Category: Uncategorized

Venturing into multifamily can be pretty lucrative, especially if you know the right moves. Multifamily investments are a great way of diversifying income. It’s a sector that provides stable cash flow and tax benefits.

Factors like the crashing of the real estate market industry in 2008 served as an advantage for multifamily investors. It was a terrible time as it drove more people to rent, considering they could no longer afford a home, especially millennials who had just graduated and entered the workforce.

Additionally, it continues to thrive because people will never stop looking for places to live. The great thing about multifamily investments is that they continue to thrive through recessions and inflations.

Even though it is constantly shifting, the multifamily market remains highly competitive. The only option is to stand out, stay diligent, and only discuss good deals. These are the top seven tips for multifamily investment strategies to make it profitable.

1. Research the Market

Before investing, conducting research ensures that you know what it takes to milk profits out of that market. Studying the multifamily investments sector should go beyond looking at properties online and talking to brokers.

An essential part of research when looking to invest in a multifamily is evaluating all aspects of an investment. Scrutinizing the location of a property should spearhead research into the market. It entails learning about the area from various points of view such as:

• The population of the area
• Management firms in the area
• Performance of investors in other sectors such as students housing in the location
• Employers and employment rates in the area
• Attractive aspects for renters in that area

It’s essential to refrain from investing in a new market before knowing the major players. The most effective approach to this part of research is interacting with property agents.

2. Build a Team     

Large multifamily investments are complex to manage, but that doesn’t mean managing them has to be a pain in your neck. Delegate the tasks to a management team that will handle the various aspects of your multifamily unit.

Having a team to handle some parts of the project ensures that investors can focus on the vital aspects of multifamily investments. In addition, engaging people with the necessary skill sets and shared responsibility ensures that everything runs smoothly.

When delegating, choose personnel who are up to the task. For instance, when looking for a groundskeeper, give the job to someone familiar with the area.

3. Start with Small Properties

Contrary to popular belief, multifamily investors don’t only have multiple-unit buildings in their portfolios. By the time an investor gets to the level of investing in multifamily projects, they probably have had sufficient experience managing and investing in small property investments before working their way to small multifamily investing.

Starting small allows an investor to explore the real estate market and learn about the market dynamics. Consider starting with small units such as a duplex or quadruple. 

Investing in small properties teaches you the dos and don’ts of multifamily investing, so you don’t take significant risks with your capital.

After learning the dynamics of the multifamily real estate market, it’s easy to approach more significant investments confidently since you know where to start and have the requisite knowledge to manage a property.

4. Prepare For Unexpected Events

When investing in real estate, one brilliant thing you can do is prepare adequately for the unexpected. Even with timely assessments of your investments, there is always a window for something unexpected to come up.

Large multifamily properties often have frequent maintenance calls and prolonged vacancies than average. Another thing that investors experience is unexpected costs incurred by tenants through issues like property damage.

Someone familiar with occurrences of unexpected events such as maintenance knows to take 10% off the expected amount in rent. Doing so on time keeps you from touching the income irregularly.

As for extended vacancies, it helps to tie down tenants to long-term leases while saving cash every month to cushion you from the lean times.

5. Device a Plan

As an investor, it’s essential to watch out for certain oddities with multifamily deals. For instance, when buying a multi family home with tenants, you must be aware that it’s probably on sale because it’s not generating adequate income.

Another issue could be that it comes with a high asking price which is not proportional to current income. Further, the property might not have an immediate return on investment.

Tackling such oddities often calls for a realignment in the operational strategy to bring in profits. As an investor, it’s up to you to figure out what you can do to start bringing in profit which would probably entail finding a way to reduce expenses.

Figuring all these aspects out can help you develop a business plan. Sticking to a plan ensures that an investment produces revenue as was forecast during its establishment.

6. Come Up With a Budget

Coming up with a budget for sizable multifamily investment after research is the way to go that guarantees investments success. You can set up a budget that aligns with the location and size of your assets.

A budget is helpful in various ways such as:

• You will know where to adjust costs
• It plays a part in tracking revenue for the investments 
• A budget is a valuable reference for future reviews
• It makes it easy to identify potential problem areas

When setting aside a budget for multifamily projects, it is essential to consider unforeseen expenses. Leave room for unexpected events such as maintenance.

In addition, a budget only serves as a guide. Since the real estate market is ever-changing, leave room for budget adjustments to accommodate the price of materials.

7. Renovate

Tenants often pay for houses with the best visual appeal. The last thing you want is to invest in property that lacks the visual appeal that renters look for. Rental properties that lack specific properties often end up staying vacant for long periods.

Renovating multifamily property restores its desirability and value. It all comes down to researching what renters are looking for and trends in real estate decor and design.

Don’t just go for renovations only but try to upgrade what you can. Also, when tenants require you to conduct some repairs, do it with haste which ensures you’ll retain them.

Final Word

When buying your first multifamily property, you must consider that large multifamily ventures are resource and time-consuming. You will have to spend a lot of time and effort to retain the value of your investment.

Some of the activities you will have to conduct include employing a management team, repairing and renovating the units, and budgeting for everything, including the unexpected. That way, you can be confident you will turn your multifamily into a lucrative venture.

Now is one of the best times to become a multifamily landlord because apartment vacancies and interest rates remain low compared to a few years back. Private equity investors can also access a pool of lucrative debt capital.

What’s more, the White House notes that there’s a thirst for decent housing coupled with a chronic undersupply, leading to skyrocketing housing prices, as seen in the table below:

Statistics show that investors should expect a 6% net increase in their income for the coming year. All this signals that multifamily properties are a lucrative investment ripe for purchasing.

Suppose you are new to investing and do not understand why you should invest in multifamily property. In that case, these are the reasons why this kind of property must be a part of your investment portfolio.

1. Increased cash flow

A higher cash flow is one of the biggest reasons to invest in multifamily property. Such properties are always in demand by rookies and seasoned investors alike.

You can expect a high occupancy rate if your property is in a strategic location. With time, this leads to increased monthly revenue.

One way to ensure you rake in good profits is to invest in different geographical locations. Doing so allows you to have multiple income streams from the same type of investment.

2. Easy to manage

Managing 12 units in one multifamily property is more manageable than 12 single-family units spread out across the city. With the former, you can manage it or hire a property manager instead.

It is impractical and costly to hire 12 managers to manage single-family units. On the other hand, hiring a manager for a multifamily property makes sense because of the number of tenants you are dealing with under one roof.

3. Enjoy tax breaks

A multifamily property makes you eligible to enjoy tax breaks as a reward from the government for providing housing for city residents. The kind of tax breaks you enjoy depends on the property classification.

That’s because you can write off expenses from taxable income. In short, you can deduct repair, maintenance, and management expenses from the taxable income produced by the multifamily property.

4. Lower investment risk

This is not to say that multifamily properties do not come with risks–they carry some risks like any other investment. The only difference is that the risks associated with this kind of property are lower than single-family units, as the table below illustrates:

One of the risks you may encounter is the vacancy rate. Because you are dealing with several tenants at a time, the possibility of 0% occupancy is slim to none.

Suppose you have a well-maintained property with fair rental rates. In that case, a low occupancy is something you will rarely worry about.

Also, ensure you research the property beforehand, choose a good location, and market it well. Doing this will guarantee you a high occupancy rate.

5. Short-term leases are advantageous

Five years and more is the standard term for most commercial and retail leases. If the market changes, you are stuck with properties whose rent you cannot increase. With multifamily properties, the leases are shorter, typically lasting a year.

This means that you can raise rents quickly depending on market conditions and inflation. Shorter leases ensure your property stays lucrative in the long run.

6. Quickly build an investment portfolio

If you want to delve into real estate full-time, this is one of the best ways to boost a portfolio quickly. Multifamily properties offer the chance to invest in multiple units without the hassle of managing several separate housing units.

Think about all the research, planning, permits, and cost it takes to invest in one property. Now multiply that by several units, and you know why a multifamily property is the best option.

Moreover, you’ll find it easier to purchase a multifamily property than buying a single-family unit.

7. Strong rental demand from millennials

Data from the U.S Census Bureau shows that renting is the most common form of housing for millennials. Currently, the millennial generation is the largest in the U.S.

One reason why they find leasing a favorable option is the increasing cost of median home prices. This places homeownership out of reach for many. Also, millennials value flexibility and mobility over owning property.

Combined, all these reasons make millennials more likely to rent than own, spelling good news for multifamily property investors.

8. High appreciation rate/value retention

Multifamily properties continue to hold value even if you do not get immediate cash flow. The general rule for real estate is that it appreciates over time. With multifamily property, the appreciation rate is higher.

Sure, this is not set in stone. But the best way to ensure the property retains its value is to maintain and repair it often. Check for broken or damaged areas, mold, and more issues between tenants, and it will hold its value with time.

9. Better financing options

Data shows that multifamily investments have better funding terms overall than other real estate types. Understand that this investment type costs more initially, but it is easier to maintain than other property types.

Expect lower interest rates if you opt for a mortgage loan for a multifamily property. This is a relatively risk-free investment for first-time investors. Because of the high occupancy rates, financing institutes view multifamily properties as having lower risk.

10. Insurance simplicity

Buying insurance for a multifamily property is relatively easy. Like financing, getting insurance is a simple process compared to other real estate types. Several factors affect how much a policy will cost.

However, the number of units in the building, amenities like a pool or rooftop terrace will raise the insurance cost. This is because tenants or visitors are more likely to injure themselves on the property. It would help if you also understood that insurance premiums for multifamily homes are rising.

Despite this, most insurance companies know how to cover multifamily properties in a way that favors you. Further, if you have several such properties, some insurance companies will grant you a “blanket” cover, insuring all the properties under one provider.

Final word

Investing in a multifamily property is one of the best decisions you can make today. You can look forward to better cash flow, lowered risk, tax breaks, easier management, and a higher appreciation rate. Despite stiff competition and an initial high investment cost, a multifamily property is still an excellent investment opportunity.

Pursuing a medical degree is often at the top of most students’ minds as it offers a chance to impact people’s lives positively while enjoying a fruitful career.

However, the cost of medical education has soared to unprecedented levels in recent years. Studies show that the average medical student graduates with tuition debt north of $250,000, which they are struggling to pay off.

With medical school graduates entering the workforce burdened by financial strain, this affects the career choices and quality of life for new doctors and their long-term earning potential.

In this blog post, we will examine the escalating costs of medical education and analyze its impact on doctors’ earnings and potential consequences on the healthcare industry.

The Rising Cost of Medical School

During the summer of 1957, Dr. Warren D. Widmann, an Emeritus Professor at Columbia University, had annual tuition fees of at most $850.

He paid his first year’s tuition for the School of Medicine and saved surplus funds as a waiter at a New Jersey shore hotel. He completed his medical education without incurring student debt.

In contrast to Dr. Widmann’s era, current medical school tuition fees have experienced a more significant increase than both wages and the overall cost of living.

According to a study by Education Data, the average annual tuition for medical school is rising at approximately $1,500 per year. Consequently, the total cost of a four-year medical degree is growing by $6,000 annually, placing substantial financial baggage on aspiring physicians.

As of 2024, the average total cost of medical school is $235,827, while the median cost of attending a medical college exceeded $270k in 2019. This figure represents an annual expenditure of $58,968, which includes tuition, fees, and health insurance.

It’s important to note that these costs do not include additional year-specific expenses such as USMLE exam fees and laboratory charges.

Inflation-adjusted median education debt and cost of attendance (COA) over four years in constant 2019 dollars using the Consumer Price Index for all Urban Consumers (CPI-U).

Source: https://store.aamc.org/downloadable/download/sample/sample_id/368/

Student debt accumulation: Now vs then

Three decades ago, medical students graduated with an average student loan debt of $32,000. Now, the average medical school graduate has accumulated $250,995 in total student loan debt.

This figure is four times the average debt amassed by college graduates in other disciplines, underscoring the significant financial challenge faced by aspiring physicians. As a result, 73% of medical school graduates are burdened with educational debt.

The median four-year cost of attending medical school has increased by approximately 20% since 2009. Notably, the tuition for public medical schools has risen at a rate of 31% faster than private medical schools.

Median COA and education debt of medical school graduates in public or private schools in constant 2019 dollars.

Source: https://store.aamc.org/downloadable/download/sample/sample_id/368/

The Impact of Student Debt on Doctors’ Earnings

Total student loan debt in New York has increased by an average of 8.5% annually since 2003, surpassing the average annual growth rate of 3.1% in mortgages during the same period.

Moreover, student loan debt per capita has experienced triple-digit growth in every state since 2003. While New York’s increase of 335.2% over the past 18 years is noteworthy, it ranks lower than most other states, occupying 40th position nationally.

Per capita debt by component, New York vs the nation.

Source: https://www.osc.ny.gov/files/reports/pdf/household-debt-in-new-york-state.pdf

The trend has predominantly affected doctors as they take on the most student debt. A recent survey by Laurel Road highlighted the high student debt-to-income ratios many healthcare professionals face, forcing them to reassess their financial priorities.

Healthcare professionals reported an average pre-tax income of $323,693 while carrying an average student loan debt of $188,317. Early-career physicians, particularly those from Gen Z, faced even more severe financial constraints, with student loan debt as high as 64% of their $183,873 average annual salary.

When asked about the projected repayment timeline for their student loans, the doctors estimated it would take them approximately eight years. As the student debt burden rose, 74% of physicians indicated reallocating funds to meet payment obligations.

To alleviate financial pressures, 94% of doctors reported making adjustments in various areas, including:

• Reducing travel (35%),
• Dining out or ordering in (30%),
• Retirement savings (28%).

Additionally, 77% of doctors acknowledged postponing certain financial goals for 2024, such as purchasing a new car (33%), buying a house (33%), or embarking on a dream vacation (32%).

While physicians invest substantial time and financial resources in their education, resulting in significant student loan debt upon graduation, their earning potential often does not fully materialize until later in their careers.

The impact of student debt on doctors’ decision-making regarding specialties and practice locations

Research indicates that comparatively low compensation is among the factors deterring medical students from pursuing certain specialties.

A recent study revealed a 40% decline in the internal rate of return between 1989 and 2019 for a career in orthopedic surgery, long considered one of the most lucrative medical specialties. The high cost of medical education was identified as the primary catalyst for this decline.

Between 1995 and 2004, primary care physicians’ incomes grew by 21.4%, while those of specialist physicians rose by 37.5%. In 1951, 50% of all physicians were practicing internal medicine and primary care. By 2015, only 33% of all physicians were in general internal medicine or primary care fields.

Change in specialization between 1951 and 2015

Source: https://www.amjmed.com/article/S0002-9343(17)30134-1/pdf

The declining number of U.S. medical school graduates choosing less financially rewarding specialties has contributed to critical shortages in these fields. For instance, the American Academy of Pediatrics (AAP) has expressed concerns that some pediatric subspecialties are recording 20-40% fewer applicants than positions.

Although the growth rate of primary care physicians’ (PCP) compensation outpaced that of specialists between 2008 and 2017 (1.6% vs 1.2%), with the average annual salary for primary care physicians increasing significantly to nearly $250,000 after the enactment of the Affordable Care Act, specialists’ salaries grew to about $400,000.

Despite acknowledging the high job satisfaction of pediatricians, the AAP reported that only about 33% of graduating pediatric residents planned to pursue a career in primary care in 2020, compared to over 66% in 1997.

The same report indicated a twofold increase in the average educational debt of graduating pediatric residents during this period, while their average starting salaries barely kept up with inflation.

The Relationship between Medical School Debt and Physician Burnout

Medical students with higher debt levels are more likely to experience stress and anxiety compared to their peers with less debt. Internal medicine residents burdened by high debt are also more prone to burnout symptoms and tend to score lower on their in-training examinations than their colleagues without debt.

One survey revealed that 32% of students always or frequently worried about debt. In the Laurel Road survey, 75% of doctors repeatedly or constantly experienced anxiety when reviewing their student loan balance.

Financial pressures often motivate students to pursue more competitive specialties, which offer higher compensation, a better lifestyle, or both. However, this creates a vicious cycle as these specialties often entail increased workloads, further contributing to the likelihood of burnout.

A study revealed a correlation between every $50,000 increment in medical student loan debt and an increase in self-reported stress. In another study, 89% of the respondents agreed or strongly agreed that financial stress is correlated with burnout.

While a previous study of junior anesthesiology physicians did not find a relationship between educational debt and burnout, it did associate debt with higher rates of distress and depression.

The huge debts impact medical graduates’ ability to navigate medical training, manage stress and burnout, and make informed professional and personal life choices. These challenges have far-reaching consequences, affecting other sectors of the healthcare system and economy.

The Association of American Medical Colleges (AAMC) forecasts a potential physician shortage ranging from 37,800 to 124,000 by 2034 for both primary and specialty care physicians unless a comprehensive approach is implemented to address the stressors contributing to student burnout.

Strategies for Reducing the Cost of Medical Education

A recent study revealed that ten years after graduation, approximately 40% of bachelor’s degree holders continue to carry outstanding student loan debt. There are several solutions that students, physicians, and the government can take to reduce the impact of medical student debt:

1. Government interventions

As a band-aid solution, governments should consider increasing funding or reducing the student loan burden for medical schools and residency programs as they keep searching for long-term solutions.

One way of easing the burden is by analyzing debt-to-income ratios, which offer a more nuanced approach to targeting student loan relief than focusing solely on debt or income.

Debt typically increases as family income and wealth decreases, so lower-income families generally borrow more, highlighting the regressive nature of student debt financing. Additionally, race and gender determine incomes, further exposing systemic inequalities.

Periodic balance adjustments for borrowers with persistently high debt-to-income ratios are the most effective way to minimize financial hardship.

Unlike one-time cancellation after 20-25 years of repayment as promised by income-driven repayment plans (IDR), balance adjustments would provide incremental debt cancellation, bringing balances to more manageable levels.

2. Consider state and federal loan forgiveness programs

For individuals aspiring to serve in public health settings, loan forgiveness programs can provide financial relief. The National Health Service Corps (NHSC) offers up to $120,000 in repayment assistance in the Student-to-Service program for those who undertake primary care specialties.

The NIH provides up to $50,000 annual repayment of qualified educational debt for a researcher in bio-behavioral or biomedical research careers.

Further, the Public Service Loan Forgiveness (PSLF) program cancels the remaining balances of Direct Loans for a qualifying, full-time public service employer after 120 qualifying monthly payments.

3. Advocacy

To alleviate the financial burden on medical students, residents, and fellows, you should advocate for legislation to permit interest-free deferment on their student loans during service in medical internship, residency, or fellowship programs.

Additionally, push for the conversion of currently unsubsidized Stafford, Direct PLUS, and Graduate PLUS loans to interest-free status for the duration of undergraduate and graduate medical education.

4. Tax credits and deductions

Graduate medical students can explore educational tax credits and deductions, such as the Lifetime Learning Credit, to reduce their tax liability. Additionally, student loan interest is tax-deductible.

5. Consolidate loans

Many physicians have student debt distributed across five or more loans. Consider consolidating your medical student loans into a single new loan to simplify your debt overview and establish a single point of contact for easier management.

If you have federal loans, you may be able to consolidate them with the U.S. Department of Education. However, for competitive interest rates or a combination of federal and private loans, private lender consolidation may be an option.

Note that consolidating with a private lender may result in losing federal benefits, including access to IDR or eligibility for PSLF.

6. Private lender refinancing

This option involves obtaining a new loan from a private lender to replace your existing loan(s). The lender repays your existing loan(s) and establishes a new one. The new loan may offer a lower interest rate and reduced monthly payments.

Just remember you would lose federal benefits, so weigh the pros and cons of this option before making your move.

7. Apply for grants and scholarships

On admission to college and submission for Free Application for Federal Student Aid (FAFSA), you may be eligible for scholarships and grants without additional applications.

Additionally, consider exploring external scholarships offered by organizations, churches, and your parents’ or guardians’ employers. If you have an employer, find out if they offer scholarships or tuition assistance.

8. Return excess student loans

You may receive a surplus loan beyond your tuition costs. If you do not require these excess funds, you can request your college return them to the lender.

9. Military scholarships

The Health Professions Scholarship Program presents a compelling opportunity if you intend to pursue a career in military medicine. This scholarship covers your entire tuition, provides monthly stipends, and reimburses you for books and supplies. In exchange, you commit to serving in the military following graduation.

10. Utilize AAMC resources

The AAMC’s FIRST (Financial Information, Resources, Services, and Tools) program provides a wealth of information for applicants, students, and residents. This includes videos and webinars on topics such as student loan repayment and management during residency, as well as online resources on financing medical school and strategies for affordability.

Conclusion

The excessive rise in the cost of medical education is negatively affecting doctors, affecting their future earnings and career choices.

The burden of student debt is not just a personal challenge but a systemic issue that could influence the broader healthcare system, potentially affecting the quality of care and access to medical professionals.

While the current situation poses significant challenges, there are avenues for reform and support that could alleviate the pressure on future doctors. These include policy changes,  financial aid improvements, innovative funding models, and debt repayment programs.

Addressing these issues is crucial for sustaining a robust and effective healthcare system. Prioritizing the financial well-being of healthcare providers is an investment that supports their ability to deliver high-quality care to all.

The real estate sector deals with tangible, real-world assets like land, homes, and buildings. It covers the residential, commercial, and industrial real estate segments. As you’ve probably guessed, it is one of the largest industries in the US, with the commercial and residential real estate segments commanding $113.58 trillion in market value in 2023.

On the other hand, cryptocurrencies are digital currencies operating on a blockchain, which is a cluster of records stored in a decentralized ledger. The cryptocurrency industry is an emerging industry with a global market value of $2.56 trillion as of June 13, 2024.

Although crypto operates on intangible technology, that has not stopped enterprising investors from finding investment opportunities in the real estate industry using the blockchain. This article explores the top six ways physicians can invest in real estate with cryptocurrency.

1. Buying Using Crypto

You can use crypto to buy property locally or internationally if the seller is willing to accept crypto. One of the great things about crypto is that it allows for fast transaction speeds at a lower cost, especially for overseas payments. For instance, there are about 1.1 million Ethereum transactions daily, which cost $1.4 per transaction on average.

For instance, if you were to purchase overseas property using traditional means, it must receive approval from a clearing house in the US and another where the property is located. A payment platform like PayPal will charge you 5% of the entire amount as transaction cost, while some financial institutions have a transfer limit.

Because some sellers and real estate platforms don’t allow crypto, new FinTech lending platforms in the market (like Milo) are allowing buyers to collateralize down payments with crypto. The platform provides crypto-collateralized mortgages in place of traditional down payment loans.

Moreover, buying real estate internationally using crypto can offer additional benefits. For instance, buying real estate in Montenegro and St Kitts and Nevis comes with the option of citizenship or residency. St Kitts does not charge capital gains tax on some investments like crypto under certain conditions.

Since Crypto prices fluctuate frequently, you might strike it lucky with its price rising before the transaction. That could save you some cash without even having to invest it. Ethereum, for instance, experienced an annual growth of 144.4% between May 2023 and May 2024.

Ethereum growth rate

Source: https://ycharts.com/indicators/ethereum_price

Note that a Lending Tree survey shows 38% of crypto holders said they made a loss when selling crypto. 28% asserted they made a profit, while 13% said they broke even.

2. Crowdfunding

Refers to using tokenization and blockchain technology to raise funds from several investors for a real estate project. This works like conventional crowdfunding but where real-world assets (RWA) are tokenized on a blockchain.

Under the arrangement, the block-based crowdfunding platform creates property-related tokens (PRT) aiming to raise money for the real estate project. The PRT represents a share of ownership of the RWA.

The global real estate crowdfunding market size brought in revenues worth $11.5 billion in 2022. It is projected to rake in $161.8 billion in revenue by 2030 at a compound annual growth rate (CAGR) of 45.9%.

Under Regulation D 504, a company can sell unlimited tokens to any number of investors, but the offering has a $10 million 12-month limit. However, under Regulation D 506(C), the offering is unlimited, but investors have certain limits.

Crowdfunding platforms enable pooling of resources from a wider audience of global investors. Further, they facilitate automation and digitization of the real estate transfer process, as well as near-instant trading and liquidity.

Some of the leading crypto-based crowdfunding sites include:

1. KickICO: An Ethereum-based platform for donation and reward-based crowdfunding and initial coin offering (ICO). As a backer, you send a bid for tokens on a specific project, and if you are one of the highest bidders, you secure the tokens. The platform has helped entrepreneurs raise more than $500 million to date.
2. RealT: The platform brings together experienced real estate and blockchain experts. It relies on the Ethereum and Gnosis blockchains to facilitate fractional investing. Investors worldwide can crowdfund and buy tokens of residential real estate properties in the US.
3. WeiFund: This decentralized crowdfunding platform has pre-developed templates integrated with smart contracts, simplifying the campaign starting process. If a campaign does not hit the target, investors will receive refunds.
4. Tecra Space: A blockchain crowdfunding platform aimed at raising capital for blockchain-powered projects, like the real estate Etherland project.

3. Tokenization

The blockchain has opened up a new avenue for expanding the reach of real estate by pioneering the concept of real estate tokenization by turning assets into digital tokens. One way to utilize tokenization in real estate is through fractional ownership.

Since investing in traditional real estate property requires hefty amounts of money to purchase (median home sale prices are currently at $420,000), fractional ownership enables investors to own a fraction of a real estate property.

This has seen the real-world tokenization industry move from a $0 market cap to over $300 million between January and September 2023. Global RWA payments volume hit $1.6 billion at the end of Q1 2024, with a total RWA supply of $533.3 million.

Growth of real-world assets tokenization

Source: https://www.vaneck.com/uk/en/blog/digital-assets/from-0-to-300m-market-cap-in-a-year-tokenized-real-world-assets/

The process utilizes smart contracts in a blockchain by converting the ownership rights of a fraction of the real-world property into a digital token on a blockchain. Each token represents a share of the asset, which you can sell or trade on digital platforms.

Tokenization facilitates faster sales of traditional property as the fractions are more affordable, transaction costs are lower (average cost per transaction is $0.000065), and assets are exposed to a broader, international market.

Even if you have the cash to buy a property outright, fractional ownership helps you buy fractions of properties in diverse markets, diversifying your investment portfolio and minimizing risk.

4. Real Estate Crypto Investing

Another way to take advantage of tokenization is to invest in real estate-centric cryptocurrencies. These innovative solutions combine the strengths of traditional real estate and the blockchain, enabling tokenized property investment.

According to a UK government survey, 63% of crypto investors reportedly made a profit, with 14% making a loss. Average profits and losses were under £500, while 8% reported making profits over £12,500.

These investments rely on a variety of ways to profit from the real estate industry, so you don’t have to do the research. Since they use cryptocurrencies, they operate globally, ensuring exposure to the best-performing markets. Examples include:

• USP: A stablecoin pegged to the US dollar. The company maintains $2 worth of reserves in the form of real estate and cash for every token and commits to buying its token at a minimum of $1.
• Propy: Leverages automation to facilitate real estate transactions. Users can buy or sell a real home using crypto, turn it into an NFT, and list it as such. The company uses its crypto, stylized as PRO, to facilitate transactions on its platform.

Alternatively, you could invest in companies with a heavy focus on cryptocurrencies. The crypto market is experiencing respectable growth, with data from Statista projecting it will experience an annual growth rate of 8.62% between 2024 and 2028, realizing an increase of $71.7 billion in that period.

Investing in a crypto-focused company could tap into the potential earnings if their stock rises as well. Examples of such companies include:

• Milo: Provides mortgages to foreign nationals to help them invest in American properties. It offers a crypto-backed mortgage where investors can use their crypto as collateral to secure a mortgage. Borrow up to $5 million for 30 years.
• Digital Currency Group: This is a venture capital company specializing in the digital currency market. The company buys, builds, and invests in blockchain companies. It reported revenues of $210 million in Q4 2023, up 59% year on year (YoY).

5. Investing in Digital Real Estate

Real-world real estate comprises physical properties, while digital real estate works in the same way but in virtual spaces. Digital real estate is a virtual property that users can interact with online in the metaverse.

Just like real-world assets, investors can buy, sell, and trade in digital real estate found in the metaverse, which is a 3D virtual world that allows users to log in and interact with their digital assets.

S&P Global Market Intelligence predicts the worldwide metaverse market revenue will grow from $17.5 billion to $54.5 billion between 2023 and 2028. Businesses accounted for 42.8% of the users in the industry by 2023.

You can use digital real estate in a variety of ways, such as building a mall and renting out shops to tenants. Some companies are even expanding their online footprint by recreating their real-world offices into the metaverse and holding meetings with clients in the virtual world.

The metaverse relies on the blockchain to record transactions because they are immutable, ensuring transparency and reputability of commerce on the platform. The blockchain also helps preserve data privacy, store data, and improve data interoperability.

The leading real-estate-related platforms in the metaverse include:

1. Decentraland – Users utilize the MANA cryptocurrency to buy virtual plots of land turned in the form of NFTS. On June 11, 2024, Decentraland had a market cap of $835 million, with a trading volume of $46.4 million in 24 hours. The average land price for the same day was $344.75.
2. The Sandbox – Players can own, develop, and sell land, represented as NFTs, using the SAND Ethereum-based token. As of June 11, 2024, its market cap for the past 24 hours was $893 million, with a volume to market cap of 21.72%.

6. Staking and Investing

Staking is one of the ways cryptocurrency holders can earn rewards while still holding onto the assets. If the crypto you’re holding allows staking, the blockchain will use it in the proof-of-stake validation process or lend it to third-party DeFi protocols engaging in yield farming, earning you passive income.

The global staking industry has a market cap of $334.86 billion, providing nearly $5.85 billion in rewards annually at a benchmark reward rate of 5.54%. As of June 11, 2024, the net staking flow for the last seven days was $16 million.

Annual percentage yield (APY) varies from platform to platform. For instance, staking the Crypto.com Coin on Coinbase will earn you a 7.77% APY on average if you hold it for a year. The coin has an asset market cap of $2.8 billion, with a staking market cap of $99 million. Other reputable platforms include Binance, OKX, and Kraken.

Staking follows a similar process as depositing cash in a savings account, with the bank lending the money and giving you interest on your balance. You can use the proceeds of the staking returns to invest in real estate. Some platforms like DappRadar can help you find the best staking options and provide detailed analytics and insights to maximize returns.

Alternatively, you could invest your existing crypto assets by posting them as collateral for a loan, which you can use to invest in real estate. There are plenty of traditional and decentralized financial institutions that offer this kind of service. Examples include Aave, Compound, and YouHodler.

Advantages of Investing in Real Estate Using Crypto

Using cryptocurrency to invest in real estate comes with several benefits:

1. Liquidity

Crypto is highly liquid, so it allows you to effect transactions quicker and more efficiently. Digital assets also have a history of fast buying and selling times, so you can trade them more often than physical real estate.

2. Global accessibility

You might not be able to access fiat currency wherever you go, but you can access cryptocurrency anywhere online. Crypto also facilitates frictionless cross-border payments as it has the same value in all countries.

Digital real estate also operates globally, so investors can access real estate markets in different countries without relying on the bureaucracy of traditional financial systems.

3. Lower transaction fees

Crypto transaction costs are much lower compared to traditional real estate transactions. Further, traditional real estate transactions are slow. Cryptocurrency transactions are faster, with transactions completed in minutes.

4. Automation

Part of the reason traditional real estate transactions are slow is that all parties need to meet face-to-face several times to iron out issues. The blockchain provides tools like smart contracts specifically tailored to real estate transactions.

Smart contracts automate the payment process, property transfers, compliance checks, auto-send for signatures, and retrieve verification information. This minimizes the need for manual processes and intermediaries, streamlining the process.

The intersection of real estate and cryptocurrencies offers opportunities for potential growth and diversification of portfolios. Conducting thorough market research will help you pinpoint viable investment opportunities.

Final Word

Cryptocurrency is a relatively new frontier compared to the more established fiat currency. That’s why entrepreneurs are developing innovative solutions to utilize crypto and the blockchain to facilitate real estate transactions, which are traditionally slowed down by bureaucratic practices.

Some of the solutions include tokenization of real estate assets, staking and investing in real estate-friendly projects, and pooling resources in crowdfunding platforms. These solutions have enabled faster and cheaper transactions and opened the market to international investors, ensuring faster disposal of real estate assets.

Before investing in crypto and real estate, be aware that these markets are risky. Conduct thorough research before making an investment decision in the two.