Weighing Risk and Reward: Crypto-Investing in Home Equity

For homeowners that are looking to access home equity funds, but don’t want to take out a second loan, a home equity line of credit (HELOC) or a reverse mortgage, there are not many options; however, blockchain technology is looking to change that by offering investment opportunities that are tied to a home’s equity and rising values.

Quantm Real Estate (quantmRE) is a membership-based real estate investment network built on blockchain technology. It allows the primary issuance and secondary trading of investment tokens backed by fractional equity interest in single-family homes. This means that quantmRE invests in a fraction of the home by paying the homeowner a pre-determined amount of money (USD) to later benefit from rising home values when the homeowner decides to sell.

Any funds gained are used by quantmRE to continue investing in single family homes—of which the portion purchased goes into a pool of other equity from other homeowners. The company also invests in non-homeowner occupied single-family homes that are held as investment properties.

“Having to borrow from a bank simply to access the wealth that you have built up in your home is deeply unsatisfactory,” said Matthew Sullivan, CEO and founder of quantmRE, in a statement. “Our ability to digitize the value of a homeowner’s equity and realize the locked-up value will solve a huge problem for homeowners worldwide. It’s time for people to be able to access more affordable homeownership options, flexibility and less financial risk.”

Although the company makes a consistent effort to stay away from the term loan—because the process lacks monthly payments and interest charges—it is, in fact, a type of loan that needs to be paid back. The company does not charge interest, but homeowners are required to pay more than the original sum provided as quantmRE becomes a partner with the owner of the property and is entitled to a fraction of home value gains—a lien is placed on the property to make sure of that.

So, what’s in it for homeowners? At the moment, fast cash without having to worry about monthly payments and a small chance to profit should the property values dramatically increase from the time of investment. Of course, quantmRE funds are on the line if the property doesn’t appreciate; but if it does, homeowners will typically receive less for the sale of their property than if they had not engaged in a shared equity contract in the first place.

The question is, do these blockchain investment properties make out better than the homeowners? That may be the case. QuantmRE will always make its initial investment amount back, and has the chance to profit from home value appreciation. Homeowners, on the other hand, are automatically in debt—a term quantmRE chooses to refuse—and are then on the line for an even larger balance should their home’s value rise.

The pros? Risk of volatility is reduced, as the tokens deal with only real estate assets instead of other less reliable crypto-investments. When it comes to home improvements, quantmRE is not entitled to a fraction of the property value gains earned from these updates. Homeowners can also pay quantmRE before the sale of their home; however, the company may add provisions to ensure they don’t take a loss in the case of unfavorable market conditions. Although quantmRE’s website states that tax consequences are not known until a future date, homeowners should speak to their tax advisors to confirm before participating.

As with most investments, profitability is determined on a case-by-case basis. While this is a chance for homeowners to participate in a blockchain-based investment, they should consult a financial advisor to determine if this is the right choice for them or if traditional equity-funded loans make more financial sense.

Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at ldominguez@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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