Bitcoin, Blockchain and Cryptocurrencies Will Upend Real Estate Market

A few months ago we are The Reeves Team wrote about the potential that exists in the blockchain space.  At the time of writing many people were declaring bitcoin and cryptocurrencies dead.  Unfortunately we live in a media age where a majority of what you read online and hear from “news” outlets is either clickbait or at worse fake news.  Since the time of publication the price of Bitcoin has more than doubled and people are starting to come to the realization that cryptocurrencies are not going anywhere.

Like any revolutionary technology it seems like something that is nothing more than a curiosity to the casual observer.   If you need a reminder of how people viewed the internet in the 90’s here is a clip of Katie Couric asking “What is the internet, Anyway?

It is safe to say that 20 years later you can replace internet with blockchain and that will let you know where we are with the adoption of the new technology.  It is safe to say that the internet has changed our lives on a daily basis but will blockchain and cryptocurrency do the same thing?

In the previous article we discussed how blockchain will revolutionize the title company industry and also a different ownership model.  Now that Bitcoin is back in the mainstream news we would like to present a few more ways that blockchain technology will revolutionize real estate as we know it.

Property Managment

Property management can be a pretty hectic process.   Often times there are multiple applicants that want to rent a particular property.  A management company will typically ask for an application fee upfront as well as extensive information from an applicant including personal information such as address and social security number.  More times than not this private information is sent to companies with varying levels of security and the applicant will not successfully sign a lease. Blockchain technology offers transparency that is not typically associated with the property management world.  What if you could see a persons rental history right on the blockchain?  What if the tenants could see if a lease was already signed directly on the blockchain instead of waiting weeks for the property management company to respond? What if you could share your credit history with someone without giving them your social security number? These are just a few of the efficiencies that will be provided when the blockchain revolution comes for the real estate market.

Real Estate Investment Trusts

We recently discussed REITs as a potential real estate investment vehicle. In this article we will dive into the implications that blockchain can provide for REITs.   To give a bit of a background a REIT is a company that owns, operates or finances income-producing real estate. These REITs allow anyone to invest in real estate in the same way they would invest in an ETF or a mutual fund.  The downside of REITs is there is typically high management fees.  With smart contracts blockchain technology could all but eliminate these hefty fees and will also allow for more transparency when investing.  There will also be more liquidity in the market as people will be able to buy and sell smaller increments of the property.

These are just a few ways in which the real estate industry will be disrupted by blockchain technology. Do you agree with us here at The Reeves Team or are you still a blockchain and cryptocurrency skeptic? Let us know in the comment section below.

How To Make Money Investing In Real Estate

It is well documented that fewer and fewer people are owning the homes they are living in.  It is a harder decision than ever before if you should own a home outright or rent.  Millennial’s notoriously are choosing the flexibility of renting over owning a house in historic numbers.  While many people people are choosing to rent there is another question you should be asking yourself.  Should I invest in real estate?  For many owning a home is the single biggest investment they will ever make, but is real estate investing a strategy that fits your goals?

Even if you chose to rent for the flexibility of being able to pick up and move whenever you want, it still may be a good decision to invest some of your capital into real estate.  Making an investment into real estate can seem like a huge undertaking but here at The Reeves Team we will show you that it doesn’t have to be the case.  Below are four different ways to invest in real estate ranging from the traditional to the unique.

Option #1 Owning a rental property

When people think of investing in real estate this is typically what they think of.  Owning a rental property can be a great investment.  Housing for the most part appreciates over time and you can also gain cash flow if you are able to collect more in rent than it costs to own the property.  There are some things to consider before deciding to purchase a rental property. You will either need to plan on spending a significant amount of time handing matters related to your rental unit, or you will need to hire a property management company which can eat into your profits.  Another great thing to remember when purchasing a rental property is the possible tax deductions.  Expenses are tax deductible and if there are any losses related to the property they can offset gains from other investments.

Option #2 Investment Groups

If you want exposure to the real estate rental market but don’t want to get your hands dirty by being a landlord you always have the option of an Investment Group.  Typically if you are investing in an investment group you will be investing in a company that purchases, or sometimes builds real estate.  Often the type of real estate you are investing in will be condos or apartments. Similar to owning your own rental property and hiring a property management company their is typically management overhead that will eat into your profits.  The benefit of an Investment group over a rental property is that you are more hands off in a way that you would typically see with a mutual fund or stock portfolio.  The negative side is there are more fees and you have less control than you would if you had your own rental property.  You will also need substantial capital to start investing in investment groups.

Option #3 Real Estate Investment Trusts

If Investment groups are similar to mutual funds or stocks then REITs are nearly identical.  REITs like many stocks will pay dividends and are basically the same as owning stocks.  This is good if you are familiar with owning stocks but you are not comfortable owning large amount of real estate.  REITs can be a great investment and can help you create a diversified balance sheet when you are investing.  You are however, less likely to hit a home run with REITs because unlike Investment Groups and rental properties they are not leveraged.  This means you don’t have the option of taking out a loan on a property so the gains and losses are not going to be as large as if you invest on a large property by taking out a loan.

Option #4 Flipping Homes

This one is not for the faint of heart.  We do not recommend flipping homes unless you know exactly what you are doing and have lots of experience in the real estate market.  If done right you can make a great deal of money flipping homes, but there is also a lot that can go wrong.  When flipping homes you typically have high interest short term loans on a property.  If you are not able to turn the home around and sell it quickly your profits could very quickly turn to losses. Also if the real estate market takes a turn you could be left holding a home you never wanted and paying extremely high interest rates on it.  However, if you are handy and know how to spot a good deal flipping homes can be a very lucrative business.

So what do you think about these 4 options for investing in real estate?  Do you use any of these strategies? Let us know in the comments section below.