On January 29, 4 Concordia MBA teams presented their findings on blockchain technology as a culmination of a month-long research, interview, and data analysis project for their Business Policy class.
Each team presented on one social or business application of blockchain technology, and analyzed policy implications. Team members also addressed challenging questions from faculty and students, and talked about practical constraints in applying blockchain.
Because of the volume of information the students presented, we are publishing a 4-part series addressing each of the 4 blockchain applications the team members presented on.
This is the second part of the series, in which we discuss the application of blockchain technology in streamlining commercial real estate investment and empowering individual investors.
Missed out on the first part of the series? Check out our discussion on the application of blockchain technology in improving firearm tracking.
What is Blockchain Technology?
Last week, we began by addressing a fundamental question: what exactly is blockchain?
Blockchain is a decentralized means of collecting, recording, encrypting, and tracking transaction data in the form of digital signatures and unique identifiers called hash. Each hash is different even if the transactions that are recorded in each block may be similar.
In other words, blockchain provides a verifiable ledger stored in a centralized network, making it easy and seamless to record and track data transactions in industries ranging from finance to mining to healthcare.
Using Blockchain in Commercial Real Estate
There are currently two main problems plaguing real estate and property investment in the United States.
First, at any given time, thousands of false property listings advertise a sale offer for real estate that is actually not really on the market. Lack of accuracy in listings causes a major hassle for commercial investors.
Second, investors incur huge costs researching the legal parameters of a property sale offer.
Investors pay lawyers and consultants thousands of dollars to look into liens against a given property, and to look through past and pending lawsuits against its former owners. This not only creates a tedious and time-consuming process but also increases the potential for mistakes.
How Blockchain Could transform real estate investing
Blockchain technology has the potential to save commercial real estate investors thousands of dollars of transaction costs on each land purchase.
Using what our Master of Business Administration Business Policy team referred to as ‘SmartContracts’, blockchain would create a verified papertrail with accurate information about the current status of a property listing.
Because legal information is also fed into the blockchain, claims to property or litigation history are also recorded on each block, and can be viewed next to the property listing on the blockchain. This greatly lowers the research costs related to commercial real estate investment and also voids the list of expensive litigation in the future.
Although blockchain technology is a long way from being adopted in the industry, Andrew McDonald, is very optimistic on its potential. McDonald led the MBA team that presented on blockchain and commercial real estate.
“It is mindblowing what blockchain can do!” he exclaims. “Investors would have open access to trails of litigation and ownership history, allowing them to understand exactly what happened on a given property and when. This could be a huge breakthrough in property law.”
Other Real Estate Applications
McDonald also pointed to a potential benefit of blockchain property listings to renters.
When tenants leave, landlords currently inspect the apartment before releasing the tenants’ security deposit. Because everything is manually done, renters often incur a waiting period to receive their deposits after leaving an apartment.
“With blockchain” says McDonald, “there is no need to wait 45 or 60 days.” You receive your security deposit back automatically once a landlord has conducted the apartment check and verified this through the blockchain.”
According to McDonald and his team, blockchain also has the potential to empower individual small-scale investors by catalyzing crowd-investment.
Through blockchain, individuals could obtain fractional ownership (up to 0.0001%) of large-scale property such as hotels. This would open up real estate investment, while guaranteeing ease and accuracy of transactions.
“Without blockchain,” says McDonald, “it would be otherwise impossible to get a partnership agreement for thousands of people to invest in a single hotel.”
This prospect is far from far-fetched.
Just last year, the St. Regis Aspen Resort in Colorado launched a blockchain investment campaign to procure fractional investments on its property from individual investors. Using block-chain to track ownership, the hotel allows people to become super-minority owners of the property.
And while blockchain may be far from being adopted as an industry standard in commercial real estate, it could play a huge role in propelling development in the real estate industry and beyond.
Next, we will discuss an MBA team presentation on the application of blockchain in addressing America’s severe opioid crisis.
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