Collateralized Real Estate
With investors continually seeking means of financial return, a trend has emerged surrounding U.S based real estate. This is the concept of ‘flipping’ a home/property.
The concept is simple – buy a home in disarray at a discount, strategically renovate, and sell the home for more than the cost of purchase and renovations. This model has proven quite lucrative, and shows no signs of going out of fashion.
OpenLTV has recognized this and developed a platform aimed towards giving investors access to such opportunities. This is made possible through the issuance of digital securities, which represent fractionalized ownership of real estate backed debt. These tokens are ERC-20 based, which means they are issued on the popular Ethereum network. With this being the most commonly used protocol, it is expected that support for secondary trading in future months should be supported.
OpenLTV indicates that through the use of its platform, investors can expect to generate returns in the 8-12% range per year.
Stablecoin of Choice
While investors have the ability to invest through the OpenLTV platform with cryptocurrency, a stablecoin of choice is needed to facilitate interest payments etc. OpenLTV has chosen PAXOS to be this stablecoin.
PAX tokens are ERC-20 based tokens, allowing for widespread support throughout the industry. Paxos issues monthly ‘attestation reports’, along with undergoing regular audits. These steps are taken to ensure transparency, allowing investors to verify that funds are indeed backed 1:1.
Upon announcing the launch of their platform, OpenLTV CEO, Kirill Bensonoff, took the time to issue the following statement.
“The OpenLTV platform will simultaneously allow us to tap into a global pool of investors and unused crypto-asset liquidity…We are thrilled to be partnering with the Paxos team to bring a long-standing and secure investment option in the real estate industry to the financial future.”
In addition to their issued statement, we reached out to OpenLTV for further comment on this development. The following is what CEO, Kirill Bensonoff, had to say.
Q: With the various stablecoin options available, why was PAXOS chosen to partner with?
A: “We have used PAX previously, and were impressed with what they have built. We were looking for a trusted company with regular audits that had verifiable 1:1 USD backing, and a great platform, and they were it.”
Q: How will clients benefit through use of the OpenLTV platform versus more traditional means of investing, such as REITs?
A: “There are a number of differences OpenLTV is issuing on the blockchain, where all transactions and interest payments are open and immutable, bringing a new level of trust and global access. Investors can choose what loans they want to back, unlike with a REIT, which makes all of the divisions and charges more costly. The loans offered on the OpenLTV platform will be short term and at a high-yield. This enables investors to avoid risk, shortens the time before they get their investments back to 12-24 months, and subjects them to less market volatility.”
OpenLTV is a Boston based company, which was founded in 2019. This young company has developed a platform allowing for qualified investors to gain exposure to U.S based real estate through fractionalized ownership.
Company operations are overseen by CEO, Kirill Bensonoff.
Paxos is a New York based company which was launched in 2012. The company states that their mission is ‘creating a global, frictionless economy’. This led to the development of Paxos Standard (PAX). These are digital tokens, which act as stablecoins pegged to the U.S dollar.
Company operations are overseen by CEO, Charles Cascarilla.
In Other News
While OpenLTV appears to be a promising platform through which investors can invest in debt-backed real estate, they are not the only ones to tackle this industry. Real estate has proven to be one of the most possible industries to be tackled by digital securities – and with good cause. The illiquidity, yet potential high-return of real estate makes it a perfect candidate for beneficial blockchain implementation. Here are a few examples of companies tackling real estate through digital securities.