We’re halfway through 2018 and to talk about cryptocurrency disrupting industries might seem a bit dated. One industry that is still feeling the shockwaves of Bitcoin, Ethereum, and the rest of the blockchain revolution, though, is real estate. Nowhere in real estate is this more readily apparent than when it comes to lending. That’s right, we’re talking about real estate lending and cryptocurrency.
While it might seem like these are two incompatible areas, there is actually more overlap than most people realize. Now we’re not saying you should get an investment property loan in Bitcoin. Far from it. In fact, these types of loans don’t even exist at the moment. Rather, this is an area that people could use some general education on.
Keep reading to learn about real estate, cryptocurrency, and lending. If you need a short-term commercial bridge loan, give Lionshare Lending a call today at 855.505.LEND.
Real Estate & Cryptocurrency
While the real estate industry has experienced far less upheaval than others thanks to blockchain technology, it isn’t immune by any means from blockchain’s impact. There are a few areas of the RE industry in particular that bear examining.
The first of these is the idea of smart contracts. Much like the trend of smartwatches, smart homes, and smart cars, smart contracts are a type of automated, algorithmic contract that produces a single end result. To put it another way, once a smart contract is started, it will produce one and only one outcome.
This is incredibly beneficial. It removes the possibility of someone defaulting on their part of the contract. Have you ever been in escrow when your buyer suddenly balks? This quickly torpedoes the deal and has the potential to cost you significant money in lost time and legal fees. This doesn’t happen with smart contracts. Everything is hardcoded to happen automatically and, if someone doesn’t come up with their payment, a refund is generated on the spot. It goes instantly into your blockchain wallet.
Which leads to the second impact cryptocurrency has had on real estate – the transparent transfer of money. Every transaction that a single unit of cryptocurrency goes through is recorded on its blockchain. This is the foundational ethos behind the entire blockchain revolution. So, if you use cryptocurrency to purchase or sell property, there is a record left that anyone can see.
Not only does this help savvy real estate investors spot trends ahead of time, but it leads to less fraud and an indisputable property record. This is all thanks to blockchain’s decentralized nature.
Another disruption that cryptocurrency has had on the real estate industry is the massive shifting of necessary roles. While no single profession has been made obsolete by cryptocurrency yet, there are certainly some that are headed that way. For example, the transparent and secure transfer of money can lead to banks being removed from real estate altogether. As private commercial real estate lenders, we are very much in favor of removing unnecessary paperwork, lengthy approval processes, and mountains of closing costs.
Imagine a world where all real estate deals are done through blockchain lenders. That is the world we’re headed towards. This also speaks to the idea of previously illiquid investments becoming liquid. The value and equity you have tied up in real estate aren’t quickly accessible. It takes weeks or months to sell a piece of property and that’s without any extenuating circumstances. With blockchain tech, you can quickly sell property and convert it to cold, hard cryptocurrency.
These are just the most readily apparent ways that cryptocurrency and the blockchain have impacted the real estate industry, but there are many, many more.
While this sector of the financial industry is still very much in its infancy, there are a few things you need to understand about borrowing and lending through cryptocurrency. This type of lending isn’t as simple as a hard money purchase loan and really hasn’t been applied at all in commercial real estate. Maybe this presents an opportunity for daring investors and innovators, but we’ll leave that up to speculation for now.
Cryptocurrency lending is done peer-to-peer, or P2P. Due to the decentralized nature of all blockchain technology, there isn’t a way for banks, REITs, or other large-scale institutions to enter into the equation. While some banks have ventured into the world of blockchain-based security trading, this is still very limited in scope.
All of this is to say that lending cryptocurrency behaves in much the same way that hard money lending does. It doesn’t require a lengthy financial history and a sterling credit score. It doesn’t require months of deliberation before coming to a decision. It doesn’t require red tape. All it requires is someone in need of financing. This is remarkably similar to private commercial real estate lending.
The Marriage of Crypto, Lending, & Real Estate
This is the future real estate lending is headed towards. It isn’t there yet, and it likely won’t be for several more years at least. Blockchain technology in general, and cryptocurrency specifically, needs to be adopted by a wider audience before lenders and borrowers feel comfortable exchanging large sums of money digitally. Make no mistake, though, this is the future.
Now that you’ve read Lionshare Lending’s hands-on guide to real estate, cryptocurrency, and lending, it’s time to learn a bit more about what it is that we do. Check out some frequently asked questions and give us a call now at 855.505.LEND to get your loan started. We have some of the quickest financing in the industry and can get you your share today!