Crypto and Real Estate
Crypto And Real Estate: Direct ownership of real estate by CuBit™ would transform CuBit™ from a currency into a security. It would also burden CuBit™ owners with the problems commonly associated with direct ownership of real estate. The most problematic burdens of real estate ownership are:
- Liquidity
- Transferability
- Tax consequences
- Regulatory burdens
- Operating losses
Liquidity
As noted elsewhere, real estate is largely an illiquid investment. Liquidating real estate costs time and money. In contrast, liquidating an investment in CuBit™ is as quick as the chosen currency exchange permits. Done through a digital exchange it will be nearly instantaneous. If done through Universal Real Estate Wealth Protection Solutions, LLC™ (UREWPS™, the Company), at most, it will take no more than three business days.
Transferability
When you invest in stocks, a key feature enabling stock trading is the presence of a strong market where sellers can readily find buyers. With stocks and bonds, the volume and extent of trading is extensive. The ability to reliably compare investments is robust and understood well by many people.
None of that is true with real estate. The real estate investing market is highly fragmented. Even though it is a large market, it is often heavily influenced by local market conditions. This local influence makes it especially difficult to compare one real estate investment to another. The risks and business side of real estate is not understood by most people. They are complicated and it takes both time and money to get well educated in real estate. A lack of knowledge can easily cost you hundreds of thousands of dollars. This fragmentation and lack of ability to readily compare one real estate investment with another makes it difficult to quickly get into or out of real estate.
Tokenized Real Estate
Many companies have recently begun touting the transferability of real estate investments in the form of “tokenized” real estate. Tokenization uses blockchain technology to better enable fractional ownership of real estate. Unfortunately, the tokenization of real estate does not resolve the lack of transferability. This is because each individual real estate investment is a unique value proposition. Just because you call the two different real estate investments tokens, and give them matching names, it doesn’t make them interchangeable. Each property represented by a token is on a different piece of ground, with a different building, and a different street address.
In contrast with nearly every other real estate related investment, CuBit™ is entirely fungible. One CuBit™ is worth the exact same as every other CuBit™. You are totally insulated from the illiquidity of direct real estate ownership. The problems of transferability arising from real estate are eliminated as CuBit™ can be easily transferred directly into BTC, ETH, USD, or another liquid asset. You can do all that without any attorney’s fees, notaries, a trip to the courthouse, or payment of transfer taxes. You can’t do it that easily when you directly own real estate.
Tax Consequences
Direct investment in real estate results in many and varied tax consequences. Some are positive and some are negative. Requirements around depreciation, cost recovery, and many others create a substantially complex tax situation. One wrong move can cost you thousands.
Buying CuBit™ is not free of tax consequences. When you buy CuBit™ you get a simple tax compliance situation. You know how much the CuBit™ cost when you bought it (cost basis) and how much it was worth when you sold it. These are the same tax consequences you currently experience with any currency exchange (e.g., FOREX), or stock exchange (e.g., NYSE).
Regulatory Burdens
Real estate syndication and real estate investment trusts (REITs) are two common ways that many people band together to directly invest in real estate. However, real estate syndications have many regulatory requirements which often prohibit who can invest. REITs carry many regulatory burdens which often drive down the returns. They also are more complicated than many stock purchases and are more complicated than currency exchanges.
Blockchain technology, and recent regulations changes, have significantly lowered the hurdles to fractionalized real estate interests. Unfortunately, the regulatory burdens are still substantial and can depress returns for investors. Buying CuBit™ gives you some key benefits of real estate by combating volatility and inflation. It does not put any special regulatory compliance burden on you.
Operating Losses
When you invest directly in real estate and the investment fails to perform as expected things can get ugly. The losses directly and proportionally have an impact on your financial wealth. This is the risk part of the “risk versus rewards” element of investing. The risk of loss is one of the primary reasons most of our securities regulations exist today. The government has taken great pains to ensure that investment promoters fully and accurately disclose the risk of loss that goes with any investment in real estate.
There are no investments devoid of the risk of loss. However, the pleasant reality is that CuBit™ allows you to gain the inflation-hedging and volatility reduction benefits of real estate without requiring you to become particularly knowledgeable of all the risks, rewards, and operational mechanics of real estate investing. The Company manages the processes and bears most of the risks. The Company’s financial model is built to manage and absorb nearly all the real estate ownership risks. When bad things happen, and they will, your potential loss is minimized. It is offset with other gains and spread across all the properties owned by the Company. All CuBit™ buyers share their own tiny portion of risk from any adverse events.
The Indirect Solution
CuBit™ does not directly hold real estate investments. The Company directly holds all the real estate used to back the value of CuBit™. The investments held by the Company are in various geographic parts of the USA. Therefore, the impacts of losses are spread across many real estate investments. This also means they may be more than offset by gains in other investments. Individual property losses and individual property only affect the value of CuBit™ indirectly.
The Company which directly owns the real estate backing CuBit™ value, will manage losses. They will also generally absorb the losses and gains of specific real estate through its operating revenues. Geographic dispersion insulates CuBit™ from large-scale impacts from specific markets. However, a nation-wide, or world- wide, loss or gain of real estate value could respectively decrease or increase the value of CuBit™.
Universal Real Estate Stable Coin™ (URESCu™ or CuBit™)
To be totally transparent, UREWPS™ makes money by using your money. Real estate deals produce a variety of different kinds of profits. Rents, interest income, tax breaks, and capital gains encompass most of them.
Increasing real estate value creates capital gains for real estate. Real estate driven capital gains that come to UREWPS™ directly increase the value of CuBit™. All other real estate income streams pay UREWPS™ operating costs. Excess income from these streams is profit for UREWPS™.
UREWPS™ works for the routine cash flows on the real estate while CuBit™ holders get the appreciating value of the real estate (capital gains). Under US securities laws, driving CuBit’s™ value solely from real estate appreciation qualifies CuBit™ as a currency instead of a security.
Tax Deferred Growth
Increased wealth from the growing value of CuBit™ is not taxable until you sell your CuBit™, making your wealth growth tax deferred. You will have a taxable event when you sell your CuBit™, not before.
Using Debt
Many real estate investing experts like to entice people to invest in real estate with the lure that banks will lend them money to buy real estate. The nominal idea is that if you have $100k, instead of buying one house worth $100k, you put down $20k on five houses. Then you borrow the $400k to fund the rest of the investment. Turning $100k of cash into $500k of real estate sounds great. Unfortunately, these experts seldom explain the risks of borrowing to invest in real estate. They also gloss over how quickly things can go very badly for you when your investment doesn’t perform as expected. The end result can literally leave you bankrupt.
Unlike many real estate investment funds, the Company does not use leverage to increase the real estate assets backing CuBit™. This will constrain the amount of real estate the Company can buy. Leveraging the funding pool created by CuBit™ sales would expose the wealth entrusted to CuBit™ to certain risks which could suddenly and dramatically decrease the value of CuBit™. We won’t expose our wealth to these potentially devastating financial risks. We won’t expose your wealth to these risks either.
Forced to Sell at a Loss
During the financial crisis of 2008 many owners of revenue producing real estate found themselves forced to sell profitable properties. They could not renew the loans they had used to acquire those same properties. This wasn’t because the owners were unable to make the payments. It was because government regulators told the lenders to eliminate all exposure to real estate risks. Owners couldn’t get a loan from anyone. Lacking the financial reserves to pay off their loans, they had to sell their properties. Though these properties had good cash flows, they were “financially distressed” because they had to repay the loans in full, immediately.
Distressed properties often sell at “fire sale” prices to buyers who could pay cash without using any loans. The original owners lost most of their equity and wealth in those sales because they thought it was safe to use loans to invest in real estate. The Company does not risk your wealth by using it to get loans to buy real estate.
Conclusion
CuBit™ is not a security, and it is not a fractional real estate ownership. You don’t get a claim on any piece of land when you buy CuBit™. Real Estate and liquid assets, held by the Company, back the value of CuBit™.
The processes and strategies of the Company are specifically designed to mitigate the risks of direct real estate ownership, protecting the value of CuBit™. The Company makes money from the operation of real estate. The value of your CuBit™ grows from the increasing value (appreciation) of the real estate the Company holds.
Glossary: CuBit™ Glossary
About the Author: CuBit™ Roots
Disclaimers
This does not constitute an offer to sell or buy a security. Any such offer would be accompanied by all legally required documentation. CuBit™ is a receipt currency. Distributed Regional Affiliates shares are regulated under the securities laws of the United States of America.
Although the design of CuBit™ incorporates inherent protections against volatility and Universal Real Estate Wealth Protection Solutions, LLCTM (UREWPSTM, the Company) is committed to support the asset-based valuation of CuBit™, as with any currency there is nothing to prevent speculators from taking unforeseen actions which might cause the price of CuBit™ to vary without reference to the underlying value proposition. The Company cannot prevent and is not responsible for the actions or results of such speculative behaviors.
CuBit™ may lose value. Deposits in CuBit™ are not insured by the FDIC or any other entity. CuBit™ is not a bank product.
The graphics utilized the Universal Real Estate Wealth Protection Solutions, LLC™ (UREWPS™) and CuBitREvolutionTM websites and in the Company and product documentation include both AI-generated images and licensed content sourced from Deposit Photos and Shutterstock via TechSmith. While we strive to ensure the accuracy and relevance of all visuals, all graphics are intended for illustrative purposes and may not fully reflect actual products or services. The use of AI in graphic creation is subject to limitations, and we encourage users to verify information independently. The company disclaims any liability for decisions made based on the content provided. For specific inquiries or further information, please contact us directly.
