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Startups Are Looking To Fractionalize Real Estate Assets, But Should They? – Forbes

Startups are looking to fractionalize real estate assets to lower the barrier to entry in the … [+] industry.

Investing in commercial real estate or vacation rental properties can be a consistent source of passive income and returns, not to mention growth and the potential liquidity you don’t get with owning your home. Yet the price of entry is often prohibitive to all but those who already have wealth. This was the puzzle Drew Sterrett wanted to solve in 2017, when he worked as an analyst at asset manager Tungsten Partners, focused on real estate. He spent all day looking at the potential investment returns as he poured over the numbers and helped the firm structure deals. He wanted in.

Sterrett believed he had the background needed to be successful. What he didn’t have was the capital required for a retail investor like him to get involved in the way he wanted. “Real estate is one of the largest wealth creators in the world, but it’s really been held off for the less than 1%, the 0.1% [of people], to invest side by side with institutional investors,” Sterrett tells Forbes One

If an asset was broken up, Sterrett realized, each tranche could be priced low enough to eliminate the financial hurdle, just like stock ownership. He cofounded LEX to do that. The New York-based startup acts as a securities broker to help existing owners of commercial buildings hold a public offering of shares for accredited and nonaccredited investors to buy and trade on LEX’s marketplace. “We are removing the cost of entry and many, or all, of the limitations,” he says. “We are now bringing [real estate investing] to the many and allowing them to gain access to a market they never thought they would be able to.”

LEX isn’t alone. The company joins a growing number of startups capitalizing on the concept of fractionalizing real estate assets. Each has its own strategy. Miami-based Here offers a marketplace of stakes into existing vacation rental properties. And Toronto-based Vesta Equity allows homeowners to tokenize and sell portions of their ownership as NFTs. Yet all claim the same mission of opening up the asset class to allow more access to its potential riches, and have the fees to create a great balance sheet. Market insiders and investors however, aren’t sure this strategy is the best idea for the market or the underlying users.

Clelia Warburg Peters, a longtime proptech investor and managing partner of Era Ventures questions whether the average investor is really prepared to tackle the nuances of the real estate asset class. She also wonders what problem these companies are really solving, as retail investors already have the ability to invest in real estate through real estate investment trusts (REITs) and many don’t. “The level of education in the public even around holding REITs is pretty low,” she tells Forbes. “This is literally exposure to a direct asset or a pooled vehicle of private assets, there is both education needed and risk.”

Market analysts, meanwhile, find this a dubious strategy in current market conditions. The pandemic-driven frenzy which drove up demand and lowered mortgage prices has started to cool, points out Gay Cororaton, a senior economist at the National Association of Realtors, who expects this to continue.  If home ownership becomes more affordable, some potential customers may choose to purchase a full property, rather than invest in real estate assets. What’s more, fear around investors not knowing what to do may be overblown though, she adds. Mom and pop landlords maintain a lionshare of residential assets and many didn’t come to the industry with a real estate background.

On the commercial side, L.D. Salmanson, the CEO of real estate data and analytics startup Cherre, says it all depends on the asset. Warehouses and other industrial buildings including data centers have seen continued strong performance, he tells Forbes.  But assets like retail and office buildings are just too up in the air right now to be a solid investment strategy. “Office is not doing well right now, it’s an open question whether that’s temporary or long term,” Salmanson says. “I can make the argument both ways.”

Yet the founders of both LEX and Here suggest their offerings aren’t any riskier than, say, downloading Robinhood and pouring money into stocks with no guidance, or backing early-stage startups on crowdfunding sites. Plus, the users of these startups aren’t stuck with the physical asset at the end of the day.

Here looks to avoid some of the risk by performing robust due diligence on the investment options on its platform,  founder Corey Ashton Walters tells Forbes.  While future performance isn’t guaranteed, the startup lists only existing vacation rentals that already produce 10% to 20% yearly booking yields. “We want to keep the wheels on the bus,” he says. “If an asset is doing well, they will continue to do well. Instead of one owner, there are hundreds of owners.”  All assets on LEX were already producing a stable cash flow, according to Sterrett.

There’s also definitely a demand. When LEX officially launched in November, it had 10,000 potential members on its waiting list. And commercial property landlords are showing strong interest in working with the platform, too. Here launches this week with more than 20,000 members waiting to invest. Vesta Equity, currently only available only to accredited investors, plans to open its platform to nonaccredited investors within the next 12 months. Even before its February launch, Vesta Equity says it had hundreds on its waiting list and has since been approached by real estate developers interested in expanding Vesta’s offering as well.

All three real estate investing startups offer a new slate of options to the market. For LEX and Here, it’s opening a new avenue for retail investors looking to differentiate their assets. For Vesta Equity, cofounder Michael Carpentier says that the tokenized platform doesn’t just provide a new opportunity for investors, it gives homeowners a new strategy to gain liquidity without having to move.

“Imagine if you had $100,000 of cash in your wallet, nice you’ve got that, but you can’t use it, you have to borrow against it,” he says about the current system.
While all these startups have users and venture backers, it’s too early to see if their mission statements outweigh the risks.

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Lifestyle

No, you don’t need to freak out over Facebook’s new listings rule

Is it over for real estate agents to post their listings on Facebook? Here’s what’s going on. So you may have gotten an email over the last few days, if you’re a real estate agent, saying that you cannot post real estate listings to Facebook anymore, and you might have freaked out.

Here’s what this means. The change that’s happening to Facebook is that you cannot post your listings to Facebook Marketplace through your business page. That’s the only change that’s happening.

So can you still post your listings to your Facebook business page? Yes. You can also still link to your website. You can still post photos of your listings on your business page. You can still post videos, Reels, Stories, and all of that. Facebook Live can still happen on your Facebook business page.

The only change is if you’re posting rentals or properties through Facebook Marketplace, you have to do so through your personal profile, not your business page. That’s it. This has caused a lot of concern, but that’s all that this email means.

Katie Lance is the author of #GetSocialSmart and founder and CEO of Katie Lance Consulting, a social media strategy firm and founder of the #GetSocialSmart Academy. She’s been recognized by Inman News as one of the 100 most influential people in real estate and is a featured keynote speaker at many industry events. Katie is also is the author of the best-selling book, #GetSocialSmart.

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Real Estate

Wisconsin experts predict 2023 inflation, employment, housing trends

APPLETON – In November, the Wisconsin Department of Revenue released a forecast wherein IHS Markit, a provider of information, analytics, and solutions for governments and financial markets, predicted a slight recession in the last quarter of 2022 and continuing into the first half of 2023.

“Inflation continues to be the largest downside risk to the economic outlook,” it stated.
It is now projected that the Consumer Price Index — a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services — will rise 4.3% next year.

Over the past 12 months, the Bureau of Labor Statistics reported an increased CPI of 6.8% in the Midwest region. The bureau also reported an increase of 11.7% in food prices, and an increase in energy prices of 11%, due to an increase in the price of gasoline.

Brad Tank, an investment management expert and University of Wisconsin-Madison alumnus, thinks federal officials will be successful in limiting inflation in 2023.

Tank explained in a recent UW Now livestream, “Predictions for 2023,” that he expects inflation to remain above 4% up until the middle of 2023. The rate most likely wouldn’t hit 2% until 2024.

Inflation, he said, is most likely to continue due to factors that coincided with the ongoing COVID-19 pandemic.

“A big part of that is the demographic shift affecting workforces for major world powers including the United States and China,” Tank said.

Aside from a slight recession, here’s what economic changes are predicted for Wisconsin for 2023:

The Wisconsin Department of Revenue predicts employment throughout the state will post small declines of 0.4%, fluctuating around 4.6% in 2023.
Through October, the Wisconsin unemployment rate sat at 48,800 jobs, which was 1.6% below its rate before the COVID-19 pandemic hit in February 2020.
Nationally, there will be less job hopping and fewer counteroffers — offers made by an employer, such as a better salary package or career prospects — in 2023 as demand for talent and the supply for candidates becomes steady, Forbes predicted in November.

“Salary rises will be less common, too,” Forbes wrote. “Many employers have already increased wages over the past 12 months — a shortfall of talent left them with little choice. So, any pay raises they can afford to award in the future will be marginal.”

The state’s Department of Revenue reported a 7.8% wage growth in Wisconsin in 2022.
“Generally, we are seeing many of the same hiring trends from the past two years persist into 2023,” said Jeffrey Sachse, director of the Center for Customized Research and Services (CCRS) and economic development at UW-Oshkosh. “Companies are hiring across most staffing levels with a focus in health care and manufacturing on entry level workers, citing attendance and time management as key concerns. This continues to drive up wage rates in a more competitive environment.”

Sachse said while there are some genuine concerns for a recession in 2023, it is unlikely that there will be large layoffs locally, because many firms are already understaffed.

“I have seen projections recently of the local unemployment rate increasing to as high as 4.5% by the end of 2023, but this is still well below historical averages,” Sachse said.
The Department of Revenue predicts professional and business services will face the largest decline in the new year. The construction industry will be the second most affected, as high interest rates are expected to continue reducing home affordability, resulting in a decline in residential investments. Manufacturing jobs are also expected to decline within the next two years.

Ryan Long, a Wisconsin Department of Workforce Development regional economist in the Bay Area and Fox Cities, said its most recent data from August showed 1.73 job openings per unemployed job seekers. Long said this ratio has been on a downward trend since April.
Long said that some challenges the workforce had been facing pre-pandemic and throughout 2021 were also due to long-term demographic patterns such as an aging population, declining labor force participation rate, below-replacement fertility and minimal net migration. These patterns will also need to be addressed in order to bring the workforce back to a stable market.
This year proved to be difficult for people looking to buy homes, as demand to purchase became greater than the inventory of houses available.

Because of low inventory, those who did find a house often had to put in an offer higher than usual.
According to the Wisconsin Realtors Association, Wisconsin inventories remained very tight, in March 2022 there continued to be just 2.1 months of available supply. Rapidly rising prices and a significant uptick in mortgage rates, 4.17% in March, has led to a reduction in housing affordability across the state by 19.5%.

Michael Sewell, president of Realtors Association of Northeast Wisconsin, said local interest rates have gone up significantly in the past year and are about the highest they have been in 20 years.
However, Sewell said he believes interest rates will begin to decline in the beginning of the year.
“I think, probably, by the middle of the year, they’ll be around 5½ (percent), and I think they’re going to hover between 5 and 5½ for a while,” Sewell said.
According to the Wisconsin Realtors Association, the average cost of a home in November 2022 was $259,950, a jump from $240,000, the average cost in November 2021. The number of sales averaged 5,400, down from the 7,905 sales in November 2021.

The report shows that in Outagamie County, sales have continued to decrease since 2020 while prices have steadily increased since then.
Trends in the national real estate market doesn’t necessarily reflect local real estate market, Sewell said. Although the market is still seeing high interest rates, Sewell said the Northeast Wisconsin market is much more stable than many other parts of the country.

“The reason we’ve had issues the last couple years is because inventory’s low,” Sewell said. “There’s much higher demand for houses than we have supply.”
Sewell said, going into 2023, there will be an increase in inventory over the course of the year, but demand will continue to be greater than supply.
Part of the reason inventory is low is because people are hesitant to move or purchase a new home because their current interest rate is lower than what the average rate is now, Sewell said.

“But I think as interest rates start to loosen up after the first of the year that we will see more of those people decide to put their house on the market and that will help our inventory as well,” Sewell said.

Foreclosure trends will change going into the new year as well. For the past two years, foreclosure rates had declined due to homeowners receiving extra funds from forgiveness programs put in place by the pandemic.

Now that most of the programs are done, foreclosure rates will increase bringing them slightly higher than what the normal rate has been in the past.
“Back in the last recession, in 2008, 2009, 2010, people’s houses weren’t worth what they owed on them,” Sewell said.
Now, most homeowners have significant equity, meaning even if they’re struggling to make payments they have the option to sell their home, pay off their loan and move forward.
Despite these changes, Sewell believes Northeast Wisconsin will have a more normalized market moving forward into 2023.

“There won’t be as many as many sales as we’ve had the last couple of years, but I think that it’ll still be a very solid market in the coming year,” Sewell said.

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Real Estate

Housing Market 2023: Where It’s Headed, According To Experts

Han sido unos años salvajes para el mercado inmobiliario. Si está pensando en comprar o vender en 2023, probablemente se sienta un poco preocupado por el proceso.

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Más: En qué se diferenciará la recesión de 2023 de la de 2008 y cómo debe prepararse de manera diferente

No hay forma de saber exactamente qué desafíos enfrentará, pero desea estar lo más preparado posible. GOBankingRates habló con varios expertos en bienes raíces para averiguar cómo creen que podría ser el mercado inmobiliario de este año.

Buyers Will Get Some Leverage
“The market has shifted to a buyer-friendlier market, but sellers still hold a lot of cards,” said Lindsay McLean, co-founder and CEO of HomeLister. “As mortgage rates rise and affordability dips, sellers may have to shift their expectations to match the changing market — and buyers [will] have more leverage.”

Despite that, she said the market will return to a more balanced position than in previous years.

“Buyers are finding they can once again buy without waiving contingencies and sellers are starting to offer concessions,” she said. “However, many sellers hold low-interest-rate mortgages and are not under pressure to sell and so may hold out for the offers that they want.”

Los precios de las viviendas podrían disminuir
El mercado de la vivienda ha cambiado considerablemente, pero McLean dijo que aún es difícil decir si esto significa que los precios de las viviendas disminuirán en 2023.

“Si bien los precios han caído desde donde estaban en su punto máximo en esta época el año pasado, todavía están por encima de los precios de 2021 en muchos mercados”, dijo. “Las tasas hipotecarias se han estabilizado un poco en diciembre y la actividad de las ofertas parece reanudarse, ya que los compradores están volviendo lentamente a la mesa”.

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