When you make the decision to invest in real estate, it can feel as if you are entering into a very old, established world. People have been buying and selling properties for hundreds of years, using their portfolio to boost their overall wealth and income– and now you’re joining the long list of people who have done just that.
As old as investing in real estate may be, it is worth noting that the industry is resistant to change. As time has passed, the way we buy and sell properties has become ever-more convoluted, confusing, and heavy in terms of bureaucracy. The property industry has undergone many shifts and changes of focus to get to the point it is at now, and it would be naive to think that its evolution is complete.
In the future, however — and potentially the very near future — the way properties are exchanged could be very different indeed. Below are three accepted realities of real estate transactions that seem so established, the idea of investing in property without them may seem bizarre… but they may indeed soon be facing obsolescence. As a keen real estate investor, you’re going to need to be ready and primed to keep pace with these changes as they come.
ACCEPTED REALITY: Needing to pay the full purchase price to invest
At this point in time, if you want to invest in property, you have to be able to buy a house.
Let’s say that you want to buy a property with a sale price of £200,000. To buy this, you have to first raise the deposit from your savings; £20,000 would be a standard amount for a deposit, especially if you are not buying a property as a primary residence. Even when you do have the deposit, you have to go and source a mortgage for the remaining £180,000.
If you can’t source a mortgage or fund a deposit, then the result is simple: you’re not investing in that property under the current system. Given that property is such a great choice for investment, thousands of people are unable to take advantage of the potential returns that property holds.
However, modern technology suggests that this may change. Blockchain technology is more commonly associated with cryptocurrencies, but as this video explains, it can be used for a variety of different purposes:
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Companies are now beginning to emerge that are using blockchain technology to allow people to invest in property without the need to purchase the entire property. Take that same £200,000 house from the earlier example. If you can’t get a mortgage or raise the deposit, then you’re stuck using conventional methods. However, if you invest in tokens for companies such as I-House, then you can use those tokens to buy part of the property, for example 5%. You still have a property investment, but you don’t need a full mortgage, and you don’t have to take on all the risks and paperwork associated with owning a property outright– you share the property with other investors. You invest in property, but without the hassle of having to actually own, maintain, and rent an entire property.
The idea sounds odd now, but it’s proving to be popular. The I-House ICO — that’s the initial coin offering, when tokens were first offered for sale — sold out in 10 minutes, so it looks like there are plenty of experienced property investors who see this kind of system as the future.
ACCEPTED REALITY: Visiting a property before buying
When you’re investing in property, you have to do a lot of guesswork, especially if you’re intending to flip the property. You have to physically go and see the property, walk through the rooms, touch the walls, and then try to imagine how it might look when it is redesigned. Many property investors have found that these measures, though essential, are not exactly reliable for envisioning what a property might be– and visiting numerous properties to try and find “the one” is time-consuming to do in person.
Virtual and alternate reality technologies will allow a future in which you can visit multiple properties all from the comfort of your living room, and you can then change aspects of the design and layout to see how each property may look when it has been renovated. These technologies may currently be associated with gaming and little else, but they offer an endless scope for being able to investigate properties and their potential in the most time-efficient manner.
As well as saving time, there is also the potential for property developers to avoid very expensive mistakes by knowing what the property will look like when development is complete. No more guessing, no more hoping the development will work out as you hope– just complete confidence that you know exactly what to expect from the finished renovation.
ACCEPTED REALITY: Using escrow
Escrow is an established part of the process of buying and selling a property. The amount is paid, contracts are exchanged, and then the escrow company (or agent acting as an escrow company) sends the funds through to the seller. The escrow process is an integral part of property investment, to the point where it’s tough to imagine how a transaction could be completed without it… until now.
Once again, the potential change comes courtesy of blockchain technology. Blockchain offers a method that can allow people to transfer funds and verify the funds have been received in an open, transparent way– without the need for an intermediary. This change could be catastrophic for the real estate market as we know it, but it could also open up new avenues for easy processing of transactions and faster sales.
The three accepted realities above seem as if they are so crucial to real estate investment, it can appear nigh-on impossible to picture the world without them. However, as technology changes and develops, there’s no doubt there is a promising future ahead for all property developers.