Roadmaps And Recommendations For Property Management Using Blockchain

In this article, you will learn about roadmaps and recommendations for property management.

Roadmaps And Recommendations For Property Management
 
Property Management is the managing and operating of residential, commercial, and/or industrial real estate, including apartments, detached houses, condominium units, and shopping centers. It typically includes the managing of property that is owned by another party or entity. Property management may include seeking out tenants to live in the space, collecting monthly rental payment, maintaining the property, and aftercare of the grounds. Apartment complexes are overseen by some type of property management company.

There are basically four types that fall under the term ‘property’:

  1. Residential- Residential real estate includes both new construction and resale homes.
  2. Commercial- Buildings and offices that are made to produce incomes are commercial properties such as shopping centers, strip malls, medical centers, educational buildings, hotels, and offices.
  3. Industrial- it includes manufacturing buildings and warehouses. The industrial property can be used for research, production, storage, and distribution of goods.
  4. Land- this type of property includes vacant land, working farms, and ranches.

Property Management is not as easy as it seems to be for buyers, sellers, tenants, landlords, and agents. It includes property listing, repair, maintenance, control, responsibility, tenant screening and selection, rent collection, legal procedure, and renovations. It is clear with these terms that the whole procedure of Property Management is not as straightforward and easy as it seems to be.

The biggest problem with traditional property management:

  1. Not open to everyone
  2. Severe lack of transparency
  3. High fees
  4. Lack of liquidity
  5. Pricing commitments
  6. Transaction speed

But all these problems can be diminished with the buzz-creating Blockchain technology. With blockchain technology, you can transfer assets digitally without the involvement of a central verifying authority. No middleman required means reduced fees and faster transactions.

In the context of Real Estate, this means reduced legal and title-related costs and rapid settlement processes.

Furthermore, any transaction conducted on Blockchain is permanently and publicly recorded on the ledger, effectively increasing transparency, accuracy, privacy, and security.

As such, the first application of blockchain technology, the cryptocurrency market has skyrocketed in the past years.

An assessment shows Blockchain is best suited for trade finance and property management. Blockchain-based property transactions will be secure and real-time through mobile and web apps. Trust, transparency, and efficiency offered by Blockchain in property transactions will strengthen good governance and reduce the volume of property related legal proceedings in the country. A solution with a centralized database is likely to be less costly but would offer vastly reduced security and minimal improvements over current processes. There is no other technology that has enabled a trustworthy solution for creating, enacting, verifying, storing and securing digital contracts. This means that every time you buy, sell or transfer cryptocurrency or use virtual coins to buy or sell goods and services, a new encrypted “block” is created and attached to the existing blockchain or ledger. This mitigates the need for a central authority as the block is permanent and cannot be altered.

Traditionally, when you transfer money to an overseas account, your financial institution would charge you a fee to facilitate the transaction and it would then take a few days for verification.

FUTURE OF REAL ESTATE INDUSTRY WITH BLOCKCHAIN

  • 100% electronic and secure property sale where fraud and paper deeds are not anymore
  • Digital contracts will automatically withdraw rent payments and service charges with a full audit trail and no human error
  • A self-ruled accounting system where every transaction is automatically recorded and balanced without fear of anyone making any changes in the system
  • A secure electronic record for each individual and corporate entity showing all their details and their credit history
  • Can you imagine a commercial building that has every system (like utilities) connected securely and adjusts itself without the occupants or any other party intervening or instructing!

In the near future, it may be possible for a homebuyer to buy a home and complete the sale by clicking on a shopping cart on a website. The blockchain will make sure that the buyer gets the title or deed and the seller gets the cash via a cryptocurrency. The blockchain will also record the title or deed to the relevant public records.

Real estate professionals will continue to prosper in the era of the blockchain. The advice, knowledge and hand-holding of real estate professionals will always be an important part of a buying or selling process. However, the handling of money and transactions will change for sure, and that change is already underway. Brokerages will need to adapt their business models to understand and enable smart transactions but otherwise will continue to succeed in the era of the blockchain.

The three main properties of the blockchain are:

  • Decentralization
    All the data that is stored inside a blockchain is not owned by one single entity.

  • Transparency
    All the data that is stored inside the blockchain can be seen by everyone who is part of the network. Every single piece of data can be traced right to its very origin.

  • Immutable
    All the data that is inside the blockchain cannot be tampered with because of cryptographic hash functions.

    The Blockchain brings in several advantages into the real estate ecosystem, chief among them being,
  • Smart Contracts
    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. Smart contracts could provide safer and more reliable options for property sale as well as rental transactions.

Major benefits of Smart Contracts

    1. Cutting out the Middlemen -- The most obvious benefit is that you can for sure cut out quite a number of the middlemen when you transact on the blockchain using smart contracts. You deal directly with the buyer or seller so imagine how much money you can save by cutting out all the brokers, bankers, and lawyers.
    2. Enhance Speed of Transactions- real estate transactions can take months to end and that is mainly because of the vast amount of bureaucracy, middlemen, and lack of transparency that you need to go through. Smart contracts could speed up the process of verification, search for homes and processing of ownership.
    3. Protection against Fraud- finally Smart Contracts can protect property owners from forged documents, false listings, and rental scams. The records on blockchain and smart contracts are immutable, permanent, secure, transparent. No one can delete or alter them.
  • Tokenization
    A token is a digital representation of a real-world asset, value, or function and the process of applying token is called Tokenization. The token has no extrinsic or exploitable meaning or value. The process of Tokenization will increase the liquidity of traditionally illiquid assets and will make it possible to trade those assets without a third-party.

Major benefits of Tokenization

    1. Lower Investor Barriers- as the real estate assets become more liquid, the barriers for investor entry will likely be lowered. The accredited investor restrictions may view Tokenized real estate in more liquid light.
    2. Programmable Securities- these tokens can be managed through smart contracts that would automatically enact important processes like automated dividend payout through smart contracts, which would reduce costs.
    3. Security and Immutability- it allows more security and risk reduction in the whole process of property management. The information once filled, cannot be tampered or deleted. All the transactions can be easily tracked.

HOW WILL A BLOCKCHAIN-BASED PROPERTY REGISTRY WORK?

  1. All the actors involved in a transaction will have a digital file representing the agreement of ownership of the real estate, mortgage deeds, and transaction processes. These files can be stored in the cloud, locally, or at some other location of the actor’s choosing.
  1. The authenticity of the process, the signatures, the file confirming ownership, mortgage deeds, etc. will be secured with a blockchain by the land department but the blockchain will also be stored and validated by other actors. It will, therefore, be easy for authorized third parties to verify the information. These third parties would usually be actors who are part of the process: banks, buyers, sellers, real estate agents, etc.
  1. Keeping privacy laws in mind, the land department can choose what information related to the property/ transaction will be public and keep the rest confidential.
  1. The only way to steal a property will be by entering a new real estate transaction process with stolen or forged identification. To counter this, the security of the ID-solution can be improved to include more strict identification procedures such as photos of physical ID-cards, biometric identification where available, multiple signatures, etc.

Three features that are offered with Blockchain in Property Management are irreplicability, immutability, and verifiability. These properties were difficult to find before Blockchain. These properties prevent corruption, fraud, and usurpation that plague the real estate sector. 

Currently, many real estate systems and processes are siloed, and information is consequently dispersed on different point solutions. This lack of interoperability results in data redundancies, duplication of records, and opaqueness. As such, real estate management’s decisions are frequently based on data sets, which do not provide a real-time view of ongoing activities. Therefore, the advantages and potential for positive disruption are great, for many the challenge may lie in capital acquisition as well as transitioning from the current models to the digital modes. But given early market entry delivers more benefits, we encourage you to apply blockchain and smart contracts to your processes and the returns would be great.

Blockchain Technology will allow for the democratization of real estate properties. It will open up the gates for potential investors from across the globe to try their hand in real estate investment. If executed properly, then this can be hugely beneficial for crypto space as well, because it will increase the real-life utility of tokens. The scary part is that we have just scratched the surface of what could be possible via the amalgamation of Blockchain and Real estate.

AREAS OF REAL ESTATE BEING TRANSFORMED BY BLOCKCHAIN TECHNOLOGY

 
Property Search Process
 
Currently, the most common method that brokers, owners, buyers, and tenants use to store and access property listings are through third-party platforms. These platforms tend to be subscription-based and can command high fees from users. Moreover, there is a lack of standardized processes and often poor communication between the platforms.

This causes property data to frequently be inaccurate, dated, or incomplete. Further, the data can be fragmented across multiple listing platforms, which introduces inefficiencies.

Blockchain technology can fix these problems by allowing a property listing to exist on a single decentralized database. With data distributed across a peer-to-peer network, brokers would be able to have more control over their data, as it would be more difficult for it to be interfered with by any third parties. Market participants could access more reliable data at a lower cost.

Due Diligence and Financial Evaluation Process
 
Physical paper documents for proof of identity are still the norms today. This approach requires the commitment of significant time and effort for due diligence and financial verification.

This manual verification process also increases the likelihood of errors and can involve multiple third-party service providers. These factors can be costly and slow down the due diligence process.

Using digital identities on the blockchain, this entire process can be taken online in a secure manner — increasing efficiency, lowering costs, enhancing data security, and reducing the chance of manual errors.

For example, a real estate property’s digital identity could consolidate information such as vacancy, tenant profile, financial and legal status, and performance metrics.

Property Management
 
Property management is highly complex, with many stakeholders involved — including landlords, property managers, tenants, and vendors.

Most properties are currently managed either offline through manual paperwork, or through multiple software programs that generally don’t integrate well with one another.

Through the use of a single decentralized application that uses blockchain-backed smart contracts, the entire property management process, from signing lease agreements to managing cash flow to filing maintenance requests, can be conducted in a secure and transparent manner.

In residential real estate, for example, a landlord and tenant could digitally sign a smart contract agreement that includes information such as rental value, payment frequency, and details of both the tenant and property.

Based on the agreed upon terms, the smart contract could automatically initiate lease payments from the tenant to the landlord, as well as to any contractors that perform periodic maintenance. Upon termination of the lease, the smart contract could also be set to automatically send payment of the security deposit back to the tenant.

Title Management
 
At present, property titles are often paper-based, creating opportunities for errors and fraud. Title professionals find defects in 25% of all titles during the transaction process. Any identified defect makes it illegal to transfer a property title to a buyer until it is rectified. This means property owners often incur high legal fees to ensure the authenticity and accuracy of their property titles.

Moreover, title fraud poses a risk to homeowners worldwide. These title management issues could potentially be mitigated by using blockchain technology to build immutable digital records of land titles. This approach could simplify property title management, making it more transparent and helping to reduce the risk of title fraud and the need for additional insurance.

Some companies and governments around the globe are already implementing blockchain technology for the title management process.

Financing and Payments system
 
Due to the extensive documentation required and the involvement of various intermediaries, existing modes of financing and payments for property transactions are currently slow, expensive, and opaque. These issues are especially pronounced when a property is financed through a mortgage and when international transactions are required. This process could be simplified and made more transparent when blockchain technology is applied. For example, verifiable digital identities for properties could allow a reduction in both due diligence and loan documentation time, thus speeding up the mortgage approval process. The borrower and lender could also use blockchain technology to execute an immutable smart contract-based loan document, fully accessible by all legal parties involved.
 
Real Estate Investing
 
Real estate investing has historically only been available to those able to put down large sums of capital — especially in regard to commercial property and multifamily housing. Additionally, real estate investing often involves expensive intermediaries such as fund managers, further raising the barrier to entry.

However, blockchain technology is looking to disrupt real estate investing by providing a way to decentralize the process through crowdsourcing and tokenization.

Tokenizing real estate assets refers to a process in which a property owner can offer digital tokens that represent a share of their property. Using a blockchain to track these investments, with each transaction being time-stamped and immutable, makes it possible to limit the risk of fraud.

This approach makes it easier to establish a market for property “micro-shares,” creating the potential for a property to effectively have numerous co-owners with a stake in potential returns.

While blockchain technology could help solve many problems within the real estate industry, there are always challenges that come along with transitioning to an emerging technology that has not yet fully matured.

ON-DEMAND SOLUTIONS

The blockchain based property management solutions will enable you to manage your real estate operations as effectively as possible. These solutions will provide a comprehensive and flexible set of tools crafted to help you take on today’s challenges.

Advantages of on-demand solutions

  • Access property data anytime, anywhere with web-based property management software
  • Manage your residential and commercial properties under one complete and flexible system
  • Simplify the resident and tenant experience with online portals that increase engagement and empower communication
  • Foster reliable, accurate collaboration by working off one set of data across your business
  • Provides you with the property options and property manager according to your requirements.
  • Help you with constant data backups and real-time threat scanning.

At RevInfotech, we are re-imagining the landscape of the future and making it a reality. We are working on the solutions to make your buying, selling, and renting experience easier.

Our solutions allow,

  • Affordable Digital Ownership
  • Instant Digital Buying and Selling of Properties
  • Instant payment and collection of rentals
  • Instant, safe store of value
  • Transparent and secure transactions

We are constantly working to make Property management an easy task for buyers and sellers with the Blockchain solutions that help in Real Estate listings. Our property management solutions are focused on renting which ensures you have a faster, secure, and transparent payment experience with Blockchain.