chainlinks retail advisors 2015 forecastBlockchain & Real Estate Panel

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chainlinks retail advisors 2015 forecast chainlink to dollar Blockchain & Real Estate Panel
thanks for being here tonight uh my name is lee bradshaw the president of texas blockchain council were an industry association making texas a leader in blockchain innovation we cover anything from bitcoin mining crypto d5 to enterprise blockchain tokenization real estate all those kinds of things tonight were talking about real estate and crypto talking about tokenization weve got an awesome panel who will be filtering to the front as i speak i see a few of the other they are over here before we start the panel discussion i will say a few housekeeping notes uh the bar is open but if you would just uh move move forward and instead of congregating the bar because the the floor is concrete and it echoes therell be a challenge for you guys to hear it theres a bunch of people in the back talking so move forward and grab a seat as youre able uh the texas blockchain council does these events monthly in houston austin dallas theres actually an event going on tonight simultaneously in houston in the woodlands well well be starting at fort worth soon uh so if you maybe kind of click out of town we do these events all over the state as ryan said we are working on the policy side but we also have member companies both individual members who are not affiliated with the company and corporate members who are part of our industry association think of it as like a chamber of commerce and we help build their influence help them find their next investor the next client or the next employee we are a non-profit industry association so we dont really have a dog in the fight as far as all that goes the last thing i want to do is just thank our host this evening uh tim2 back there and gown who runs the drawing board the drawing board has been an incredible host for the tbc our offices are here we do this uh our dallas fix event here um and and i know theres a bunch of crypto people who are now offering here too so i just heard there were six um thats six additional uh crypto folks who are now off this here the last couple months thats great were trying to make this facility sort of a hub for that kind of innovation so without further ado let me introduce im going to have the panelists introduce themselves uh so we have uh sohail hassan we have brian shepler and yeah we have yale hamrick excuse me on the far right uh theyre gonna introduce themselves and were gonna dive into a conversation about blockchain crypto and tokenized real estate so so now once you kick us off so as i mentioned or as lee may have alluded to my name again is sohail hassan i am a principal and managing partner at a firm called market space capital we are a private equity real estate development firm based out of houston texas and we focus primarily on ground up development and value-add acquisitions of multi-family properties we currently have around approximately 480 million dollars of assets under management and we are going through the process right now of tokenizing our very first asset which is located right here in dallas uh and so were going through the process of that right now and im gonna im you know excited to share with you guys kind of what weve learned along the way and uh hopefully you know youll come away with it learning a little bit more about how blockchain and real estate can work together thank you thats great my name is brian shepler my background is software development i co-founded a software as a service business about 18 years ago and just last year we had a successful exit of that business ive been investing in real estate for about seven years both as a lp and gp on multifamily and so ive been looking at what to do next on the software side and focusing on blockchain and real estate and how they work together and how they can solve a lot of the problems that exist today and yes thank you uh for having us up here ive already learned a lot just been here tonight and hopefully ill learn a lot more uh on the panel hearing everybody talk can you hear me can you hear me guys no not really can you hear me now come here now all right so uh my name is joe hamrick uh lee thanks for having me ryan also thanks for inviting me uh ive been a uh single family investor uh single family real estate investor for the last decade um i got out of real est i got into real estate after i was in the navy um ive focused on the burn method of acquiring rental properties a multi-million dollar rental portfolio mainly here in tarrant county texas um i dont usually speak at these things of in real estate but i feel like real estate in bitcoin blockchain specifically theres a lot of parallels and ive been in the bitcoin space uh for a handful of years now so i feel like i by no means do i feel like im an expert at all um in in blockchain but i feel that theres a lot of similarities and i feel that theres a lot a big disconnect between the crypto space and the real estate space and i feel that when theres more knowledge that happens uh people see that theres a lot of similarities and theres a dire need for blockchain technology in real estate so uh thanks for having me and uh looking forward to speaking with these guys up here and kind of having a conversation but im really want to talk to everybody in this room you know and see because i really feel like this stuff moves forward with uh little groups like this and uh we we all talk amongst it and we come up with ideas and then we take massive action and thats how this happens so uh thanks for having me and hopefully we can accomplish that tonight so uh you share a little bit i didnt talk about the similarities between bitcoin real estate talk about those things as an asset class yeah so sorry all right im an audio tech you know i clearly know what im doing okay were good yeah so like as an asset class there is volatility in in bitcoin and um and you know theres not as much volatility in in real estate uh the thing that bitcoin in my opinion is is going to try to be is is almost operates as as like a bond where something to where youre going to be able to you know lend against your bitcoin holdings over over time as the volatility if bitcoin goes to say a million two million a coin the volatility will cease and it will start to act more like real estate now is a time where most people can afford to continue to buy bitcoin the the the similarities of real estate right now i use my rental properties and i take loans against that to take my cash and then go purchase things like bitcoin later on in the future um you know it its probably going to be bitcoin that i use because the holdings that i have in bitcoin will outweigh my real estate holdings i i also think um you know if were going to talk about bitcoin real estate uh i mean him just talked to me and he just talked about this i think that over like the next 10 to 20 years um over the last 10 years i thought that real estate was was the asset class to be in and and i holded my real estate and i sold some and i kept some and i and i sold my real estate but over that 10-year period i i kept my real estate now is the time to be doing that with bitcoin i i think that uh you you hold the bitcoin over a period of time you continuously invest into the market a lot of similarities to how i built my rental portfolio because i continuously just invested into that market i continuously held properties sold some and i think that there are drastically similar similarities to holding a bitcoin position um are we taking questions please im not sure just a real brief question sure when you say bitcoin do you mean the actual bitcoin or just cryptocurrency oh no yeah great question you know and i think that that needs to be uh i mean bitcoin so i i i am uh i am a i wouldnt call myself a bitcoin maximalist uh but ive been in the space i dont think all cryptocurrencies should be looked at equally uh i dont think all blockchain should be looked at equally i think that the bitcoin blockchain is is very uh is immutable in um other blockchains say they are but we know that over the course of the last 12 13 years that bitcoin is so um im talking specifically about bitcoin and when that asset gets to to a price where it acts similar to real estate um one thing i do for talking about that real quick um i i think that over the next 10 to 20 years possibly um if bitcoin does go to a million to two million a coin um i think that uh it may if bitcoin does fix this you know you hear that saying a lot to some of the crypto people i think that the it could fix the affordability in single-family homes i feel that it could bring down the price of single-family homes if bitcoin is an asset thats worth a million to two million a coin your regular investor is probably just better off buying bitcoin than trying to get into single family taking all that risk um theres an education theres management and i really feel that the prices nowadays are going up because of investment you know a lot of investors are looking at single family as as a way but you know i think so how well well well uh talk about tokenization and stuff like that here but yeah to me those are the similarities of of bitcoin and real estate sure i think theres a its important uh thank you for that yale i think its important to understand the distinction between the asset classes okay so when youre talking about bitcoin youre talking about cryptocurrency right youre using that to pay for something then you have nft which is non-fungible tokens i think somebody had asked me earlier a little bit about that then what were talking about specifically is whats called digital security tokens right and thats why taking ownership in real estate and being able to tokenize that so its important to not uh combine the two because a lot of people have a negative connotation when it comes to bitcoin or ethereum particularly because of the volatility thats inherently there right uh but when were talking about it were looking at the technology that powers that cryptocurrency which is called blockchain and that and how we can apply that blockchain technology to a variety of different industries is what were interested in particularly tonight of course is how we can apply it to real estate so i think thats important to make that distinction and also to note that uh bitcoin is not a security as with the icc is declared that bitcoins are not securities all the things that were talking about in real estate sure sure id love to and i think before i do that let me preface the conversation by kind of giving you guys a little bit of history on kind of how we ended up to where were at today so when we originally you know started this firm i was working with two other partners of mine and they have been working in the real estate space since 2011 and they had made a variety of different acquisitions into multi-family office and retail assets but when i joined the company you know and we met for dinner the very first night it was on the conversation was how we can use technology to really disrupt this industry and of course at that time uh blockchain or particularly the application of blockchain to real estate was still in its infancy right and so we decided to take a traditional approach of investing in you know the traditional way into real estate assets and building up our aum our assets under management with the idea that one day we would then go and tokenize it so over the last year and a half i would say that we really spent a considerable time money and resources onto a strategic plan of how we can tokenize an asset and theres been about 10 different people in our office that have touched this as i mentioned over the last year and a half and you know what we wanted to do is take one single asset and tokenize that first to really understand the implications of it to understand the unknowns right but once we can use that as a sort of case study that we can then take the remaining portion of our assets under management and tokenize that as well not to mention theres partners of ours for example i was mentioning this uh back there that you know we have a partner of ours in houston that owns 11 000 apartment complexes right he has over a billion dollars of assets and he is the only owner in these assets but its funny because every time hes going to acquire a new asset he doesnt go and syndicate capital he doesnt go and raise money he he refinances an asset and uses those refinance proceeds to be able to go and invest in real estate now for him imagine taking his billion dollar portfolio and tokenizing it were essentially creating you know so much liquidity for him that he can then use that liquidity to go and of course acquire other assets so theres you know i i fundamentally believe that were just in the beginning stages of this and again you know we for better or worse have kind of been thrown into the spotlight simply because were the first you know uh sponsor or company a private equity firm thats doing this in real estate uh and as you mentioned you know were doing this with a property here in dallas so its a 250 unit property uh the you know construction cost is right approximately 50 million dollars it was appraised at a stabilized value of 66 million dollars and so thats it right and the traditional way of you investing in real estate with our company you would basically sign a subscription agreement or a ppm a private placement memorandum and our limit our minimum investment amount is 50 000 so you would be signing a agreement with us saying that youre buying 50 000 units of this llc and again this llc owns the underlying asset now in this traditional way youre locked into this partnership right the only way youre getting money back is if theres a liquidity event and that liquidity event will happen in a refinancing scenario or if we sell the asset all right so this is the traditional method right now and if you invest with us we offer you an eight percent preferred return typically on our project so if you invested a hundred thousand dollars with us youre earning eight thousand dollars per year on that investment and we go through and construct the project we stabilize it and then again we go and refinance it now in this same tokenization aspect its the same exact scenario but in this scenario instead of me giving you a piece of paper that says you own a hundred thousand shares of this llc in this scenario im issuing issuing you a hundred thousand tokens okay now these tokens are what we we we use what is known as a stable coin in particular were using something called circle circle coin right and basically it it tethers itself to a fiat currency obviously us being here in texas were using the us dollar so every one token that im giving you equals one us dollar now because its a tablet its it its attached to that stable coin theres no fluctuation or volatility that you might see in bitcoin or ethereum so that is removed from the entire process and and lets be honest thats kind of the biggest fear that people have by investing in these things is that they have no idea whats going on so immediately thats eliminated now i give you those tokens and you basically have a digital wallet similar to a charles schwab account and in that account you now have a hundred thousand tokens that you can you essentially keep in your account and after 12 months theres a vesting period right according to the sec rules its called rule 144 section 144 where basically he says that theres a limited vesting period thats required so in this scenario its a 12 month vesting period so after 12 months you have the ability to take all hundred thousand tokens or fractionalize it and take 25 000 of those tokens and put them onto a secondary market which is basically a decentralized stock exchange where people can offer you shares to buy those tokens from you okay now what this does is it addresses and to your point lee this address is kind of the two biggest drawbacks to investing in real estate first and foremost is the inherent lack of liquidity right again youre locked into the partnership with us the second is the high ticket cost again to invest with us its a minimum of fifty thousand dollars and ninety three percent of retail investors in the us currently do not have fifty thousand dollars that they can put into our assets so by allowing fractionalized ownership into real estate youre now breaking it down so i can take a hundred thousand of my tokens and i could take 25 000 of those and put them onto this platform and somebody from japan from korea from the uk and im mentioning these countries because people literally from those countries have reached out to us saying that they want to invest in us real estate but they dont have a method or means to do so so now were were essentially providing that for them and one more point before i hand it over to my fellow panelists here but the value that were attributing to here just kind of break it down for you in simple terms again were building this project for 50 million dollars the project is going to be worth one day at a stabilized value once we have occupancy its going to be worth 66 million dollars so all of those investors who are buying in at the token share price theyre buying in at that 50 million valuation but we know that the project is going to be worth closer to the 66 million dollar evaluation so that token you hold with us is going to increase in value now imagine this as we go through the construction process and we achieve certain milestones the cost of your tokens are increasing right the value of your tokens are increasing so after a single year lets say were halfway through the project and you need some capital you could easily go on to the secondary market and be able to sell those tokens at it maybe double the value of probably what you bought it for again but it gives you more options right and ultimately as i mentioned its kind of addressing those two biggest drawbacks to what is typically known with investing in real estate and i dont know if were open for questions right now but look ive got questions so that yeah thats very very fascinating um im going to ask a few questions first [Laughter] the um and it ties in with with uh syndication so the stable coin is pegged to the dollar it can be done many different ways im not familiar with circle weve talked about a few different ones there are some that are that are backed by usd directly the dollar so as you buy like gemini they actually take your dollar and they put it in a bank account and it is somewhat fdic insured yes so circle is usdc okay this is all software which is which is just absolutely fascinating because soft with software you can do almost endless number of things the tokens that are being described are are digital and they are controlled by smart contracts smart contracts are nothing more than programs and so these programs have rules and algorithms and decision trees and all kinds of things that that will help the token deliver value one of the things is how do you distribute to your lps how do you distribute money when you have tokens you distribute to the token so you track the tokens you dont have to track the individuals anymore who are in your deals as as a syndicator and so it eliminates a lot of friction so where in the past syndicators liked having fewer number of investors now it doesnt matter whether theres five or 500 their amount of work is exactly the same so id like to dive a little bit into the tax part of this and we you know those of us who are gps or lps we get k-1s at the end of the year how does this change when you can be in and out of tokens throughout a year do you get a k1 if youre just a small like if you owned it for six months how how does that work whats exactly right so theres a couple of different uh vendors that we use and again we spent a considerable time and amount of money to really do due diligence because we wanted to make sure you know what were investing in obviously was credible resources so we hired an attorney that specializes in blockchain law hes based out of philadelphia fantastic attorney uh we hired a company called digishares digitshares essentially helps us with the actual tokenization aspect and they also uh and we can get into this a little bit later if we want to take a little deeper dive into the weeds of this but theyre also helping us on the investor portal aspect as well and the investor portal again imagine that right now were using an investor portal like crowd street or juniper square thats very favored towards real estate investments now we need something that also is reflecting you know tokenization and blockchain so thats kind of a whole other story as well in addition to that we use t0 which is the secondary marketplace there where were listing essentially these uh tokens then you have the ability to trade them t0 is again you know i think id mention these guys back there the reason why we went with them is because they have about 90 of the current market share they were founded by the guys and you know so theyre very well funded of course uh and the very you know the most famous real estate asset which is you know tokenize the very first one is the saint regis hotel in aspen colorado they kind of did the t-0 t-0 had tokenized their assets so thats one of the reasons why uh we worked with them but the other one to note is a company called compushare and this kind of comes back to your question here brian and confisher manages our cap table because as you said on a single day there could be you know millions of people theoretically that could buy and share your tokens and so all of that has to be managed and so there is a specific company that manages that again copy shares and essentially its all done on the blockchain and all of this is managed from them and its put up into a nice tidy little package and its sent to our cpa whos then able to do the taxes on it and the taxes are treated just like a normal lp investor is and that you would receive a k1 for the period of time that you have that investment now at your point earlier kind of just simplifying it again these smart contracts are just like vending machines okay you put your money into a vending machine you select a number and it spits out something right so that imagine taking our ppm or our subscription agreement and integrating that into a smart contract so it has all the same actions that we the same structure that we provide to our investors and eight percent prefer return they get their money first plus any of that accrued preferred return then it goes to a 70 30 split 70 going to the investors 30 now coming to us the sponsors and thats how we make our money now all of those same exact terms are integrated into a smart contract and now its executed by and backed by the blockchain so thats thats fascinating the the thing id like to point out too is the options that you have as a syndicator or a sponsor of the deal using these smart contracts and tokens are you know beyond what you can do today for instance you could actually program these tokens so you get a small residual every time they change hands and that way youre continuously benefiting and and it doesnt have to be a lot it can be half a percent or something something to that effect and its a way for the original issuer of the token to continuously get some small amount of revenue and thats a very small number for for the lp to to have to pay and theyd gladly you know certainly would pay that sure sure no and i mean were just at the tip of the iceberg in terms of the efficiencies that blockchain can allow to our industry and from everything from you know even youre talking about earlier distributions so every time we do distributions right now we have to collect all of the ach or wiring information we no longer do checks in the mail you know typically when youre investing in real estate its its about creating passive forms of income so in the back of the day they call it mailbox money because you would literally physically receive a check in the mail but of course nowadays we do everything through ach electronic distribution so it is a headache and theres fees involved and theres a whole process now imagine how more how much more efficient that can be by the distribution of tokens right so thats just one aspect of it i mean theres a number of different elements that you can you know create efficiencies from in this industry and another one of those of course is title and i think yale and lee can have have some really good feedback on how the title industry can be disrupted by the use of blockchain maybe you can go into that yeah i actually like to comment on the tokenization aspect of it to single family a lot of people have heard of the hedge funds that are buying single-family real estate right now tons of them uh one of the the things that i see you know why would hedge funds buy single-family real estate it doesnt cash flow the best um its a lot of work to manage uh one of the things me and brian talked about that i really do believe you know hedge funds may be ahead of the game in the tokenization they may feel that because the tokenization of real estate starts with owning the asset first right you have to own the asset first to be able to tokenize it and once you have the assets owned i really feel that the hedge funds are not necessarily making a real estate play over the next five to ten years theyre making a tokenization play and they are on the forefront of buying up the assets to be able to tokenize them to do the offering just like sohal had said and i really feel that you know um you know that could be why these these hedge funds are into the single single family um real estate sector right now so um yeah you know thats some of my thoughts on the tokenization side yeah so so one one additional thing we talked about liquidity right so it it offered the ability for lps to cash out if they wanted to it also offers the ability to use it as collateral so they dont have to cash out they could actually go to a trading platform take a loan out and use that token as collateral youll value your your property so the token would get value it would be known out in the industry you know on these trading platforms what that value is and you would use that as collateral just like in the real world but digital 45 days to do it wont take 45 days to get a real estate loan and all the food 24 7. right its all software running this stuff theres no nobody checking documents and saying yes hes approved because you have the token its its has this value thats all that they care about yeah i really think that the tokenization uh it really lowers the barrier to anybody to invest in real estate right now it either you have a lot of money or you have a lot of education you know somebody that has the money that you can be able to to purchase real estate on some kind of scale i think when you tokenize it it just it the collateral is there you can you can literally interchange it out it makes it liquid in and that brings the barrier down here where you know maybe in 10 or 20 years that everybodys a real estate investor you know in instead of owning property i own tokens you know i would love to own tokens instead of real estate right now because you know real estate is its uh theres a lot of moving parts uh getting into the title aspect um you know just having to go through the title process of of purchasing a property is is a pain in the butt sometimes you know theres a lot of human error in uh lee do you want to go into the title stuff right now uh we can go into that so you know theres a lot of human error when dealing with the title process of just getting it uh you know from purchasing to recording the title um right now a lot of the software doesnt speak to one another theres theres theres counties that have deed records and dallas county is different with with tarrant county so um what blockchain will do is it will make those softwares uh communicate with one another so you dont have these silos that uh you know this different data that different people are pulling from it you have the blockchain that everything is there and the friction goes away you know ill give you an example um ive been doing this for 10 years and ive i wish i could say ive had less properties but ive had a lot of properties that sometimes i fix the property up i go to sell it or i go to refinance and somebody forgot somebody at the title company that i closed with did not record the deed okay they didnt record the deed i dont even own the house in the eyes of the county that would never happen if you are running the software on blockchain because the um i could sell my house to brian right now we could sign a contract we know its sold he knows its sold but the county doesnt know its sold in the eyes of the county it needs to be recorded so we are in a paper system right with blockchain if i sell it to him its immediate its its immutable it cant be changed everybody knows now because its on a public ledger that that is announced to everybody so if i go to the in and then everything can be built on top of that layer and i think that it takes the friction out of it definitely takes the human uh liability and error out of the title process when dealing with real estate because you have so many different people are involved and if everybody can work on that blockchain they can build their software on top of that and everything can communicate with one another and it really instead of me calling this tax office and this attorney has to work with this title company that theyve never worked with before and this county does a little things different and this insurance company doesnt know what you know has never worked with this person it all connects interchangeable in in the blockchain and i i feel that this is something that real estate definitely needs but i dont know how fast it works because its its its a government level that it has to start from the bottom up i feel like i feel like if we want to take title transfers and deed records onto the blockchain it has to happen with the people who own the real estate and i feel like it that is a long process i feel that i love to sit here and say that hey i think this is happening five years and i do think the technology is happening now but i really do feel like were in 1996 and it happens over the next 20 years um with with uh real estate and and that fully onto the blockchain i think lee can kind of talk about some of the the steps that we would have to take for blockchain to to kind of take over for title science professor and my research area looking at its going to take years for this transition to take place and title companies are not necessarily going away although i think some of them arent its like banks are not going away although probably some of them are its the natural free market competition it would happen with or without blockchain or with or without bitcoin crypto but i think those things accelerate that process uh for the companies that adopt this technology and move forward its more of a political challenge than a technology challenge youve got to get a county clerk to you know want to train here with employees on this new software theres just a lot of obstacles before we get there but i think its its certainly coming one of the big apps obstacles which is also political is the deregulation of title so in texas as you all know title is highly regulated its regulated on formula theres not competition on prices competition on service so once the legislature deregulated title you will not only have you know the incentive to provide better services for county club better services in the county recorders office for their constituents but you also have that price piece and i think thats way more important the reason why were up here talking about tokenization is because lps are incentivized with liquidity greater liquidity access all these different things that this that this incentivization pushes them towards you really need that price that like monetary incentive for um title to get deregulated and thats kind of the bottom line i think before we see great greater movement on this you got to see some some things on the political front happen on the regulatory front um but the good news is we dont need title to get rele uh to get deregulated before we do all the other things that weve been talking about tokenization and stuff so um lets lets um perhaps pivot a little bit back into a deeper conversation about tokenization um so weve done some high-level stuff lets lets get in the weeds a little bit about tokenization i dont know who wants to jump in uh but so hail brian would go there yeah or brian yeah go ahead yeah happy too so what i think is one of the most interesting things is how people are using their existing portfolio so for example theres a gentleman named jim mckinney owns a company called mckinney properties and funny enough his great grandfather founded this firm back in 1860 and hes now inherited it and most of the investments that they have done have gone to 30 40 years and the people who made those investments now their heirs have taken over and theyre receiving the benefits and theyve received like a 10x return on their money but the heirs who now own this these assets they no longer want to be involved in these real estate projects so they want out so when they went out right now they would go to you know a secondary marketplace which one doesnt really exist for real estate or they would go to somebody who would say okay ill offer you 50 off of what its worth right is that the illiquidity discount could we call that yeah and then they come to him and hes like look i can offer you you know 30 off of what its worth and hes buying him back at 70 but he even thats not fair and you know again these are like friends and family and people that have you know really high net worth and so now theyre looking at tokenization and then basically tokenizing these existing assets so they they can give the ability for their investors who want out to get out and those who want to stay in can stay in and again theyre already past the one year rule so here you know im talking about a construction project where that one year is important to us then of course its been 30 40 years so its just kind of showing you a sliver of what is to come right and theres just so many ways that its impacted we went the traditional route of investing normally into real estate and then kind of going back and tokenizing it uh theres some people out there that are now going into and raising capital through the tokenization aspect but its interesting to see somebody who again is coming from a different completely different use case in that they have a ton of people whove invested with them historically for you know hundreds of years apparently and now theyre they want to convert them into tokenization so its very interesting and its important to note that its not just real estate its its any private business can be tokenized anything that has value thats locked up with seemingly no way to to release that liquidity our business that we started was a perfect example of this for 18 years we built the business and we had to wait till the end to sell to private equity to to realize gain it would have been nice to to possibly over the years issue tokens its almost like a private stock offering but in a public forum and once you take something thats private and you make it public the value shoots up its immediate because you have a much wider audience and its beneficial to everyone so having debt right we talk about real estate the asset theres also in the capital stack theres debt debt can be tokenized as well it effectively the way the way that works is when you do take out that mortgage whether its for a house or an apartment the the broker or the agent behind the scenes theyre collecting all these things together and then they sell them to larger entities and uh i dont know what was that michael bury movie about the the big short the big short yeah so if you remember in that movie they were he was talking about how all this stuff in the the collateralized mortgage fund was just crap right and his boss said how do you know right he said he read through every one of them thats the blockchain now that is the blockchain thats perfect its a perfect example of the blockchain he wouldnt have had to read everyone it would have been available immediately for analysis real time 24 7 prep for everybody right yeah so no in some of those cases you could be doing all of those in our particular case youre buying limited partnership shares so again out of a 50 million dollar project right we go and we get debt right 75 of those project costs come from debt right theres a 25 thats left over we the owners of market space capital which will put five to ten percent from our pockets the remaining twenty fifteen to twenty percent thats left over we go and we raise from outside investors right at a minimum investment of 50 000 so now youve made that investment and again in this case youre tokenizing those shares of that llc right and youre buying those shares and youre essentially owning those tokens the real estate so this is again youre investing in a tangible asset this is not a stock where theres volatility youre investing in actual you know materials that are there people that are living there theyre paying their rents every month right thats a operation thats a business we have a net operating income we throw off cash out of each of these assets on a yearly basis that goes off to all of the investors its a syndication just digital form thats exactly thats all it is thats why it starts with owning the asset first so when you when you own the in a limited partnership like you had said its its the llc is specifically created to hold the real estate and when you own the shares in the llc you do own because the llc specifically is created to own the real estate i dont think this affects any of the real estate tax laws or rules it it is purely a syndication i i dont see how that the the issues you would have is if you want to sell the property as a gp um some of the features of blockchain and and and everything weve been talking about the tokenization is theres ways to vote right because at any one time you know every owner of the token and you can have a vote the gp can vote or can initiate a vote say weve had an offer to for somebody to purchase the property at this amount please indicate you whether youre for it or against it if theyre for it or against it then somebody would would buy their token i would assume i i or maybe the gp interest i i dont you might you might yes so hello thats the correct answer yeah we got to open up for questions we are opening up for questions yeah im fine with it so i would i would just say that were not going to digitize we wont digitize the gp shares or thats just the lp no no thats not what were the tokens are lp shares sure there can just just like today any syndication youre involved in today you have certain rights based on the ppm its all about the rules that are set in the ppm thats right if yeah if you buy shares that have no voting rights you dont get voting which is what ours are set up as and to your point the lender is actually the one whos driving that because the lender is not going to give a loan to someone that can trade right so theyre going to be the ones that provide the limitations there and in this case again it is only the limited partnership shares and we do not have those rights where they have voting rights they are just limited partners and in our case were the gp and therefore being the general partner youre the controlling entity and i heard someone here ask what a 1031 exchange was basically when you sell real estate theres a capital gains event where you have to pay taxes on that but because of the tax laws currently the way they exist you are allowed to do what is known as a 1031 where you can take those funds and then deploy them into another real estate investment and therefore defer the capital gains taxes thats being paid correct it is a fungible you got it fungible so the question is are we talking permission or permissionless blockchains often are a fungible yeah ours is fungible and it is it is closed so its only for our you know for us so so but youre not going to issue more tokens right youre just going to be able to split up the ones you have thats exactly right and we are governed by the ppm in the amount of tokens that we can distribute which is the amount of total equity that we can raise on the project a vesting period correct 12 months no not the amount the amount has nothing to do with it its just the amount of time correct yeah we have a minimum investment of 50 000 set by us of course yes correct it would never be a thousand but yes but i think through tokenization right there i mean it depends you know again youre doing this in an app at the click of a button you can convert you know your tokens into us dollar i dont know what the fees are thats associated with its a great question that i dont think has ever come up yet but if you can write that down josh well find thats correct but hes asking converting to usd right is that what your question was yes yes yeah it is okay yeah oh yeah theres gas fees associated with that but you know youre right that itself yes thats you got it the way he described that if you want to say that a little louder so that everybody could hear it yeah so you put usdc into the smart contract and youll get an air token out of here for 12 months then you can go to decentralized exchange with one caveat though because these have to be traded on broker dealers yeah d0 yeah so we have you cant go to sushi swap you have to use t0 and t0 so if you guys dont know what t0 is i encourage you if you take one thing away from tonight is number one two things number one is visit of course secondly is to download the t-zero app are we recording this because t-zero will be sponsoring our next event so if you guys dont know about t-zero t-zero is basically if i was to say you know theyre valued somewhere between coinbase and robin hood theyre the only sec finra approved secondary exchange yeah but their newest iteration of their app yeah there you go the newest iteration alternative trading system in ats so the newest iteration of their app is youll have the ability to buy stocks to buy cryptos to buy nfts and then to buy digital backed security tokens and 18 like ats in an alternative trading system like real estate backed tokens so imagine one app that you can do all of that yeah hey calm down calm using a down in any case no its interesting though correct well you guys want to take a shot at answering that im not okay well youre the hes a tokenization guy so the way so were learning up here as well the way we have to attribute the value of the actual token is through quarterly appraisals okay so right now again as we build the property and we go through construction and we achieve certain milestones as i mentioned earlier the value of your token is increasing ultimately the the value of your token is tied to the net operating income of the property so if a property is making a certain amount of money and again on a quarterly basis now so again think of it as an ipo right in a in a public offering youre essentially looking at the financials and how the company is performing almost the same identical use case here but in this case again just look at dallas dallas the cost of materials and you know we know this for a fact right 17 its increased right rents have gone up by 24 okay so you see the value of the token of the land of the real estate that were doing is increasing and so youre essentially participating in that and thats validated on a quarterly basis by the appraisal correct there is something thats different that says yeah we just saw a single family home that got sold as in miami by property right uh propy and they they basically did exactly that and i know you have if you know again i think these are really good questions but right now just understand were in the wild west of this right like nobody yeah were it is yeah yeah no and i totally understand id love to ill give you my business card and happy to share some information with you because were all learning together ultimately right and the purpose of us doing this myra park project which is the myra token is going to start being traded on the t0 platform beginning march 3rd so i encourage you all of course to check it out but that mira token again you know were going through the process of learning all of this in terms of the implications of the market how were going to see the price fluctuate the amount of investors we have 69 investors right now out of 7 million of liquidity at an average investment around around 150 000 so imagine were going through and out of those ill tell you theres so many that dont even care right like right now 82 weve been able to convert to t0 accounts so that we can issue the tokens and put them in their account the rest dont even care they actually told me theyre like i dont really want to do this i was just making this real estate investment and i just want to you know normal traditional style and were like look this is going to offer you liquidity and they just didnt care so theres always going to be those investors as well right and 82 is a very high number according to t0 its like one of the best right so imagine that out of all of these that are actually being traded youre getting half of those people that dont even care to take advantage of this technology i think brian in the background has a question no we raised traditional funds at a minimum of 50 000 then we went back and tokenized the initial investment is only accredited investors of course all of our investments we do public marketing on facebook linkedin etc and so all of our our investments require third-party accredited investor verification and so all of those original investors they are accredited but all the people in the future they dont have to necessarily be accredited but they do have to go through kyc and all of that is handled through the t0 platform none of that is being done on like the market space capital platform so so heres a question and since im going to just skip all of you in line ive been waiting im sorry what is the percentage its like a reg d is it a regular cruise offering what is the percentage of non-accredited investors that can participate in the secondary markets or is it infinite you dont have to be accredited to participate in that secondary market again youre going through the kyc process through t0 and theyre handling all of the sec regulations there but theres no limitations from our on right here no they did not good question was that a decision or thats you have to do that do the secondary buyers need to participate its a great question actually okay so for those of you that dont know what depreciation and this is different from multi-family assets as opposed to single-family residences for each property that we acquire or we renovate we perform what is known as a detailed cost segregation study that cost segregation study breaks down the different components of the renovation of the construction into different tax categories so for example flooring lighting that might hit your 10-year category toilet fixtures might be seven years paint might be five years etc right so the point is is that the existing tax laws allow us to depreciate a hundred percent of that in the first year alone so if you made an investment with us for a hundred thousand dollars then we could potentially give you a for a k1 that year from that cost sag study that in the form of 64 in our last project at like 64 on the cossack so i would give you a k1 on your 100 000 investment showing that you had a loss of 64 000 that you could then apply towards other ordinary passive income on your taxes now yeah so so to your point you know k1s are distributed but the maximum depreciation to answer your question is usually done in that first second year because you know were and to be honest i mean our whole period is five years so we acquire the asset we get rid of all the bad tenants we invest in renovating it we you know bump up the rents modestly we refinance and then we cash flow and then were out of the deal right its not necessarily a long-term hold at least thats not what were were selling to our investors i hope that answers your question yes sir i mean if youre a approved user on that platform you have the ability to buy and share we dont have any control of that and thats a 24 7 market right theres no it doesnt sleep so you can literally come in at any time so you know we looked at you know kind of a swot analysis right of what the strengths weaknesses opportunities and threats are when we come to uh you know the tokenization of real estate so one of the biggest opportunities we saw was this market you know in 2019 there was about one billion dollars in this market of digital backed security tokens right in 2021 that was 1.9 billion dollars okay so we see by 2025 that is supposed to hit five billion dollars so this is happening right now like we are living in the time where the the proliferation of blockchain into real estate is gonna happen and its happening right in front of our eyes right so we see that as one of the biggest benefits is that it opens up the universe of investors for our projects right so were not only just looking at those you know accredited high net worth investors its essentially opening up that that universe there secondly you know then we started looking at the threats and one to get back to your question sir one of the threats is obviously regulation now i will tell you as a private equity real estate firm we go above and beyond right now in terms of making sure that our investors are accredited you know them going through third party accreditation so theres an attorney or a tax advisor thats reviewing these financials and theyre providing a letter saying that they know the risk and that they can invest in this real estate so were already doing a lot of the stuff now when youre on the t-zero marketplace you dont have to do any of that so were going above and beyond right now for regular regular authority regular for regulatory regulatory regulatory authorities right thats kind of hard to put those two words together but nevertheless we know that we currently are kind of doing you know more than they ask for so we welcome regulations because i feel like its going to take out the bad actors and those people who are trying to scam people it takes those and you hear those stories all the time so i feel like it removes them and that increased regulation actually will help our industry yeah i agree completely thats thats definitely needed you need to get rid of the wild west so to speak and i think some amount of of that regulation is certainly warranted yeah if yes 100 right i mean youre looking you want to tell them a little bit about st regions sorry so is there a scenario in which the tokens uh appreciate or depreciate based upon market sentiment or whatever in the secondary market regardless of the slightly independent of the traditional appreciation or the traditional appraisal you a business if you think its not trading on public markets you can do this yeah if i could comment real quick on the the tokenization and in owning a bunch of real estate and seeing why its valuable um a lot of people have been talking about trading the tokens back and forth if youre a passive investor ive invested in passive deals you know im not going to want to sell that those tokens im going to want to invest into that project and have the collateral now that its been tokenized my shares have now been tokenized so i have collateral then i can go and take it to a bank and have a loan drawn against that to be able to become liquid i dont want to sell my tokens on the secondary market i would be out of the deal so i want to keep my value in the deal while maintaining my liquidity going to the bank with my collateral getting the loan to invest in another deal and then i can do it again and then i can do it again and then i can do it again and then all of a sudden youve literally changed real estate from this ill-liquid asset but you never have to sell any of them you sell when the deal is is done or they refinance and you maintain you know and i think that a lot of people are missing that aspect of it a lot of the investors today dont want to sell their shares in the deal but they may have to to get into another deal or because they have liquidity for something else that theyre doing and that is where the the real change happens in my opinion um with this organization and syndications i think it happens first 100 percent in syndications because because of that you know not everybody has a hundred or two hundred thousand is put in for a three to five year period because theres a lot of unknowns especially in the market you have interest rates that are rising some people might not be able to refinance so if i thought it was a two year hold turns into a five year hold right now all you can do is go into that syndication and you can talk to somebody and say hey can you give me some liquidity and they will or you go to this indicator and theyll give you a discount neither one of those really work that well um depending on how much equality you need you know so thats i think what a lot of people are missing about this in in that is that it gives you the collateral you take it to a bank you get a loan you get your liquidity you put it into another deal and you ride the deal up and and thats and thats what makes real estate great so so just to expand on that yeah lets say somebodys holding a bunch of bitcoin that if they sold they had a large capital gain they would have to realize and i want to get into your deal but all ive got is bitcoin i could go lend that big you know get get money stake that bitcoin get money buy into your deal 100 not have to pay capital gains now i start earning the distributions and i own part of that property token and now i have all the benefits of that token as well so thats thats what yale is kind of describing yeah and thats thats once you realize some of the the capabilities that all the digitization and tokenization of assets brings then it just came out your mind just opens up so did you do that yeah you could yeah i just use bank for references today it i think it will become to where you can just take your tokens and its a few clicks of a button like a block fight loan against your bitcoin today and i think that thats thats like the true value of youre seeing a lot of this the cross chain you know trades and i bought real estate i bought real estate with taking loans against my bitcoin when theres a need right there yeah when theres a need out there therell be somebody to fill that its a lot easier than getting a real estate loan a lot easier yeah so two things uh further questions um so go ahead and then uh really quick just say where they can follow you on social media and all that stuff were going to find on the internet sure well first and foremost thank you again to the the texas blockchain council for inviting us here i mean i know you guys are hosting some quality programs and this just is evidence of that so look forward to participating in future events with you as well lee uh but yes for anyone unfortunately i cant stick around but my email address is my first name sohail s-o-h-a-i-l at im also on linkedin im very responsive so feel free to reach out if youre ever in the houston area feel free to come by our office ill take you out to lunch and we can talk a little bit about blockchain and real estate sound good thank you im not on social media very much but im on linkedin you can search me by name brian shuffler and also brian is my email address yeah im on all social media yale hamrick is for everything so uh just type in your hammer if you want to find me elwhammer is my email address and yeah uh hamrick h-a-m-r-i-c-k i didnt mean to pressure you guys to give out your email addresses publicly thats all right if you want to learn about bitcoin follow me on twitter so im getting a signal like were recording whats it yes you can access a recording later for more information on that email me or ryan youtube oh subscribe to our youtube channel thats a great point um and have a great night [Applause] you Blockchain & Real Estate Panel How will blockchain technology impact real estate investing? What are the unique ways that tokenization can be used in the industry? We had a great panel of experts from various areas of the blockchain and real estate world discussing the pros and cons of blockchain, the opportunities for tokenization, and the future roles that technology will play in global real estate markets. Blockchain RealEstate Tokenization 0:00 Introduction 6:05 Bitcoin and Real Estate: asset class 10:48 Two main benefits of tokenization 19:09 Due diligence in blockchain and tokenization 24:19 Blockchain and tokenization in real estate 31:52 Blockchain taking over title 34:31 Tokenization 52:06 Investors that participate in secondary market 53:00 Depreciation 55:32 Biggest opportunities on tokenization 58:54 Investing in projects using tokens For more information go to: Subscribe: Recommended videos: Latest Uploads - Texas Blockchain Council - Follow our SocialMedia: The Texas Blockchain Council is a nonprofit industry association made up of companies and individuals that work with blockchain and distributed ledger technology. Our mission is to promote blockchain technology initiatives that drive growth and benefit the citizens of Texas. We exist to amalgamate the influence of our members to advocate for blockchain-centric public policy initiatives, to educate members of government about the benefits of blockchain technology, and to provide subject matter expertise on topics related to blockchain and distributed ledger technology. Blockchain,RealEstate,Tokenization,