Democratizing Real Estate Investing With Blockchain Technology
Singapore-based REIDAO seeks to bring real estate investing to the masses by leveraging blockchain technology. The company uses smart contract capabilities on the Ethereum blockchain to create crypto assets backed by real estate, allowing holders to gain exposure to real estate and profit from rental income and capital appreciation of underlying properties.
"We want to [offer] democratized property opportunities, to be accessible by everyone, wherever they are," Darvin Kurniawan, founder and CEO of REIDAO, told Bitcoin Magazine.
The real estate market has plenty of opportunities for making big gains. However, buying and owning real estate remains complicated and is reserved for the few who can afford to enter into real estate investments.
REIDAO seeks to provide solutions to the current issues and limitations and bring new investment opportunities.
Kurniawan recalled his earlier days as a new graduate when he was considering investing in Singapore's booming real estate market.
"I identified a few opportunities, unfortunately I couldn't enter alone — huge amount of upfront capital was needed to acquire just one property," he explained.
"So back then I and a few friends tried to pool resources together, to acquire just one property. A lot of work, a lot of hassles, and especially a lot of trust. I wanted something simpler, but there just wasn't any.
"I tried to solve this problem for a long time, and when blockchain technology came along with its trust-less properties, I thought 'this is it!' Now quite literally you can pool resources together with a lot of other people that you don't know to buy a single property. No trust needed among the participants."
Blockchain for Real Estate
Using blockchain technology to digitalize real estate ownership can transform the industry landscape, enabling a greater number of people to access real estate investing, lowering entry barriers and making the market much more liquid.
Blockchains can be used to create and distribute digital tokens that represent ownership of a property. The value of a particular token would be backed with physical real estate, and these tokens would be issued to each participant and owners.
In the case of REIDAO, every property listed on the platform is assigned a unique Token ID. Every Token ID has its own cap of tokens available, its own valuation based on the property that is backing it, and its own track record.
"By buying and selling these tokens, people are, in a way, buying and selling fractions of the underlying property. We have created a structure including Public Trust Company to create the link between the tokens and the actual properties," said Kurniawan.
Individuals that hold a certain number of tokens of a particular property are eligible for the income generated by the property. This can be rental incomes or simply capital appreciation.
Kuala Lumpur Properties
“REIDAO is set to launch its proof-of-concept in the second half of the year. People interested in the concept will be able to participate in a ‘crowd-buy’ for the first few properties listed on REIDAO,” Kurniawan said.
The company will first begin with properties in Kuala Lumpur, Malaysia where real estate prices are still relatively affordable. "We have set up the necessary partnerships in Malaysia to pull this off," he indicated.
In the long-term, Kurniawan envisions a "Property Tokens Exchange Board," which would be similar to a stock exchange, but for property tokens.
"If anyone has extra money that they want to invest in real estate, this will be a new and simple option for them, especially with the low barrier to entry.
"If you are feeling adventurous, buy a few property tokens backed by a property in Cambodia. If you are feeling cautious and want something safe, buy a few property tokens for a property in Japan. If you are feeling lucky, you can consider a few property tokens backed by a distressed property in Greece," said Kurniawan.
Going further, he sees some kind of real estate investment trust but "with tokens as one of the distribution channels."
"To do this, we will need to have key partnerships with established companies that are already in that industry, to extend their capabilities to include the blockchain," he said.
REIDAO joined the Lean LaunchPad Program by NUS Enterprise, the entrepreneurship arm of the National University of Singapore, an opportunity for the startup to validate its proposition and turn the concept into a commercially viable product.
"It is imperative for a [startup like ours] to validate what we are doing and to build something that somebody wants to use," said Kurniawan. "Even more importantly when we are deal with a new technology like blockchain."
"Our target market constitutes mainstream users who might not have heard about Bitcoin, let alone the blockchain. We need to be able to really understand what they are looking for, and how we can get them to want to use the platform without much hassle."
REIDAO is working with Digix Global, another Singaporean startup, to allow people to invest in its properties using gold-backed digital tokens. The company will incorporate Digix Global's DGX token as its main medium of exchange.
"It is easier to tell the mainstream non-technical users that they will be buying properties using gold, and if there is any income they will also be paid in gold, rather than explaining about ether or bitcoin," said Kurniawan.
REIDAO is planning an initial coin offering to raise capital to support development. A capital injection would also allow the company to start exploring other markets beyond Malaysia.
"We have a few jurisdictions in mind that we can expand to, and each one will have its own local rules and regulations which needs to be iron out independently, and the cost to do that really adds up," said Kurniawan.
"Before all that could happen though, we need to be able to pull off the Proof of Concept for the properties in our first jurisdiction — Malaysia. This is where 100 percent of our effort is going to right now."