UPRETS Research ｜ Future Payment Method: Stable Coin Utilization in Real Estate Investment

Digital securities, as one of the main forms of cryptocurrencies, have changed the way we make investment and do transactions. There is no doubt that volatility in prices of cryptocurrencies is one of the main reasons that these are used as a seamless medium of exchange. But, in the real estate, this instability of cryptocurrencies has become a key hurdle in its adoption. However, there is a resolution to this called Stable Coin(s). It is designed to achieve price stability and, at the same time, retaining the main components of cryptocurrencies.

How One Can Digitalize Real Estate by Utilizing Blockchain?

When it comes to achieving the best real estate digitalization, there are many complications about how to structure it in the best way. The digitalization of real tangible assets is not easy. A big hurdle is the fact that it needs to have a centralized record. Well, it doesn’t make sense to use digitalization if the transaction legally requires to be recorded in a centralized registry. The blockchain becomes completely redundant if that is the case. So the question is; how one can digitalize real estate using blockchain?

To truly use digitalization using blockchain for real estate, one needs a transaction that:

• The Property Is Relevant and Compatible;
• Generates Value;
• Does Not Have A Centralized Record and Has Contract Recorded In a P2P Manner only ;
• Do Have a legal Standing.

Using Stable Coins for Activating the P2P Real Estate Transactions

Well, the property management represents a contract between the landlord and the property manager. The landlord will pay a fee for the service, which is more than often are the rents derived by the property. This is a contract only recorded between the landlord and the manager, without any centralized registry, and is just right for representing on the blockchain. These rights can then serve as collateral for a Stable Coin. Landlords and renters have a peer-to-peer contract, which is valid in the eyes of the law in spite of not being recorded centrally. For example, in Australia, the residential property generates rents ranging around the 4% mark. Annually benchmarked by the CPI, the absolute rent amounts go up. However, if one considers the rent generating capability of property by discounting every future cash flow to present value and use inflation as the discount, then one can use today’s rent as a static number. If and when they want to sell, they can that, but they have to pay back what was paid for.

Dig into the Nature of Stable Coin Investment with An Example

Matt owns a property worth $500,000, but he needs the cash to invest in the business. His wife Laura is not willing to give up the house as she wants to continue to live there. She and Matt also believe that the property value will increase in the long run, and that is they want to continue to hold it. The couple sells the rights to rent on the Konkrete platform for $500,000. So, now they are living in their home, but the difference is that now they are going to pay the rent as per the market rates, suppose 4% annually. This $20,000 will be paid out in a weekly (or monthly, etc.) distribution to the investor who now owns these rights. These rental rights will be recorded on the blockchain, but not centrally. They can be used as a blockchain native noncustodial collateral, which can serve as the basis of real estate backed stable coins.

Let’s say, after ten years, the property is now worth $800,000 on the market. Matt and Laura have been paying rent that has cost them 40% so far for the last ten years of original value that was $200,000. And now they are willing to sell it, and they are free to do so. However, to extinguish the rental proceeds contract, they need to pay $500,000.That means the couple would be profited by the net difference of $300,000 and still come out ahead by $100,000 if you counterbalance the rent paid out to date.The proceeds would be distributed to the holders after the coins that were using this collateral will then be burnt. Such a stableCoin would be a hard asset and will generate a ~4% yield for its holders, which is quite healthy.

Why Go for a Stable Coin rather than Trading each of the Rights Separately?

The coin makes it all fungible, less risky, and more liquid through diversification across multiple properties for holders. Real estate transactions are pretty large, and for something like this to work, you would need significant distribution.

Quick Wrap-up

The popularity and supply of Stable Coins have been growing at an extraordinary rate, and the overall volume is also expected to get a boost in the next few months. There’s a strong expectation that Stable Coins will make way for cryptocurrencies to become mainstream. There are platforms like UPRETS that are making Stable Coin utilization in real estate easier for the property owners and investors globally. With a lot of real estate owners and investors looking to make the best use of digital securities, Stable Coins have huge potential for growth in future.

About UPRETS:

UPRETS is a platform focused on simplifying investment in real estate by advising on and digitalizing assets and securities.

We are dedicated to providing a convenient, legally compliant and advanced real estate digital securitization platform for property developers, asset owners and investors globally.

By utilizing our UPRETS platform, real estate developers and assets owners can create digital securities for their properties, providing investors with various low-barrier, secure and convenient forms of investments.

Backed by a publicly listed real estate conglomerate (NYSE:XIN) and our award-winning, patented blockchain technology, Xbolt, we bring a network, experience and luxury assets to the platform.

For more information about UPRETS,

visit https://www.uprets.io

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