Crowdfunding real estate venture RealtyShares is now taking bitcoin-based investments.
The site, founded in June last year, enables small investors to get into real estate by pooling their money with others. The crowdfunding investments include family homes, commercial properties, and apartment complexes.
Each property is purchased under a separate limited company (LLC), and investors in the property are given a share of the rent on a monthly or quarterly basis, based on their investment. When the property is sold, they are also awarded a share of that profit.
CEO Nav Athwal said that the decision to take investments in bitcoin was driven by a significant base of non-domestic investors. 10-15% of the people investing in US property through RealtyShares are from outside the country.
“10-15 countries are represented, and the process for them is a little daunting. If they transfer money, then they face wire transfer fees and delays,” he said. “The fees and delays don’t make the solution as streamlined for international investors.”
The company signed with Coinbase as its payment processor, and integrated with its API. “Some international investors specifically asked for the feature,” Athwal said.
RealtyShares is treating the bitcoin investments as pure currency, and will not be holding a position in bitcoin. As it does with Overstock, Coinbase will immediately convert incoming bitcoin payments to fiat currency based on the current market exchange rate.
For the first million dollars in bitcoin-based investments, Coinbase is providing its conversion service for free. After that, it will charge a 1% conversion rate for all bitcoins sent to RealtyShares.
When transaction fees are charged, the crowdfunding real estate investment site will swallow the transaction fee itself, although depending on volume, it may reconsider that in the future, Athwal said.
There is no secondary market for shares, and investors are committed to a contract for at least six months, and up to seven years.
Returns on property investments will vary according to a number of parameters, including the type of property, and the type of investment. One option is to be a direct owner of a property, for which Athwal forecasts (but doesn’t guarantee) returns of 8-9% annually.
The other option is to take a debt position, in which you invest in the LLC rather than the property directly. The LLC then takes a mortgage or promissory note, which reduces the investor’s risk, as they are investing in the company rather than directly in the asset, Athwal said.
“We’re the first platform that lets you use bitcoin to invest in something other than bitcoin,” concluded Athwal. “Bitcoin is generally treated as an asset as opposed to a currency. We enable investors and BTC holders to put it into something tangible like real estate.”
Real estate image via Shutterstock