Bastiaan Don

@bastiaan_ch

Investing in commercial real estate with blockimmo

The (commercial) real estate market has a bright and exciting future ahead of it. At the moment, this market is dominated by a select few investors who are able to shoulder big, chunky, illiquid investments. Tokenizing these assets will create a more accessible and efficient market. The future of commercial real estate is one where investments are liquid, possible in small stakes, and easily manageable (i.e. investors can manage risk much more effectively) — Source: EEA / Real Estate SIG — Case Study (to be linked soon).

At blockimmo, we’re enabling both investors and property owners (sellers) to take the first steps towards this new way of investing in real estate.

First, we explored the inner-workings of the Swiss 🇨🇭 land registry, seeing how the land registrar and cadastral surveyors work together to set the foundation upon which a well operating market exists. When we modeled a system based on this market, we identified a bottleneck within this otherwise efficient, transparent system — transactions.

With a large array of intermediaries (agents, banks, legal entities, notaries) facilitating these transactions, value flowing between buyer(s) and seller(s) is partially lost or redirected to these parties. We realized this bottleneck could be alleviated by moving transactions on-chain (in other words, automating transactions), so we developed the smart contracts (part 1 / part 2) to enable this and implemented a simple layer wrapping this blockchain-functionality into our ÐApp.

We arrived at a minimal, simple solution that addresses the bottleneck of the system while integrating seamlessly with its other components (i.e. the land registrar and cadastral surveyors). Our smart contracts form the core of our solution, automating real estate transactions and reducing the dependence on middlemen. Our software stack builds on top of these contracts, abstracting blockchain for our user while delivering its value.

Our framework works alongside our software to ensure transactions are legitimate and compliant, streamlining the legal processes associated with real estate transactions and abstracting this complexity for our user. The result is an accessible and streamlined real estate market.

With the heavy lifting done 💪, in this post we’ll dive into blockimmo’s focus use-case — investing in and selling a commercial investment property.

Why commercial real estate?

Our platform and smart contracts are general enough that any type of real estate can be transacted via blockimmo. We narrow our focus to the investment market because this is where we (initially) deliver the most value to our users.

We enable our users to make a small stakes investment in a fraction of a commercial property, with a liquid token that is freely transacted on secondary markets.

We narrow our focus even further to the commercial investment market because Swiss laws and regulations are comparatively simple and permissive here. This simplifies our legal framework and allows for foreign investors or owners to become involved. Considering the (Swiss) commercial investment market is extremely inaccessible, this focus allows us to reach a huge target market of untapped investors.

From an operations perspective, commercial property is much more expensive than residential, allowing us to thoroughly vet sellers and properties until we completely automate these processes. From a business model perspective, our users make investments much more frequently than they would with private residential transactions, which means more active users and recurring revenue.

Last but not least, an investment focus allows our users to start slow, scaling up their investments as they become more comfortable with blockimmo. A few thousand Swiss Francs (CHF) is all that is needed to start investing (technically speaking, investments are possible starting from 1 ETH). It’s unrealistic to expect a buyer to purchase a condo or a house right off the bat (especially considering we’re on the forefront of a new technology that our users aren’t yet familiar with).

How can I start investing / selling?

Anyone can browse blockimmo freely. When you’re ready for your first transaction (either investing or selling) you’ll need to create an account with blockimmo. This is a simple process where we identify and verify your identity (KYC / AML) and tie this information to your Wallet powered by blockID (you’ll need to download and set up MetaMask prior to this). Once verified you can start investing and selling!

How can I invest in a property?

Investing in property is easy with blockimmo. You can browse listings until you find a property you are interested in. All listings have already been reviewed and approved by blockimmo. You can see general information relevant to the property as well as its financials, such as an independent valuation, expected annual income, and estimated annual appreciation. You can see information relevant to the token sale like its progress, start / end date, target, and the number of participating investors.

You can place an investment order by specifying the amount you’d like to invest. Ether / tokens will be transferred to your wallet upon the sale’s completion.

You can monitor your investments via the investor dashboard. You will receive notifications related to token sales you’re participating in (such as target reached, completion, etc…) and see information relevant to these sales. Your transaction history and current holdings (portfolio) are also displayed here. You can monitor and manage your holdings here as well (i.e. managing income generated by your properties).

How is a property listed and sold on blockimmo?

A property can be listed on blockimmo in a few simple steps. The first step is to tokenize your property. This requires the property’s E-GRID (a universally unique identifier), Grundstück Number (Land Register Number), and the Grundbuchauszug (Property Register Abstract). The next step is to provide relevant information for potential investors such as a description, feature video, images, specifications, etc… At this point, your listing will be pending review and approval by blockimmo to ensure its correctness and legitimacy.

After the listing has been approved you’ll be able to configure and launch a token sale (crowd-sale). This is the mechanism for distributing tokens to investors in exchange for Ether. You’ll specify the price of the property (which must be in the range of blockimmo’s independent valuation), the sale’s start and end date, the sale’s target (percentage of total tokens sold for the sale to be successful), and your (hardware) wallet address where the Ether / tokens will be transferred upon the sale’s completion.

Once a token sale is live you can monitor its progress in the seller dashboard. You will receive notifications when tokens are purchased and see information relevant to the sale.

After the sale’s successful completion you will need to review and sign paperwork prepared by both parties at a notary with an investor representative. At this point, you will receive your Ether (or FIAT if preferred) and the investors will receive their tokens. If the sale’s target is not reached before its end date Ether will be transferred back to investors and the property’s tokens will be transferred back to your (hardware) wallet.

To sell a property on blockimmo you’ll need to contact us. Initially, we will hand-pick properties, execute thorough due-diligence and work closely with the sellers.

Who is responsible for the management of the property?

The complete management of an investment property will be outsourced to a professional partner active in the region the property is located. This ensures the building stays in good condition, that tenants receive excellent service, and that accounting and finances are done by a trustworthy party.

Financial reporting will also be outsourced, but managed by blockimmo. These regular (we’re aiming for quarterly) reports will be accessible via the investor dashboard.

blockimmo’s operational team will work closely with property management and financial reporting partners to ensure the highest quality of service. Investors have decision making power via the shareholder DAO attached to each (commercial) property.

Sounds nice, but I want to have a look under the hood and try it first

We’re taking a very open approach to building our platform. Transparency is an integral part of our culture and serves our goal of building trust with our customers (both investors and sellers). In the research and development phase, we’ve consistently explained our architecture, design decisions, and platform with technical and non-technical blog posts. As we approach blockimmo’s launch we have open sourced our smart contracts, and engage in public independent audits and bug bounties. Similarly, we’ll be making our legal framework / documents accessible upon receiving financial regulatory approval.

Phoenix Property — on blockimmo.ch — Try our platform!

Do you want to try out our product? We welcome you to do so at https://blockimmo.ch— we’ve just enabled a dummy property in which you can invest (no direct value as explained here). So you can get to know our processes and see how our product works. We welcome any feedback on hello@blockimmo.ch.

Did we spark your interest? Would you like to find out more about our platform, technology, or meet us? We’re happy to invite you to our offices in Crypto Valley Zug. Let’s keep in touch! https://blockimmo.ch

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