Choose Your Investments Wisely

Real estate remains one of the best asset classes for wealth creation, but remains inaccessible to most, primarily due to the upfront capital costs, the daisy chain of paperwork, high transaction fees from middlemen, and low liquidity.

The opportunities for using blockchain in real estate transactions are multiplying all the time. From bidding wars to title transfers, blockchain technology offers a simple and secure way to perform all types of real estate transactions. There is no doubt that the rise of Web3 business models to create new opportunities in real estate has been exciting, but very confusing.

There are many companies moving into these spaces that touch real estate and blockchain in some way and bringing more awareness to the possibilities, however there is so much noise that it is inhibiting mass adoption and the common person from jumping into a life-changing opportunity.

At Kopa, we see many of the current fears and bearishness many people have of the blockchain space is due to lack of education, or worse, purposeful misinformation and obfuscation to deceive people and remove them from their money. We also see now as the perfect chance for the market to purge bad actors and focus on building products and communities that want to own their future in authentic, transparent ways.

Specific to real estate investing though, there are many projects / companies that proclaim they are fractionalizing real estate and “democratizing” ownership, but it is critical to understand what they mean in the fine print.

For one, Kopa celebrates the diverse investor from all backgrounds. It is a combination of a marketplace, movement, and mentality, where would-be investors can search and select the right opportunity to invest in with complete ease, transparency, and low fees. The Kopa Mentality is that everyone is empowered participation by all, not just “democratization” for the wealthy.

And since Kopa’s team has over $10 billion of experience across real estate private equity, capital markets, and development spaces, we know the tricks real estate platforms generally play to maximize their fees from unwary investors. We pride ourselves on being transparent about what we offer and what we charge, and want all our investors to be able to do a comparison with other real estate funding platforms they may see.

Here are a few things to pay attention as you Google for the next real estate platform (with or without blockchain) in which to invest:

Accreditation

For many real estate investments (and real estate investment platforms), they are out of reach of retail investors by design. They require that investors be “accredited” (making over $200K individually, $300K as a household, or $1M+ in assets outside primary residence) to invest. This represents less than 10% of the U.S. households, yet this is what most platforms mean when they say “democratize.”

The Kopa Movement goes above “democratize” and focuses on participation. In the spirit of liberating the new investor without socio-economic bias, Kopa has no accreditation process and is open to everyone. Imagine becoming a real estate investor with no background check on how much you make. Instead, you can own your world, and watch it grow.

Lock-Ups

A lock-up is the amount of time when investors are not allowed to redeem or sell their stakes in an investment. This limit exists often because many real estate projects or funds can take 3-10 years to get built or renovated, and sold. However, that means that investors who are charged a management fee on their investment will have to pay that fee during the entire lockup time (to the managers or general partners), no matter how the investment ultimately performs.

At Kopa, we work to provide investors with the shortest lockup times possible so investors can exit their position at their own discretion. The maximum lock up period would be a year. This gives the investor significant flexibility to sell when they want to or as the market rises or dips. No investment should force one to overly commit because of its inherent volatility. Kopa is breaking the cycle of exclusion that has hampered real estate for so long.

Hidden Fees

We’ll give you a little secret that most real estate professionals don’t want you to know: the easiest way to get rich in real estate is to manage large amounts of money and charge the most hidden fees possible (called a “fee load”) on that money. Companies charge listing fees, acquisition fees, disposition fees, legal fees, property management fees (to their own affiliate companies), construction fees, and anything else they can use to take more from investors. It may not seem like much, but those fees compound and grow over time.  Sometimes they can be so bad that the fee load may be higher than the investment returns – which can make the investor poorer than they would have been doing nothing!

Kopa prides itself on being different through transparency. By leveraging blockchain technology and focusing on high volume & mass adoption while allowing property owners the ability to keep running their properties the same way, Kopa can keep fees affordable (between 0.5% and 2%). Our fee schedule will be straightforward and make it easy for investors to understand how much they will take home at the end of the day with their investments.

Minimum Investment Size

Since most real estate platforms are only for accredited investors, they also want to make these groups spend more to access real estate. So, they say that an investor has to invest a certain minimum to make it worth their while, further diluting those who can invest in real estate. Many marketplaces require a minimum of between $1,000 and $50,000 to invest.

Kopa has a unique business model which has a dual-sided market between sponsors and investors. Kopa allows anyone to invest in owning a fractional share of a property for the lowest possible amount (as little as $5), then have the property pay them from the rents it collects. In these times, with inflation increasing rapidly and the cost of food and gas skyrocketing over $4.25 per gallon, every dollar you spend to stay within your budget matters.  Additionally, it does not hurt to grow your savings in an asset that increases its rents more than inflation, and a great complement to savings accounts that commercial banks can offer.

One Last Word About REITs

We have often heard a misunderstanding that investing in real estate on the blockchain is like investing in real estate investment trusts (REITs). While public REITs are open to retail investors, this is where they stop sharing similarities with Kopa. The concept behind REITs is to invest in real estate like it is a mutual fund that pays out dividends, and like a mutual fund an investor has no power to choose what real estate goes in the portfolio, what is bought or sold, salaries and bonuses paid to management. And on top of that, it can be hard to even account for what a REIT has made from its investments…the previous quarter!

In addition to the lack of choice and transparency, investing in a REIT often requires an investor to open up a brokerage account, which exposes would-be investors to fees by middlemen who charge an upfront fee of 9-10%.

The Kopa Mentality is the exact opposite. Believe investors should be able to choose which assets they want to own, and provide information to each investor at the asset level in a simple way. Kopa investors get to see what they are buying and understand its performance, and as owners take profits from the assets they have chosen.

There are many other things to pay attention to as you determine the right real estate investment vehicle on blockchain for you and we would be happy to share them. Refer a friend to join our Discord or Twitter and we will add you to the guest list to the parties we will be putting together to meet in person in the coming weeks. It is one thing to invest in a real estate token, it is even more when you discover others that share your passion to own their world.