Generally, investment in real estate is a safe and viable choice. Profiting from these assets is relatively simple — they can be leased out to generate annual revenue or sold as their value appreciates.
A renowned real estate broker said there are many explanations why real estate is an excellent property. You will earn a high rate of return, take advantage of incredible tax benefits, and use real estate to develop your wealth.
Real estate offers higher yields than bonds, has a tangible asset value, almost often rises in value with time, and comes with many tax advantages.
However, investing in real estate is far from foolproof. It is not without flaws.
But as a result of advancements in technology, these constraints are gradually being overcome or reduced to insignificance. There are opportunities to improve the method of real estate ownership and make it more affordable to all.
What is Disruptive Technology?
A disruptive invention supplants an existing technology and fundamentally alters a market or a game-changing product that produces an entirely new business.
The word disruptive technology was invented by Harvard Business School professor Clayton M. Christensen. Christensen divides emerging technologies into two groups in his 1997 best-seller The Innovator’s Dilemma: enduring and destructive.
Sustaining technology is accomplished by gradual enhancements to existing technology. Disruptive technology is in its infancy, often exhibits performance issues, applies to a small audience, and does not yet have an established realistic implementation. (This was true of Alexander Graham Bell’s “electrical speech unit,” which we now refer to as the telephone.)
Several explanations of emerging innovations include the following:
- The digital machine (PC) supplanted the typewriter and permanently altered our working and communication methods.
- The convergence of affordability and a user-friendly GUI on the Windows operating system was influential in the exponential growth of the personal computer industry in the 1990s. Personal computers fundamentally altered the entertainment market, as well as a wide variety of other industries.
- Email fundamentally altered the way we communicate, displacing letter-writing and upending the postal and greeting card industries.
- Cell phones allowed people to contact us from everywhere and upended the telecom industry.
- A global workforce was made possible by portable computer and mobile computing, which allowed citizens to link to company networks and communicate from anywhere. Laptops have mostly displaced personal computers in several organizations.
- Smartphones largely displaced mobile phones and personal digital assistants and, due to the availability of games, often disrupted: pocket cameras, MP3 players, calculators, and GPS systems, to name a few. For certain mobile apps, smartphones sometimes serve as a substitute for laptops. Others would rather use a smartphone.
- Cloud infrastructure has become a major disruptor in the corporate community, displacing several services that were either housed in-house or delivered as a hosting service.
Social networking has had a significant effect on how we interact, disrupting telecommunications, email, text messaging, and event preparation, especially for personal usage.
Obstacles to investing in real estate
Geography remains one of the most significant impediments to real estate investing. Numerous countries have enacted legislation prohibiting immigrants from owning real assets. Thailand, Vietnam, and Greece, for example, exclude non-citizens from buying property within their respective jurisdictions.
Certain provisions of their laws prohibiting foreign property ownership can include loopholes. For example, Thailand permits foreigners to become part owners of condominiums as long as their ownership does not surpass 40%. Foreigners may even purchase whole buildings in Thailand, although they can never own the ground on which the house is built.
These factors do nothing to entice international investors to invest in real estate; nevertheless, asset tokenization enables foreigners to invest in real estate wherever they wish. The LABS Group, a startup that invented end-to-end real estate investing through “fractionalization,” provides a platform that enables everyone to invest legitimately in global real estate.
This is accomplished by encouraging investors to own tokenized assets, which are essentially digital representations of physical objects. Local owners own the tokenized assets on behalf of the investors, who may legitimately buy local land. Local owners will either sell or rent out the properties as their valuation increases. The owner in the tokenized asset then claims the benefit or profits produced by the property’s selling or leasing.
“I often have friends question me why I don’t invest in international assets, such as those in Vancouver, Melbourne, or London,” Yuen Wong, CEO of LABS Group, explains. “However, the time and resources required were just too high, considering the need for local business expertise and the possibility of running afoul of the law. Additionally, middlemen costs are large.”
This type of approach has the potential to change the real estate investment industry. It enables everyone, from everywhere, to benefit from lucrative real estate markets in various countries.
Additionally, asset tokenization enables owners to limit or even exclude transaction taxes and regulatory costs, which may reach up to 20% of the gross valuation of the asset acquired.
Investing in real estate is not inexpensive. There are a few tools such as MortgageCalculators that can help you determine your monthly obligations and see if you can afford it. By and large, it is also not intended for institutional buyers. Few people have hundreds of thousands or millions of dollars to spend in homes, lots, or other lavish assets.
However, by the principle of investment fractionalization, small investors may pool their funds to purchase real estate as an investment. This type of investment service follows the concept of fractional ownership.
Tiny or institutional buyers may participate in the purchase of a million-dollar beachfront home, for example, via the investment program. The property may generate revenue from leases or benefit when it is marketed at a significant premium. The fractional owners then receive a percentage of the revenue or benefit depending on their interest or contribution.
It is also worth noting that investment fractionalization is not exclusive to real estate. It applies to a variety of investment types. It is supported by blockchain technologies, which ensures that ownership statements cannot be challenged and that investors have a safe means of identifying their assets and claiming their respective sales or gains.
Contracts that self-execute
A smart contract is basically a self-executing contract that dynamically documents key points or activities in a deal and implements the conditions decided upon by the parties to the transaction. Though its use in the real estate industry may sound far-fetched, it is one of the innovative innovations that create conveniences or advantages for real estate investors.
Smart contracts, which are based on blockchain technologies, ensure full accountability of real estate investment transactions. “By combining smart contracts and blockchain technology, we will increase certainty, stability, and resilience. Independent parties will verify terms,” Prashant Shah writes in an article about the evolution, advantages, threats, and obstacles of smart contracts.
Returning to the concept of fractionalized deposits in tokenized real estate, it’s easy to see how complex the trades can be. There are several descriptions to keep track of in words, as well as numerical values to determine. It would be ideal if all of these data were stored in a tamper-proof contract (blockchain) and that all future computations and actions were immediately carried out until the smart contract requirements were fulfilled.
Smart contracts have the ability to accelerate and improve the accuracy of all real estate transactions. Calculation and payment of fractional investors’ respective securities, for example, maybe automated to ensure quick and reasonably error-free investment transactions.
Land investing’s potential
Indeed, new innovations have altered how people spend, especially in areas with unfavorable environmental and geopolitical conditions.
Through asset tokenization, investors may benefit from sales or gains generated by real estate located in jurisdictions where foreign ownership of other assets is prohibited. Tiny or institutional investors may take advantage of attractive real estate or luxury investment prospects in other countries by investment fractionalization. Additionally, the use of smart contracts simplifies the complex mechanisms associated with real estate investing.
These technologies are just the tip of the iceberg in terms of the technological advancements that will eventually be accessible to the real estate industry and other sectors. There will be new and inventive approaches, goods, and technologies to keep an eye out for, both of which are expected to make spending more affordable, easier, and much cheaper.