reserved for a select few with the time and money to understand it. Not true, Vincent and Moretti say.
“With the traditional banking system. I gave Shelly $10 through Venmo,” Moretti said. “It’s gotta go through my bank, the servers of my bank and it’s got to go through the servers of her bank, and then maybe in two to three days she’s gonna get that $10. Well, blockchain technology is a peer-to-peer transaction.”
One person can send a person $10 of digital currency of any kind, and it can get to the other part in a matter of minutes. The action can be “witnessed” by countless other verification and recording parties. Blockchain is a highly secured distributed ledger.
“It ensures safe, transparent transactions, and it eliminates middlemen,” Moretti said. “And smart contracts make this all happen. They automate transactions and streamline deals. Tokenization, in its purest form, is a digital representation of assets.
This form of transaction, clear, fast and publicly recorded, allows investors to invest faster from anywhere and never have money locked up in an asset for long periods of time.
Once a property is given a digital address, tokens can be applied to it or, in summary, shares. One of the major benefits is that tokens can be purchased from anywhere by anyone with verified identities. This allows smaller amounts to be purchased across a much wider geographic area, the entire world, in fact.
“Okay, but what does that mean for you?” Vincent said. “Tokenization makes it affordable for smaller investors to get into the act and so they can buy smaller coins. Instead of having tons of paperwork, which takes hours and days and weeks to process, you’re immediately buying tokens on platforms with communal bonding and inclusivity. Anyone in this room can start a tokenization project.”
Tokenized deals of any kind are covered by the same regulatory compliance and adaptability as an SEC-compliant investment tool.
The first step to tokenizing a real estate property is to identify a good investment as you would in any other traditional deal and assemble the same sort of team, including real estate agents, investment advisors and other relevant vendors. Then a person decides on the dollar amount to apply to each token and finds an appropriate blockchain platform, which will initiate the smart contract and mechanisms for token transactions.
“It’s already being done; it’s well beyond concept,” Moretti said, naming Urban Catalyst, a private equity real estate company in San Jose, California.
“They have just embraced tokenization to help create a revitalization of underdeveloped and urban areas,” she said.
When it comes to turning office buildings into places to live, investors can come together to acquire properties, tokenize them and spread the investment across the planet. Outside of the initial transaction, funds can be raised much, much faster than using traditional financing methods, assuring a streamlined, secure and community-inspired solution for fixing a serious real estate problem.
