Meridio is a blockchain-based platform for the fractional ownership of real estate. The speed and simplicity of their platform allow property owners to liquidate their assets in a way that is set to completely transform the real estate market.
Fractional ownership has opened the gates for millions of people to enter the property investment market. Previously, the barrier to entry has been fairly obvious – after the credit crunch crisis of 2008, banks were no longer willing to offer 100% mortgages. In the USA, buyers were forced to raise deposits that would average $30,000, and this subsequently lead to an increase in the number of people renting rather than owning their own home.
However, with fractional ownership, investors can join the real estate investment market for as little as $100. Let’s use a real-world example to explain how it works.
Paul owns an office building with a value of $10m. The majority of units are occupied and Paul is seeing a good return on his investment. However, he is looking to raise some capital for additional investment and therefore wants to leverage his office building against that finance. Already, Paul is facing long delays, endless contract negotiations and an expensive list of fees. The new investment is time-critical, and so all of this is a problem.
Claire is looking to invest in real estate. After researching the financial markets, she recognises that whilst property investment is a long game, that the return on her investment is likely to be much higher and less risky than the alternatives that she researched.
However, Claire only has $5,000 to invest, and under the traditional models of real estate investment, that’s really not going to get her very far.
Enter Meridio
Using their platform, Paul can divide his office building up into tokens. These are essentially digital shares that represent equity or debt in the underlying asset. Paul uses Meridio to place these tokens on the open market.
Each token is of equal value – the beauty here is that the open market in question is comprised of both individuals like Claire, as well as institutional investors, who naturally are in a position to speculate with a greater initial investment. Therefore, Claire is able to invest her $5000 in Paul’s property.
After that, Paul uses the Meridio platform to keep the office buildings financials up to date. Any percentage of the rental income owed to token holders is automatically handled via a Smart Contract and the Meridio System.
When Claire is ready to realise her capital, she simply returns to the Meridio platform and puts her tokens on the open market. Unlike traditional real estate investment, there are no lengthy contracts to be scrutinised by a lawyer – hence no management fees, and indeed Claire need not ever have direct communication with Paul at all. It’s a transaction that can literally take minutes, all handled seamlessly by the Meridio platform.
How does Meridio Work?
Meridio works on the Ethereum Blockchain – a disruptive system with the goal of using a blockchain to replace internet third parties; typically those that store data, transfer major personal investments such as mortgages and those that keep track of complex financial systems.
Ethereum’s goal is not the same as that of the likes of Bitcoin, whose aims are simply focussed on the disruption to the more established online transactional companies such as Paypal, as well as the major banks who have all seen a massive migration on the part of their client base to more online banking.
Instead, Ethereum wants to democratise the existing client-server model, with servers and clouds being replaced by a global network of ‘volunteers’ to ultimately form what Ethereum are calling a “World Computer”.
Granted, a true understanding of blockchain technology and how it works is considered the Holy Grail to most people. The good news is that Meridio has thoroughly researched the blockchain market and is confident that Ethereum provides them and their clients with the simplest, and perhaps most lucrative way, to enter the world of fractional ownership – both for property owners and would-be investors alike.
The Future of Home Ownership?
Meridio is not just for owners of commercial property. With around 37% of all homes in the USA currently occupied by tenants, the Buy to Let market is showing tremendous buoyancy.
John can buy a house with a view to renting it out. He puts the house on the Meridio platform and divides up the tokens. Jane and her family can’t afford to buy their own home, and so look to rent, but in this instance, they actually purchase a number of tokens for themselves.
This means that they genuinely own a share in their own home, and can increase that share on the Meridio platform at any time. As investors, they’re entitled to a percentage of the rental income, hence their rent is actually discounted each month.
Fractional ownership to tenants like this has shown a host of other benefits to the original owner too. As part owners of the property, these tenants are more likely to keep that property in good shape, thus holding, and subsequently increasing its value, should the owner decide to sell outright.
Meridio – The Future of Real Estate
The dream of homeownership has become a dream which feels exclusive to the wealthy. Blockchain technology is making a dent in the traditional models of real estate investment. Fractional ownership muddies the waters between ownership, renting and investment in such a way that a new framework is required.
Meridio are building this new technological framework. Ethereum – part of the ConsenSys formation, is already helping us to recognise that we need to change the way we think about ownership and indeed, the management of our personal property.
The cost of capital continues to rise, and yet when it comes to real estate, the models for buying and selling are centuries old. Meridio brings fractional ownership to everyone, and therefore brings property investment into the 21stcentury.
