Despite being the most valuable asset class in the World, the technology underlying the real estate investment market has remained largely unchanged for decades. Max Property Group, a real estate investment company in the Netherlands, having suffered antiquated practices and outdated technology first hand, has developed a platform with the potential to rock a US $228 trillion market.
The World’s Most Valuable Asset Class
In 2016, the Savills World Research team calculated the value of all global property at US $217 trillion in total. In 2017, their research showed that global asset price inflation had grown by 5 percent to US $228 trillion.
To put this in context, real estate is a more valuable asset class than all the stocks, shares and securities in the world combined, as well as all the gold ever mined throughout history.
Yolande Barnes, head of Savills World Research, said, “Real estate is the pre-eminent asset class which will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.”
In other words, the real estate investment market has the power to affect the entire global economy.
Given the enormity of this asset class and its potential impact on literally the world’s finances, it is peculiar that it has not been more subject to disruption by the wave of startups and technological advancements that have emerged in recent years. In fact, real estate technology, with the possible exception of rental listing platforms, has not advanced significantly in decades.
In addition to its sheer size, few asset classes deliver passive income and capital appreciation levels comparable to real estate, but similarly few are subject to the same entry barriers. These barriers can include access to banking, credit scores, finance, cash requirements, and reliance on industry professionals. This is particularly applicable to cross-border investment, where anyone planning to invest in another country will most likely have to make international trips, go through several middlemen and navigate foreign languages, laws and cultural practices.
Lack of transparency
The lack of transparency in the real estate market is reflected in the fact that, according to the United Nations, money laundering can reach up to US $2 trillion a year, of which a significant amount is laundered via real estate transactions.
On a smaller scale, many homeowners have experienced issues such as properties with hidden damages, unknown debts, problematic neighbors and a myriad of potential problems that can be obscured. Title ownership records are often specific to a country or region, making it difficult to ascertain ownership or rights over a property. For example, the majority of U.S. states operate under a land recording system wherein there are no government officials to make an absolute determination of the property title or whether a title transfer transaction is valid.
This lack of transparency can make almost every element of property investing difficult, risky and time-consuming.
Costs and fees
International real estate investments are subject to multiple, varying fees such as exchange fees, transfer fees, broker fees, legal fees, taxes, etc. not taking into account the cost of consulting lawyers, tax advisors, and accountants.
Because of the sheer number of middlemen involved, international real estate investment can be an extremely expensive process.
Liquidity and speed
One of the most significant problems with real estate investing is its lack of liquidity. When property investors wish to release their cash from their investment, selling a property can take months or even years, often leaving investors with their money tied up. Even investment funds often have a tie-in period, which means that property investing often means committing cash to a lock-in period of several years.
Similarly, buying and selling a property can be extremely slow. According to a Chinese travel survey, 56% of Chinese investors spend over a year selecting a US investment property. In general, it can take six months to find a property and a further six months to complete the transaction.
Distributed Ledger Technology (DLT), more commonly known as the blockchain, is proving to be a major disruptive force in the financial world and is beginning to branch out into other areas in the financial sector. One of the industries that DLT could have a great deal of impact on is real estate and specifically the real estate investment sector. Blockchain technology can greatly improve, if not overcome, some of the major hurdles holding the real estate market back, making it more transparent, accessible and efficient.
Enter Max Property Group
Max Property Group (MPG) is a real estate company based in the Netherlands with operations in Germany and the United Kingdom. MPG has been managing property funds since 2016, but its founders, including Munte Immobilien in Germany, have been active in the real estate industry for decades. They also engage in property sales, management, and rental activities. Having endured the challenges of the property investment sector first hand, MPG decided to streamline the real estate investment process and has subsequently been developing the Max Crowdfund platform since 2018.
Max Crowdfund is or will be since some features are still under development, a real estate investment platform where real estate investment opportunities can be listed by developers, purchased by investors, and overseen by authorities. The addition of DLT means that every transaction is recorded on the blockchain and can be performed almost instantaneously. Max Crowdfund is one of the first platforms leveraging blockchain technology to disrupt the real estate industry, proving that DLT can be used to modernize the real estate investment market and open it up to a global audience.
Perhaps the biggest disruptive potential of blockchain technology in the real estate investment sector is the elimination of high entry levels. Historically, property investing has been exclusively for the rich, requiring outlays of tens of thousands of dollars as a minimum, and often going into the millions.
However, the tokenization of assets has made it possible to split up real estate assets into small parts, thereby reducing investment levels to mere hundreds of dollars. For example, by placing its own property funds on the Max Crowdfund platform, MPG has succeeded in lowering the minimum investment amount from €10,000 to just €1,000, without affecting investment returns, and are currently working on reducing this to €100. This means that anyone who has €100 can become a property investor, joining the super-rich in enjoying asset-backed investments with high returns.
This in itself is a game-changer for the real estate investment market. Considering that real estate is the most valuable asset class in the World, currently only accessible to the very wealthy, opening up the market to regular people could become one of the most significant financial events in history.
Blockchain technology is resistant to tampering and, once an activity has been recorded, it cannot be removed or altered, resulting in an extraordinary level of transparency.
Every transaction that will take place on the Max Crowdfund platform, whether it is an investment transaction, the signature of a rental contract or a transfer of ownership, will be recorded on the blockchain.
The platform will also have a property management feature so that activities such as renovations, repairs, mortgages and rental contracts can also be recorded on the blockchain. This way, when investors look at a property, they can access important information such as its repair history, its rental history, its previous sales price, etc. eliminating the need for agents and lawyers, and reducing the risk of deception.
If blockchain technology was taken further and adopted by authorities, it could theoretically lead to a global land registry where all titles are recorded impartially under one, international system.
Costs and fees
By automating much of the sales process, Max Crowdfund has managed to eliminate many of the fees associated with property investment. Agent fees are eradicated completely as properties are carefully vetted before inclusion on the platform, and all information relating to them is provided. Access to land registry documents, mortgage information, company accounts, etc. are all made available so that investors can make informed decisions without the use of an intermediary.
Automation further eliminates fees such as notary fees, legal fees, accountancy fees, etc. Transactions happen electronically on the platform, without the need for paperwork and are “witnessed” by the blockchain without the need for “official” supervision. Intermediaries are replaced by technology thereby fees are reduced to relatively tiny amounts.
Liquidity and speed
Historically, an individual or company would own a property and in order to liquidate it, would have to: list the property with an agent, market the property, wait for a buyer with enough money to buy the entire property, then engage in the sales process which could include structural checks, finance applications, price negotiations, etc.
With tokenized assets, an individual or company owns a share of a property investment product which could be a company share, property bond or brick (a fraction of physical property) which is represented by a digital token. Generally, this would be in small units of €1,000 or smaller, and all the information regarding the asset would be available on the blockchain. The process of selling this asset would, therefore, require little more than placing it on the platform and trading it electronically, an operation that could take just a few seconds.
Max Property Group (MPG) is made up of real estate professionals with decades of real estate industry experience. Since its foundation in 2016, MPG has raised several millions of Euros in investment and currently holds assets valued at close to 8 million Euros (as shown in the Q2 2019 financial report). They currently manage properties in the Netherlands (Rotterdam and surrounding areas), Germany (Lower Saxony region), and the United Kingdom, as well as offering property sales services, running a rental agency and operating an academy that provides seminars and workshops on real estate and blockchain.
The idea for the Max Crowdfund platform grew out of the company’s frustration with the historical barriers affecting their industry, and their inability to find the technological tools to overcome them. The development of the platform has been successful with all milestones having been met to date. The platform has tens of thousands of registered users from around the world and is functional on many levels, with more features being added in line with the developmental roadmap.
Investing via Max Crowdfund
High-quality property investments are listed on Max Crowdfund, and registered users can purchase them, subject to KYC and AML procedures, via the platform. Payment for the use of the platform is charged in Euros but paid in MPG tokens. This allows the transactions to be registered on the blockchain. MPG tokens have been in circulation since January 2019 and are listed on several exchanges as shown on CoinMarketCap (https://coinmarketcap.com/currencies/max-property-group/).
Max Property Group is currently applying for the relevant licenses from the Dutch Financial Authorities (AFM) to operate Max Crowdfund. Once obtained additional licenses for operation in other jurisdictions will be applied. As soon as they have been granted, the platform will be opened up to listing third party investment products. Projects seeking funding will then be able to apply for listing on the platform, and investors will have access to a greater diversity of high-quality investment opportunities.
MPG is currently holding an equity round to pay for the final development of the platform as well as the license applications that will allow for third party listings. Details can be found on the Max Crowdfund platform. https://maxcrowdfund.com/en/mpg-security-token
 Blockchain: Digitally Rebuilding the Real Estate Industry by Avi Spielman B.A., Philosophy, 2008 Vanderbilt University https://dspace.mit.edu/bitstream/handle/1721.1/106753/969450770-MIT.pdf?sequence=1
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