Here at CREST, our focus is typically on issues relating to the tokenization of commercial real estate—but what about residential real estate? With a cumulative value of approximately $120.0B USD, the residential real estate market is equally prime for blockchain tokenization in the coming years. Recently, the security token industry has seen offers in residential real estate tokenization arise in New York, California, and South Carolina. So what’s driving this trend of residential real estate tokenization?
Recently, our team at the Security Token Academy sat down for a discussion with Matthew Sullivan and John Livesay from QuantmRE, a company aiming to revolutionize how owners and investors approach home equity via tokenization. QuantmRE allows homeowners to tokenize and sell fractional ownership in their properties to unlock capital while giving investors access to potential real estate appreciation via token ownership. As a result, investors aim to share in the upside as the real estate property appreciates.
Matthew Sullivan, founder and CEO of QuantmRE, had this to say regarding the company’s mission:
“If you’re a homeowner, QuantmRE allows you to unlock the equity in your home without taking on more debts. We are creating a token backed by real estate assets.
The money that we raise from the sale of those security tokens goes into a traditional structure that is audited and allows us to buy the equity in your home, which means that you get some cash without having to move out, without having to sell, and most importantly, without having to go back to the bank and borrow more money.”
John Livesay, Co-founder and Chief Marketing Officer, addressed why tokenization has had a positive impact on the real estate industry saying:
“We’re taking something that’s not liquid…the equity in homeowners’ homes, and making it liquid on the blockchain. Because right now that equity is locked up. It’s dead money. And we release it to homeowners by buying a percent of their home so they get the cash without taking out more debt. Then, we take that equity that we’re buying, and put it on the blockchain as a token backed by actual real estate assets. And now everyday people can become real estate investors without the headache of being a landlord or needing huge amounts of cash to buy the real estate.”
Many curious investors looking to invest in this industry may be wondering what type of real estate instrument might be tokenized first—will it be the debt piece of the property or will it focus on equity? Those same investors might also be wondering which sector might break out first—commercial or residential? John Livesay had this to say regarding current traction in the tokenization space:
“Well, there’s a lot of different people working on different segments at the same time. I think commercial is probably going to be first. There’s a lot of conversations around, ‘Oh, let’s buy a percent of the Empire State Building.’ Our niche is residential real estate. We’ve already released $300 million of equity in over 300 homes in California. And so, we know how to do that. And that’s our special sauce. And now tokenizing it will allow everyday people to invest in that asset class that hasn’t been available for anybody to really invest in, because it’s not part of a REIT right now. So, we’re making something that’s not liquid, liquid. And giving people access to an asset class they’ve never been able to invest in before.”
So, why might blockchain, a type of distributed ledger technology, be such a revolutionary shift for the real estate industry? John Livesay believes the answer lies in its ability to democratize the industry and bring new investors to a segment that has traditionally relied on insider knowledge and high net-worth individuals:
“Well, I think that’s the beauty of the blockchain. Because even if you have $500 or $1000, and you want to get into the game now, you can buy a fraction of a fraction of a home, or a fraction of a fraction of a token that lets you in, that you don’t have to be insider information to know what’s going on. In fact, we’ve built something called the active portfolio for that laptop and latte crowd, that likes to invest and do things on their own. And if they want to buy homes in one specific neighborhood that they think is going to take off, they can do that, which really allows people a lot of freedom to pick what they know best.”
Whether or not commercial and residential real estate tokenization via the blockchain becomes the gold standard for real estate transactions remains to be seen. In the meantime, stay tuned to CREST for more information and interviews as we cover this emerging trend.