Chris Lesak is a blockchain technology enthusiast with an extensive real estate background.
Every aspect of real estate as we know it today will be impacted as blockchain technology matures.
Finance, title, insurance, transactions, the fractionalization of real estate itself, nothing is off the table.
Watch as Chris talks about how he sees blockchain technology impacting real estate.
Watch the full episode of How Will Blockchain Technology Impact the Future of Real Estate: https://youtu.be/srBWp3vyhK0
Transcriptions:
Chris Bounds 00:02
We’ve talked a little bit about this topic, I didn’t quite know that you were pretty, pretty deeply involved in the whole blockchain crypto world until we talked most recently. So, how do you think blockchain is gonna impact real estate, especially over the next 10 years?
Chris Lesak 00:22
Well, I like to say it’s going to change everything. And I think it’s going to change the way real estate’s being done. I think that we’re going to see a shift in transaction times, the way it’s transact- transacted ways as financed, you know, one of your earlier guests, he- he didn’t think that it’s gonna affect title companies, I think it’s gonna disrupt title companies, I think- I think just the whole phase of, you know, the real estate landscape can change, whether you’re buying a house, investing in real estate, whatever it is, whether you’re- you’re pulling money, no matter what- what you’re going to do in real estate, I just think it’s going to change because- and the ability to fractionalize, and to tokenize, and to transact instantly, and to be able to, you know, scan QR code on your phone and transact something, you know, to go to an exchange or a swap, and be able to swap something out instantly.
I just- I think that changes the whole game. I mean, you know, your last guest talked about cap rate compression. Your cap rates gonna, you know, change drastically, because you know, not just the premium moving from private to public. But also like, you’re going to look for value, you know, you’re getting point 1% in the bank, you’re getting 1%, one and a half percent on a 10 year treasury.
But you can instantly go transact and something and you’re going to be able to get, you know, 2, 3, 4, or 5% on it. And someone says, “Hey, I need to hold my money somewhere for eight months”. But then I need my money back in eight months, we can go to an exchange, and you can make that, you know, that trade and hold it for eight months, and they get your money back. So, it’s gonna change. Yeah, it’s gonna change, you know, the way it states are planned, you know, yet, I know,
I’m just kind of going here. But the way the states are playing, you got to think about states now you know, someone passes away, you probate you do all these other things can take six, nine months. But if someone’s invested in a partnership, they don’t have to disrupt the partnership to get their fractional ownership out of that partnership, that can be transacted instantly, like everything changes. It’s gonna change everything.
Chris Bounds 02:42
I agree. On the fractionalization, you talked about, you’re basically you’re globalizing the local asset by, by the secondary market. I mean, there’s still gonna be SCC requirements, depending on you know, how these things are structured. But once that timeline, take a 506 C, for example, you have to be an accredited investor to participate back in 12 months, in the US.
But after 12 months, that security can be sold and don’t take any of this as legal advice. But right now, but at that point, when you have a liquid secondary market, like blockchain can offer and platforms is are developed can offer. Now you have a global pool of investors, as opposed to, right now, you kinda have to know someone. Unless you’re going on- unless you’re going on some of these like, was it RealtyMogul, and some of the crowdfunding platforms.
Basically, you have to know someone, but now you don’t. And you can participate in the Sears Tower in New York and buy your point 005% of it. But New York City has a huge boom over a 10 year period. Hey, you, I mean, you get the cash flow long that time period, you’d had to sell in 18 months, your equity. Got and do whatever you want with it. Do you think as that evolves, there is it creates a risk in the near term of a potential bubble? And not, not to you to speculate, but that maybe investors should watch out for that?
Chris Lesak 04:18
Yeah, I mean, that’s what anything I mean, you’re seeing some of the coins you’re seeing within FTEs. And I think it’s gonna depend on how fast, how fast we adopt the currencies right or the tokens. You know, if we gonna slow adoption of tokens, and there’s not a mass influx of money, you probably won’t- you won’t see that happen.
But if everyone catches it, and it gets a lot of publicity, and you know, there’s a lot of, a lot of people that are rushing to the space and there’s not a lot of product that’s available, a lot of product hasn’t been tokenized and I think you’re gonna see then you could see bubbles form.
You know, we already know there’s gonna be some some cap rate compression. You can you can see massive fluctuations in that the one good thing that you have when it’s with real estate versus with other assets, is if you’re buying into a cash flowing asset, that cash flowing assets still gonna be there. A lot of this other stuff it’s gonna like…
Chris Bounds 05:19
Yeah. Those coin doesn’t have intrinsic value. It’s turning the netwoek complex like, people still live there and they’re paying rent.
Chris Lesak 05:28
Yeah, well even think about publicly traded companies, you go into the stock exchange, and you can go buy a publicly traded company. Well, how many booms and busts that we’ve seen in the stock market? Where, you know, what was it Worldcom was 100, and something billion dollar bankruptcy, and Enron and all these other companies, that- you know, you can have a bad operator on some real estate, but also usually built into those partnerships is, what do we do when there’s a bad operator?
Can we remove that operator? The building still there, there’s cash flows still there, sometimes to the building storm fire or something like that we got insurance, you know, let’s think about real estate is, you know, we can even out smooth out a lot of those rough spots that you might see in the other market.
And when’s the last time an apartment complex, spiked 400% in value overnight, and then dropped? You know, 50% the next day. That really happen. I mean, there’s a couple houses down the street that probably sold for 100 grand more than I thought they should have. But that was short lived in a boom, you know. So, yeah, I think- I think like, if you have a limited amount of product, and you get a lot of hype in the space early on, I think you will, I think you could get a lot of money rushing in.
But that’s going to depend on the structure of the deal too. Because if you don’t have, you know, if you don’t have it set up to receive overseas money, if you don’t have a reggae, reggae plus, reg CF, some of those things, you may be limited. Some of the governing documents from the transaction could limit, you know, the buy in size.
So you probably have a few things that could help, you know, prevent those fluctuations, but at the same time, look at the NFTs most people buying them. They’re, you know, if you’re paying a million bucks for something, you got the money. So you’re gonna qualify for all those things if you’re a wealthy investor. So, we’ll see how that shakes out.
Chris Bounds 07:27
Yeah, in some sense, it’s kinda like the Wild West. But, you’re still dealing with, you know, SCC and they’ll go before the regular, regular- regulatory action taken on to protect the in, you know, the consumer. So, that’s good. Thank you.