(Editor’s note: LIFULL recently purchased the Mitula Group, Dot Property’s parent company. LIFULL also served as the lead investor in the latest round of seed funding for BitOfProperty.)
International real estate investment can be expensive and legally challenging for those new to the process. Finding information about property investment in foreign countries can also be problematic. These factors were not lost on the founders of BitOfProperty.
Karl Vään, Co-Founder and CEO of BitOfProperty, notes the company wanted to help bring international real estate investments to the masses. In order to do this they would need to find a way for investors to start with small amounts, provide them with a transparent ownership structure and carry out the due diligence process.
The company’s ultimate vision is to make global real estate investment simple and the company is developing a decentralised platform to accomplish this. The crowdfunding platform allows many people can own one property. Prices start at EUR 50 and investors have the ability to invest in various deals on the platform, Vään details.
“The platform is built in a way that brings more transparency and safety to all investors regardless of if they are local or come from overseas,” Vään explains. “All transactions are recorded on a public database (blockchain) making ownership movements are seamless and immutable. Additionally, investors can read their investment agreements on smart contracts.
Once the property is acquired, investors start to receive monthly rental income to their wallet on the BitOfProperty platform. They can then use these funds to invest in more properties or withdraw the cash to their own personal bank account. BitOfProperty or one of its partner companies manages the properties.
“On the BitOfProperty platform, investors can receive between 5.6 to 7 percent net rental return per annum. These returns are on the high side, but still remain in the range of local averages. Investors have also the potential to earn capital gain from any property price increases. After three years, the property is sold and the principal, along with any capital gains, are returned to the investors,” Vään says.
BitOfProperty has already built a legal structure for the company to acquire properties in Estonia and Japan. The company’s platform is up and running in Estonia and is moving forward with its plans in Japan.
“When compared to Europe, then rental returns in Estonia are relatively high and attractive for passive investors,” Vään reports. “You can get similar rental returns in the Japanese property market, which in our view is competitive, and should be interesting for investors since it is a passive real estate backed investment.”
The innovation caught the eye of Japanese real estate company LIFULL who was the lead investor for BitOfProperty’s latest round of seed funding. According to Vään, LIFULL was interested in small real estate investments utilising blockchain technology as it looks to build a platform for global real estate transactions.
BitOfProperty targets Bangkok and Southeast Asia
After a successful rollout in Estonia and one planned for Japan in the near future, BitOfProperty is now exploring new destinations. Bangkok sits on the top of the company’s wish list for a number of reasons.
“Thailand is an exciting and dynamic market. There are many good and profitable projects to be found in the country,” Vään says. “Since the vision of BitOfProperty is to make global real estate investing simple, Bangkok adds to the diversity of places that investors can invest in.”
Of course, the company also understands that it will face challenges as it moves into Bangkok and Southeast Asia as a whole. Perhaps the most daunting issue is the regulatory framework, which varies across the region. This means BitOfProperty would need to study each country before it could open a platform. And that is only one issue it needs to take into consideration.
“(Dealing with) Different currencies can become a challenge, because raising money and eventually converting it to the currency which is used to make the acquisition can be different due to exchange rate. This is something that needs to be mitigated,” Vään points out.
He continues, “Lastly, language can be a problem as well, even if our investors are international. If the property comes from, for example, Bangkok, then people from Thailand are also potential investors. This, however, would mean that the platform and materials should be in the Thai language as well. That will increase the cost for the company and require us to build a team in Thailand.”
BitOfProperty believes it has found a solution to the aforementioned problems by building an International Property Exchange (IPEX). The IPEX would work like a stock exchange for real estate crowdfunding/investment companies from around the world.
“Projects listed by members of the IPEX system are mirrored on each other’s platforms in order to raise funds together simultaneously, but each company is doing it in their local country and jurisdiction,” Vään notes. “This way companies can leverage investors from other platforms and have easier access to foreign capital.”
This ensures each platform can offer overseas real estate without needing a license in every country while companies can build trust in the new markets they are entering. The domestic exchanges benefit in these partnerships since they are able to offer international real estate to their clients that would only found on other platforms. The benefits extend to investors as well.
“At the same time, investors can enjoy the exposure of foreign investments and diversify their funds accordingly. Also, they are open to more liquidity when it comes to buying and selling their shares. Investors don’t rely solely on the platform where they made an investment, but can sell their share to any investors whose service provider is connected to IPEX system,” Vään states.
Why Bangkok and Southeast Asia?
One of the Bangkok property market’s main attractions is its affordability. Real estate prices in the Thai capital are significantly less than in more developed markets, but Vään sees this as an opportunity, not an issue.
“Since the prices in Bangkok and other cities in Southeast Asia are cheap, then real estate crowdfunding makes a lot of sense. This is a good time for investors to go in and get some exposure in emerging markets’ real estate,” Vään says. “Of course, each country needs to be studied separately and it doesn’t mean that all of them will be doing well in the coming years. However, Thailand is definitely worth looking at.”
Although BitOfProperty may seem to be for inexperienced investors, looks can be deceiving. BitOfProperty seeks to move the needle for experienced property investors who are looking to diversify their funds with ease as well. At the end of the day, they want to bring a new wave of real estate investment for all to Southeast Asia.
“BitOfProperty is the best avenue for investors who do not want to take too much risk, especially those who want to learn about the markets and understand them before investing large sums. Investors can participate with little capital and learn about the market while investing. We believe that this is the best way to go about your first investments in an unknown territory,” Vään concludes.
For more information on BitOfProperty, click here
