Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last 50 years and has become a common investment vehicle.Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. For many people, real estate is the easiest to understand investment because it is simple, straight-forward and involves a fair exchange between a property owner (the landlord) and the property user (the renter). As long as the hot water keeps flowing and the rent arrives on time, everyone is happy and benefits. Investing in real estate is much more complex than this, though, because there are several different types of real estate investments including residential, commercial, and industrial, as well as real estate that trades on stock exchanges, which are called REITs.
When you invest in real estate, your goal is to put money to work today and make it grow so you have more money in the future. You have to make enough profit, or “return”, to cover the risk you take, taxes you pay, and the costs of owning the real estate investment such as utilities and insurance. This overview explains the basics of real estate investing for beginners to help you learn what to expect and how investors make money from their real estate properties.
The blockchain technology is rapidly hitting the mainstream and according to a World Economic Forum survey of 800 executives and information and communications technology sector experts, 57.9 percent of the respondents believe that 10 percent of the global GDP information will be stored on blockchain technology by 2025. Until recently, blockchain was known more as the technology powering Bitcoin. However, industry players now realize that blockchain-based smart contracts can play a much larger role in real estate dealings, potentially transforming core real estate operations such as property transactions.
Due to the nature of real estate transactions, there are many ways to structure a deal. If a homeowner wants to sell their house and they can agree to specific terms with their buyer, the parties can enter into a contract through the blockchain that allows the buyer and seller to name their terms based on certain pre-set conditions that are detailed in the smart contract.
For instance, if the inspection reveals that the house has a cracked foundation, the buyer may want a discount on the sales price based on that contingency. If the seller agrees, the contract can reflect that potential option.
When the Ethereum contract is written, coded and then validated on the public ledger, that sets the legal terms of the contract. When the property inspector makes his report, he can make that report a part of the blockchain, which then is validated by all other participants of the DLT. If the contingency is met and the inspector’s report shows that the house’s foundation is cracked, that triggers a reduction in the agreed-upon sales price and the transaction is conducted according to the contingency price in the contract. There is no need to rewrite the contract to reflect the new sales price. Instead, some of these contractual details can be automated into the transaction itself. There is no limit to the number of contingencies a smart contract may include. An Ethereum real estate contract may be written so that any number of final sales prices, reductions in price, or increases, can be triggered based on specific events agreed to by the parties.
A real estate developer may want to pay one price for a plot of land based on whether or not the seller has a clean title. A smart contract can be written as the title research is conducted with the final price determined upon completion of the due diligence and research by other parties involved.
Another scenario may be a landlord-tenant situation where the landlord sets rent prices based on various factors like: whether or not a family has a pet, if improvements are requested to the property before move in, or depending on the renter’s credit report and rental history.
Every contingency can be spelled out in a real estate smart contract and recorded on the DLT. This allows all of the parties involved to save time and money while performing due diligence. The benefits to Ethereum contracts are legion, and as the technology progresses, real estate professionals are learning new and efficient ways to use it to their advantage.
Westrend is a crowdfunding real estate investing platform that aims to innovate and disrupt the real estate investment industry by using revolutionary technology as well as to create and provide easier, safer, and more affordable real estate investment opportunities in a global scale.
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