Another project about real estate, do you have competitors in this area, than you will be unique and different from other similar projects? And in what more direction are you going to work?
Hello and thank you very much for your interest. The real estate blockchain startup scene is exploding and a large number of these startups are designed with residential real estate in mind. However, high investor demand – both institutional and private – centers upon commercial real estate (CRE), making it an extremely interesting and lucrative field for blockchain startups. This is why AgentMile considers that stepping into this niche gap is a great opportunity.
It is generally acknowledged that investing in CRE has a number of benefits over its residential counterpart:CRE provides higher returns and rental yields than residential;
lease agreements are usually middle or long-term (3 to 10 years) compared to rental agreements that tend to be short-term (6 to 12 months);
CRE asset value is increasing over time and enjoys excellent potential for appreciation;
tenants often take a contractual obligation to incur many costs, for example insurance;
tenant-landlord relationships are professional and regulated by the agreement.
On the contrary, according to Ian Formigle at CrowdStreet, investing in single-family real estate and operating it as rentals has a number of challenges:
lack of sustainable cash flow;
excess risk (investing in residential real estate often involves more than 100% equity risk);
lack of economies of scale (items such as roofs, heating systems, etc. demand large expenses and any force majeure events can consume all available income, if not more);
binary occupancy (100% or 0%);
costly management;
entirely market dependent (the property’s value does not affect profitability. The latter depends on the conditions dictated by the market);
geographical constraints (investors are, for the most part, looking to invest in nearby properties in order to oversee them).
Sophisticated investors who want to diversify their portfolios are grasping the benefits of investing in key CRE markets such as industrial, multifamily, office or hotel sectors8 for the following reasons:
Asset value in direct correlation with net operating income (NOI)The greatest benefit of investing in CRE as opposed to residential real estate is that its intrinsic value (i.e., the revenue it generates) has a direct impact on investor profits, regardless of the market.
This means that CRE investors have ample opportunities to invest in great properties in any location and receive good income while residential real estate investors have to overwhelmingly rely on the market.
DiversificationCRE investors are not limited to any geographical area, nor business type. By partnering with property managers, they are able to invest in any commercial property they deem to be valuable.
Fewer risksCRE investor losses are limited to the amount they invested whereas it is not uncommon for residential real estate investors to incur in excess of 100% costs. Additionally, CRE tenants are contractually obliged to pay property management and insurance.
Greater predictabilityDetermining profitability of a CRE asset may be complicated but it is usually more accurate compared to residential real estate. By taking into account a variety of factors such as location, size, nearby infrastructure, etc. and building a mathematical model, investors can get a better forecast of future revenue.
All these factors add up to a larger and more favorable target market for AgentMile both as a product and a business.
Thanks again and happy to answer any more questions.
