Jean-Marc Jacobson, Co-CEO and Co-founder of RealT, a platform that democratises realty investment opportunities through tokenising properties, discusses the transformative power of Blockchain in real estate. As Blockchain becomes as ubiquitous as email, Jacobson believes the user experience will one day be so seamless that buyers won’t even realise they are utilising Blockchain technology.
How are mainstream currency and current systems failing those investors wanting to make the most out of their property?
Investing in real estate has been great for me and my business partner. Through thick and thin, our properties were here for us; we took care of our properties, and the properties took care of us. They helped us through some hard times, and we wanted to give this opportunity to everybody by democratising real estate investment. In general, real estate is more than a place to live, it is an investment. That was the mission of RealT.
Real estate today fails people acquiring real estate as, in most cases, around 90% is an anxiety trip. Firstly, in most cases, it takes a large amount of money. If you’re in a pinch one day, it can take you down if you own a property. Sometimes you can be lucky and sell it in a few months. But most times it can take years.
Your accessibility is the first difficulty but then we have administration. The administration is hellish. I have managed over 18,000 units and I can tell you it’s a nightmare. It’s constant work with due diligence and verifications, specifically with energy efficiency and that’s before you even deal with the legal elements of it. Ownership group titles, contesting taxes, you can go home, but there’s always work to do.
All these aspects are anxiety driven. The access, amount, administration, liquidity and solutions that have appeared to deal with things like investment funds, while they’re very diversified, you don’t really know what you’re buying into. They make it easy to buy and sell but you have special dates where you can bind and sell if you have buyers on the other side, as well as being top heavy with administrative fees. A flaw with all of this is there’s no transparency except for an audit report which is unreadable and always buy in bulk for most people. So, you end up with a situation where you’re like, ‘You know what, I’ll leave that to the experts.’
What role does Blockchain play in the current real estate market?
Blockchain is going to transform all types of real-world assets of investments, and real estate is a perfect use case that RealT has exemplified and continues to push to new levels.
Blockchain is going to be just as common as emails, becoming a first and foremost protocol by choice. Like an email, you don’t consider using SMTP or IMAP, you just send an email. Soon you won’t even know that you’re using Blockchain, you will just be buying an asset or fractional asset or even an entire asset and it will be registered on the ledger. And that ledger would happen to be a Blockchain ledger and yet you won’t even notice because the UX will be completely up-to-date technology.
When you sell a property on RealT, because of Blockchain, you can see how many token holders there are and how much each token holder has anonymously. But you can see how many people are invested and whether it’s a large amount or not. This transparency is unique. It’s immutable, so you cannot go back and change things. This allows you to keep up to date and have very tight management and that’s incredibly reassuring. You have increased liquidity, and you have the power of doing so 24/7.
For the investor, the advantages are immense. As the decentralised finance industry grows, you get more and more protocols and tools with the ability to optimise and magnify this performance. From the business point of view, you end up with a much stronger proposition. You end up with a much more liquid and fluid type of business and your reach is 1,000 times bigger than what it used to be before Blockchain.
How does collaborative technology like Blockchain lower the ‘cost of trust’ between businesses?’
The registry is online, it’s immutable and anybody can verify it. So already, you know the reality of who owns what and how it’s distributed. Therefore, if the person says: ‘Well, we had a return of eight percent on this property’, you can check online whether it is true or not.
Transparency allows you to see the income coming in. It’s distributed on chain, so you will know that it can collect the income coming in and you can see what has been distributed or not and all this is done with ease. You don’t have to be tech-savvy to do that. There are tools that are being built to have all this information and data on a dashboard. So, it changes the way you think of real estate which all your life has been more of a closed box and accessible only to the few.
How can Blockchain help property investors in creating more successful financial outcomes?
Suddenly, anyone can buy a real estate token in US dollars or euros and even if it’s a small amount, we can confirm that the amount is safe. We can now see a person in Bombay, for example, starting to earn money when things are difficult, wanting to put small amounts into something that can grow.
The idea is to have steady revenue and passive income. Or if you are more interested in the capital gains 10 years down the road, because you are putting this away for your children, you can buy tokens that are more patrimonial and every month, just add a token for your children or inheritors or for yourself for your retirement.
You can also gift a token and it’s a gift that keeps on giving while encouraging somebody to start managing their own portfolio.
All these types of investments are going to be easier, faster, more liquid and transparent. That’s what Blockchain is. It is going to destroy all intermediaries that are not notaries and that is a promise of the Blockchain. Notaries and agents are not going to disappear; however, their job and function might evolve as they are still necessary for the Blockchain ecosystem. My guess is the same way people were saying that streaming is going to kill the music industry and now the music industry has never made as much money as that as it does with streaming. It’s the same concept.
What is the global future of Blockchain in property investment and management?
Settlement layers. All transactions will be settled on Blockchain, which will make for any type of asset, whether it’s securities, real estate or art, everything will be set on a Blockchain. It will make the cost of settlement go down tremendously and will give you more security and confidence.
For the compliance officer, it will get more proof in case of litigation, becoming more immutable, easier and transparent, with the cost and speed improving too. This is the future. It’s the future for every asset and it’s coming fast.
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