With the world transitioning into a digital age, property acquisition, ownership, and management as we know it are changing. Technological advances penetrate every industry, including the real estate market, eliminating the need for analog documents and unnecessary bureaucracy. In the last two years, crypto traders have accumulated the highest buying power in 2 years, ushering in a new era of blockchain transactions.
Are you an investor that wants to gain more familiarity with cryptocurrencies? What are the pros and cons of using blockchain in real estate? Stick around till the end of this article because we have all the answers right here.
How Does Blockchain Affect the Real Estate Industry?
One of the most significant advantages of adopting blockchain technology is that it makes transactions safer for many users. For example, with physical cash exchange, both parties often have to meet to discuss face-to-face and confirm ownership and transfer.
On the other hand, with this technology, information is decentralized, and all transactions are recorded on an online ledger. That means you can easily confirm that the person you’re buying a property from really does own it.
As we highlighted in the previous point, blockchain technology works on an existing decentralized system. Therefore, besides making transactions safer, they also involve less bureaucracy since landlords and tenants can access open-source samples.
A practical way this solution can be effective is with smart contracts. Under usual circumstances, a house lease might involve hiring a lawyer to draw up a suitable rental agreement for both parties. However, with this technology, you can use a smart contract, a digital document on the blockchain. Since these contracts are easily accessible, you can always modify them to suit your needs.
Removing unnecessary go-betweens can free up your time and resources to acquire other essential services. For example, you could hire a rental management service to help maximize your potential returns.
A massive advantage of blockchain and cryptocurrency is that they allow property owners to invest in bit sizes. As a result, multiple landlords can earn income relative to their holding on a single property through fractional ownership. Consequently, that translates to increased liquidity.
One of the most significant drawbacks of investing in real estate is often its indivisibility making it harder to acquire and sell off. However, blockchain solves that solution by allowing owners to invest and share ownership of one property.
Using blockchain technology can vastly improve the documentation process of real estate. Currently, house purchases require several hardcopy papers, which are vulnerable to elements like fire and water. In addition, digital copies stored on the cloud are also at risk of being hacked or accessed by unauthorized users. On the other hand, Blockchain technology holds vital records in a ledger that cannot be changed, protecting the documents and, thus, investors’ properties.
Easier Title Management
Blockchain technology mitigates the risk of fraud in title management. Through transparent record management, potential investors can verify property titles before committing to a transaction. Unfortunately, manual paperwork is often bulky and allows fraudsters to fabricate and deceive unsuspecting buyers.
Issues with Contractual Law
When discussing cryptocurrency vs. real estate, one argument often made for the latter is that it is more familiar. However, one of the practical considerations barring the swift adoption of blockchain technology is that it requires a new litigation system.
Many real estate lawyers are familiar with contractual law regarding physical properties, but blockchain requires a different analysis. Unfortunately, that leaves investors liable to fraud if they sign smart contracts they don’t entirely understand. Thus, not all attorneys are up to task when litigating such cases. As a result, adopting blockchain in real estate can take time and effort.
Another complexity of blockchain that makes its adoption harder is the question of data protection. As a new technology, many investors and tenants are often unfamiliar with the technicalities required to maximize its use.
Thus, it is often hard for either party to alter details within the ledger without proper instruction. Without the correct guidance, the implementation of blockchain technology on a wide scale is still several years ahead.
The adoption of blockchain technology in real estate is inevitable due to its ability to streamline the entire process. Through advanced transparency, efficiency, and security, blockchain makes it easier for landlords, tenants, buyers, and sellers to conduct their business in a well-organized manner. Although drawbacks like regulation and resistance to change can hinder its efficacy, this technology is still likely to become widespread in the coming years.
If you need help understanding the complexities associated with blockchain, you can hire an expert to help you. A professional property manager can guide you through the latest technologies, help you avoid pitfalls, and maximize your investment.