It shouldn’t come as a surprise that the traditional ways of doing business in various industries are being re-evaluated and modified to answer the realities of the modern world. For this particular case, we will look at the ways real estate funds work to change the global ecosystem that they have to adapt to. This is not simply a question of the best investment distribution, but a fundamental understanding about how the real estate industry works and what will become of it in the future. Here, we will dig up some fresh trends and changes with the Forbes Real Estate Council and The Counselors of Real Estate agency. View the truth behind the conceptual ideas of implementing blockchain solutions for real estate cases with Ragnar Lifthrasir and check for the legal base of operations with Stéphane Blemus. And we will, of course, look at some fresh solutions for real estate investing with Dominium.
Opportunities all around
It might seem pretty surprising, but the good ole real estate industry is experiencing some major changes currently. Even while being considered as a conventional industry that has no room for innovation, the competitive environment of the free market creates an opportunity for companies to capitalize on advantages they might get through some fresh approaches. While visual marketing is soaring, and while millenials are starting to get into the market, the introduction of blockchain solutions might get overshadowed… but surely, this is not the case. As Garratt Hasenstab mentions:
“Not to belabor the already highly-trending topic of blockchain changing the world, but this is the reality of our industry. Blockchain-based applications are changing the way buyers, sellers and investors interact with each other and the properties they have interests in. Welcome to an new world of unleashed liquidity, transparency and disintermediation. The real estate world is rapidly changing and we must do so too, or we will fall by the wayside.”
So, with a long list of things to change we should be prepared to see a slightly different landscape around this industry in the coming years, and the measure of success in this case could be considered as a degree of flexibility to twist the existing concepts in order to face new realities… or is it easier to just create it anew?
Facing the truth
With all of these changes, we should also come to realize that the “rules of the game” will change as well. In the past, real estate was a simple process of building homes and selling them to people who are ready to pay the most, and then repeat. Now, the “rules” for macroeconomic conditions have changed, and that change has had a pretty heavy impact. So if you’re still holding that cliched image of real estate agents from 90’s movies than you’d better stop because it’s rather outdated. Below is the list of major issues that the real estate industry might face in the near future:
With those problems at your gates, the need to work in the post-industrial era is forcing companies to act smarter. With customers more erudite and competition tight, you need not only funds and connections, but a system to gather and process data so that the right decisions can be made.
Knowing your weaknesses – forging your strength
There is no simple solution for any problem that wraps up the situation into a nice little bow just by itself. While blockchain solutions, on average, provide some additional benefits by their implementation, it’s worth noting that some ways for their implementation is better than others.
“When we can secure the most important functionality of a financial network by computer science rather than by the traditional accountants, regulators, investigators, police, and lawyers, we go from a system that is manual, local, and of inconsistent security to one that is automated, global, and much more secure…”
But it is not just a matter of technical realization that matters. It’s the conceptual strategic planning that makes the difference. So if the blockchain is being used, the questions of what it is being used for and how could it best be implemented need to be answered first.
“I’m the Law!” is not a case here
Legal issues are a major factor that predetermine the fate of entire industries. There are lots of politics involved, and As Otto von Bismarck once said, “Laws are like sausages. It’s better not to see them being made.”. From the other side, it would be rather educational to see how blockchain-related legislation has been made across the globe, as well as what agreements between the blockchain community and governments could be reached.
“As of today, mainly official positions, public reports and “soft law” decisions have been published worldwide, searching a fine line between investor protection and economic attractiveness of the local country. Few “hard law” legislations and few court rulings are to be counted. Uncertainties remain as to the legal and economic qualification of virtual currencies, tokens, ICOs, smart contracts and distributed ledger technology… 2018 will be a crucial moment for the regulation of Blockchain technology.”
So with lots of things unknown about what the future can bring in terms of regulations, it is always important to keep in mind how dependant your activities are on those. It’s also important to scout out the situation beforehand and get agreements as soon as possible. It’s also worthwhile to have a guarantee that you would not be shot down afterwards.
An elegant approach for a delicate situation
We’ve been looking at a lot of material about the real estate industry, and aforementioned ideas are very useful, but someone has to apply them in real life and not just on paper… It seems like Dominium is the perfect contender for this role. While conventional solutions are still present, their issues could only be solved via structural changes:
“Traditional private real estate funds suffer from a few drawbacks: they are illiquid, typically requiring that investors tie up large sums of capital for years; they are often accessible only to institutional investors and high net worth ($1M+) individuals; and, while government regulations usually require fund managers to make certain disclosures about their funds and the assets they hold, these funds are not always as transparent as they could be.
Publicly traded real estate investment trusts (REITs) and similar instruments address some of these problems but also have their own complications: listing a fund on a large stock exchange is expensive and usually entails complying with a slew of extra regulatory requirements, and smaller funds that cannot benefit from economies of scale often charge correspondingly higher fees.”
With creation, financing, management, and trading of real estate funds being a serious and responsible task, having people trust you is a reputation you will have to earn, and this kind of reputation cannot simply be bought.
“One other aspect of Dominium’s approach to regulatory compliance that is worth mentioning is the company’s plans for creating standardized templates for certain legal documents. Specific requirements vary by jurisdiction, but generally fund creators must produce at least a prospectus, which often contains a rather small amount of important, fund-specific information interspersed with a generous helping of legal boilerplate.”
Solving all possible problems beforehand gives you a considerable advantage. Especially with regards to possible government and legal intervention. The ability to find a compromise is also one of the essentials for reaching success.
“Reflecting on the structure and features of the Dominium platform, and especially on the measures that Dominium has taken to comply with government regulations, I’ve changed my opinion on permissioned blockchains with a centralized authentication service. As I wrote elsewhere, I had previously been quite skeptical of blockchains controlled in some significant way by a single entity. A private database, in my estimation, was almost always a better solution.”
Overall, the right decision can only become known when the results are already present, and looking into the future takes a toll upon one’s own expertise and faith. What could happen with the world in a few years to come? Who knows? Our limit lies within the boundary of guesses, but it’s often a good guess that makes the difference between the right strategy and the wrong one. While the position of the blockchain on the real estate investment market is still unknown, it is certain that this solution will come to dominate it soon enough.