Passive income on the blockchain

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One of the main avenues for passive income in the investment world is real estate. Whether it is cash-flow producing residential properties, commercial buildings, offices or hotels, real estate has created endless opportunities for buyers to receive regular payments on top of long-term capital appreciation.

Real estate, however, is traditionally reserved for the wealthy. Especially in the North American post-pandemic market, where buyers are competing with multiple offers — some up to 10% above asking price. Canadian real estate has climbed substantially over the past few months, as you can see in the chart below from TD Economics:

As more retail investors get priced out of the asset class, real estate marketplaces are emerging to appease this demand. Those interested in gaining exposure to real estate can now buy fractions of properties or REITs, at a much more accessible price tag and without bidding wars.

Some of the top US real estate marketplaces have raised more than $1 billion and have distributed sizeable cash returns to investors (more detail in our previous article on real estate marketplaces):

However, there are key operational challenges to these venues. In a world where technology is enabling instant access across asset classes, the need for secure cap-table management, seamless distributions and streamlined KYC/AML procedures is higher than ever. On top of this, liquidity, transferability and transparency are important to investors.

In this report, we explore how blockchain technology is disrupting real estate marketplaces and creating a new investment ecosystem around the world’s oldest asset class.

Issuer-side

Issuers value simplicity and low transaction costs. After all, the lower the costs of issuing securities, the higher their profit margins and the more returns they can offer to their investors, increasing demand.

Real estate issuers compete against each other on two main fronts:

Investor-side

Investors also benefit from blockchain adoption on many fronts. From an asset allocation standpoint, diversification is an important factor — both geographically and in terms of property type. Furthermore, the ability to trade their securities without incurring liquidity premiums is also appealing, and many secondary venues are emerging around the world. As long as the digital securities are homogenous (issued on the same protocol), exchanges can list any asset independent of the marketplace it comes from.

Real estate investors can benefit from digital securities in two areas:

Visit our Research Terminal at research.atlasone.ca to get access to digital securities market insights, reports, news and more.

Disclaimer: The information provided on Atlas One’s research, social media channels, website, webinars, blog, emails and accompanying material (collectively, the “Information”) is for informational purposes only. It does not constitute or form any part of any offer or invitation or other solicitation or recommendation to purchase any securities. The Information should not be considered financial or professional advice. You should consult with a professional to determine what may be best for your individual needs. The Information is drawn from sources believed to be reliable, but the accuracy and completeness of the information is not guaranteed, nor in providing it does Atlas One assume any liability. Atlas One assumes no obligation to update the information or advise on further developments relating to these areas.

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