Blockchain technology makes it possible to automate and digitize process steps. It is ideally suited for the generation and accounting of securities, as it is secure and retroactively immutable. This also applies to real estate investments. In times of low interest rates, real estate can be an interesting concept of value investment also in USA or England.
Token-based real estate bonds
One company that focuses on real estate tokenization investing with blockchain technology is Hamburg-based Exporo. It is now Germany’s leading platform for digital real estate investing. Simon Brunke, Björn Maronde, Julian Oertzen and Tim Bütecke founded the online platform in 2014 and have continuously developed it. Exporo issues token-based bonds on the Ethereum Blockchain, under a regulated securities prospectus. Exporo investors finance about 50% of the properties, while the other half is financed through traditional bank financing. Investors can manage the securities directly online via a so-called investment cockpit.
Investors participate in value growth
The Exporo real estate portfolio promises investors an investment without additional expense: administrative work is eliminated. Further development, leasing and maintenance are in the hands of Exporo. Investors are not directly tied to the property. They can resell their shares on the trading market as needed, as Exporo writes on its website. At the same time, investors participate via regular distributions from the rental surpluses and in the increase in value of the property.
How does token financing work?
What is interesting for potential investors and investors is how the tokenization of a property proceeds all the way to financing. How does “swarm funding” into a tokenized real estate project work at Exporo?
The first priority is acquisition. Exporo employees keep an eye out for interesting real estate projects. These can be new buildings or older properties that are being renovated. In this way, Exporo is constantly expanding its real estate portfolio.
After the acquisition, the actual review process begins according to strict criteria. Suitable properties are found through in-depth analyses. The team of experts also commissions external appraisers for this purpose.
Through the legal and secure implementation of the issuing process, the purchased property becomes an investment. Investors subscribe to the digital security and invest, for example, in a new construction project or the vitalization of an existing property.
The management and administration of the property is in the hands of Exporo. The objective here is the best possible development of a property. The distribution from the rental income is made to the investors every three months.
From the ongoing distributions of rental income and the further development of a property, the return is finally paid out. Investors can also sell units via the trading market before the end of the term.
The advantages of token-based securities
Exporo relies on an offering of token-based securities. By using blockchain technology, it is possible for private investors to invest in real estate even with a small investment. The costs incurred in the process are low. Tokenization makes the processes more transparent, faster and streamlined. This offers investors a simple and direct entry into the real estate sector.
FAQ – Frequently asked questions
Every real estate investor receives a digital safe deposit box, also called a “wallet”. There, he can manage his blockchain-based securities himself. An external securities account at a bank is not necessary. Only the real estate investor and no one else can access his assets – via the account and a password. This can be restored in an emergency via a security certificate.
Transparent and secure management of the securities register is ensured via the public Ethereum blockchain. Strict regulatory requirements are adhered to in this regard. Investors can view their financial transactions in a self-determined manner and this is completely free of custodian banks.
No, as a rule they are not. The investment is made without the involvement of traditional banks. The independence from central securities depositories and custodian banks significantly opens access for domestic and especially for international interested parties.
Digital real estate trading platform
Exporo (Propvest) is a crowdfunding real estate company. Investors trade shares in the properties via the digital trading platform. These existing properties have already been fully financed beforehand. Exporo investors who have already purchased shares in the portfolio properties can also offer their own shares for sale again here. Interested investors can then purchase these shares again. What fees are incurred by the investor? The listing fees for an offer on the digital trading platform are 0.5% of the selling price.
Realized real estate projects
The first real estate project realized with the new technology was the “Ärztehaus in Hamburg” in summer 2019. By December 2020, 30 existing properties had already been digitized. With more than 32,000 individual investments, more than 70 million euros have already been invested at this point. Both residential and commercial properties are used as objects.
This can take away the value of the fancy condominium: In the neighborhood, skyscrapers suddenly grow out of the ground.Real estate platform hausInvest
Considering risks instead of blind faith
The digital offering is meeting with demand and acceptance among savers and private investors, according to Exporo. A trading volume of more than six million euros proves that liquid trading in small denominations can be realized quickly and easily
In addition to Exporo, there are numerous other providers in the real estate crowdinvest sector, such as Crowdli or Crowdhouse. Generally speaking, real estate experts warn that blind faith in real estate offers is out of place. Investors should inform themselves before a capital investment exactly about the offer:
- Value increases are not safe for all future and at each location, warns the real estate portal hausInvest. The strongest demand settles down sometime. Also local changes are to be considered. “They can take away the value of the chic condominium: The quiet side street becomes a thoroughfare. Suddenly, high-rises are sprouting up in the neighborhood.”
- Only if the current record-low interest rates last for very many years, the calculation works out, says the Swiss wealth center VZ. The VZ specialists have calculated. “Only already with a (in historical comparison) rather small increase in mortgage rates to 3 percent, the yield is halved from 6 to 2.9 percent.” In addition, crowdinvest portals would expect comparatively low maintenance costs.
- Ask yourself the most important questions: In what exactly does one want to invest?
- What are the mechanisms in the corresponding tokenization model? At Exporo, the investment vehicle is not easy to understand, says the german portal critical investors.
- What is the investment horizon? If you put too much of your capital into one asset class, you run a cluster risk.
- Those who need the invested capital again early on may struggle with illiquidity of their investment and be forced to sell at a loss.
Market changes due to digitalization
Blockchain technology provides an open system for a large number of investors and in this way ensures healthy competition. Because of blockchain technology, silos are not created in favor of investors and market participants. Access to the investment is low-threshold and offers great potential in terms of data sovereignty and supply chain management. The real estate is transparently mapped on the blockchain.
About Exporo AGSins its founding in November 2014, nearly 200 real estate projects have been co-financed, more than 440 million euros of capital have been brokered and more than 150 million euros have been returned to investors. Exporo now employs 140 people and is headquartered in Hamburg's HafenCity.