Could Blockchain Technology Allow Small-Scale Investors to Get in the Real Estate Game?

What if anybody could invest in real estate and profit in the same way as investment sharks do? AcreageWay has set out to achieve this goal by developing a blockchain-based platform for small-scale investors to participate in fractionalized real estate. This is one of the first platforms in Canada to welcome non-traditional investors who want to invest in real estate in the same way they do with stocks.

AcreageWay was founded in 2018 by Aditya Koparde and Shaily Srivastava. 

Srivastava, who also serves as the president of the Durham chapter of the Government Blockchain Association (GBA), is a proponent of blockchain technology and its potential in democratizing systems to allow people access regardless of their financial background. 

Koparde has 15 years of experience in information communications technology (ICT). He previously worked on his own real estate platform and said he realized that after development projects were done the access to finance became limited. He also wanted to find a way to get friends and family investing so there could be a greater return on investment (ROI) among people, not just one person.

They founded AcreageWay with the goal of bringing more investment opportunities to people who deserve to accrue wealth but are traditionally left out actually acquiring it.

“If you see the current real estate market, specifically on the commercial side, it is heavily driven by institutional investors and big pocket investors. The average person does not have access to these lucrative deals,” Koparde tells Storeys. “We wanted to level the playing field for everyone to invest in real estate.”

But it’s hard to invest in real estate if you don’t already have $50,000 to $100,000 to put in. Without that kind of money, you don’t get access. It’s challenging to think about diversifying your portfolio when you only have a fraction of the sum needed to spread across multiple properties to yield a worthy ROI. 

AcreageWay’s micro-investment strategy, however, allows investors entry at as low as one token worth $1,000, which can be spread over multiple properties. 

“You don’t just invest in one stock, you diversify your investment. The same can be done here with real estate if the barrier to entry is lowered for investors,” says Koparde.

Background

In order to offer this service, AcreageWay first had to be approved by the Ontario Securities Commision (OSC) as an exempt market dealer (EMD) for tokenized securities offerings in Ontario. An EMD is an underwriter or dealer that’s licensed to sell exempt market securities under provincial securities legislation, in this case the OSC. This means they are approved to onboard any issuer or commercial property within the limits of the OSC compliance framework. As an EMD, AcreageWay must also maintain key roles such as a chief compliance officer and is subject to a minimum level of capital and insurance requirements.

“We started with a business model and strategy that we knew had to meet the toughest security commission’s standards, which is the OSC, but once you have the blessing from them you can extend into other regions,” says Koparde.

AcreageWay is fully registered in Ontario, with plans to expand in British Columbia, Alberta, Manitoba, and Saskatchewan in the next few months, pending regulatory approvals. 

Srivastava says the company went through a “rigorous process” with security regulators, including being required to pass a series of compliance related proficiency exams, provide an outline of policies and procedures defining code of conduct, and outline a detailed client processing method to ensure fair and transparent service. 

“Blockchain technology, because of its security, transparency, efficiency, and with approval, liquidity, integrated with regulations can bring huge value to private capital markets,” says Srivastava. “Tokens generated on AcreageWay’s platform are considered secure and designed in a way that operates within the guidelines of approved regulators.”

How It Works

AcreageWay enables the investor to invest using registered accounts like TFSA and RRSP, which allows the investor to access opportunities while still keeping the benefits of tax-deferred or tax-sheltered accounts. Approved investors can make real estate investments for $1,000, $2,500, $5,000, or larger. Koparde said these investments can earn “much higher returns” as opposed to “keeping money in accounts with little to no growth.” However, there is a calculated risk here worth noting — investors need to do their own due diligence into each investment opportunity.  

After signing up, investors are screened to see if they are eligible, suitable, and verifiable. AcreageWay will look at how much an investor can invest based on their profile, considering their age, household income, and net financial assets. Next, identity is verified followed by more scoring to arm the investor with a suitable investment standpoint.

“Even if someone wants to invest $1 million, they won’t be able to without meeting the criteria put forth by the Ontario Securities Commision. This is done for the protection of the investor,” Koparde said. 

Given real estate’s popularity on the whole, and the market’s spectacular rise during the pandemic, it will be interesting to see if small investors are lured to put their money behind the big city lights.

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