Episode 351

Decentralized Real Estate Ownership with Kumar Ujjwal

DwellFi is the Financial Layer for Real Estate on Web3. Since the inception of fee simple title among the feudal lords of medieval England, the purchase and disposition of real estate has been dominated and engineered by intermediaries in privileged positions of power.

Now for the first time, the maturation of Decentralized Autonomous Organizations (DAOs) and Non-Fungible Tokens (NFTs) are together pointing the way forward towards a future of decentralized real estate ownership.

DwellFi synthesizes these technologies to empower users to eliminate the middlemen and unravel the complexities traditionally involved in actively managing real property.

DwellFi enables a model of truly decentralized ownership and opens this physical asset class to the power and interoperability of native DeFi applications.

Connect with DwellFi at dwell.fi

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"You can invest 10,000 hours and become an expert or learn from those who have already made that investment." - Jack

Transcript
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Welcome to the REI Mastermind Network where host Jack Haas gathers amazing stories from leaders in real estate investing.

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In each episode, our guests will tell you what they're doing that works what they've tried that failed, and best of all, you'll learn actionable steps to take your real estate investing.

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To the next level now, here's Jack with another value packed episode.

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We have Kumar with Delphi with us here tonight and I just want to point everybody because we're going to get a little nerdy here tonight.

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Head over to dwell.fi that's dwell.fi and you don't use the .com it's dwell dot FI and see what the Kumar and his team are doing. Because we're going to be talking a little bit.

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About web 3 blockchain NF.

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Keys and I know all of that is verbiage that we're probably not familiar with, but I want you to hang on here because Kumar is going to explain it all.

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That's going to make perfect sense.

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Right Kumar?

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Yeah, thank you.

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Doing our big question.

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You didn't ask, but yeah.

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So, I let's start things off.

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Kumar, you probably have done this a million times, but I'm going to ask you to do it.

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One more time, take a moment in like 4 minutes.

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Explain to everybody the concept of what you're trying to do here.

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Alright, thank you.

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So let me try to be as simple as I can and feel free to ask any question in between representing the audience so what we're doing right now at golf is I would say probably it's nothing new then the regular real state people do, it's called syndication.

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So as a syndication, you go and basically create syndicate bio property, and once you buy a property you all is Syndicate member or part of the property and then you have rental income coming.

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If you have investment properties, so you basically get the rental income and then eventually when the entire syndicate decide to re fi or sell it, you sell this.

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That's the typical way to do it.

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Now what we saw.

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Opportunity I would say problem in this thing is once you get into syndicate there are couple of things.

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The one of the biggest problem in the syndicate is liquidation.

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So now there are five partners.

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Limited partner in this indication and now one partner wants to exit.

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But it it's kind of tough.

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You have to go through the paperwork, legal work, all these things and then second you have to find someone.

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There's a liquid discount and so that is the problem, and you cannot scale in this model you if for say I want to be a part of a syndicate, $500,000 to disposable to put in, it's very hard to like.

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Right now, I have to go and find those people who have this portfolio or I myself go and create this portfolio so those are the problems which we saw.

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So now let's say take the same approach and solve this with the help of blockchain.

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So now of course when I say blockchain people will like let's say this little.

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Using, but for a moment, forget about blockchain.

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Just think about this that now you are in a syndication same syndication.

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You can buy in with a group of people and then when you want to exit you can just exit and exit in a sense, like you can sell it your membership interest to someone else and they don't have to worry about.

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OK, I have to go and update the.

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Title, I have to go and update the deed I have to.

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Basically, go and check my bank account so that I can get.

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The rental income all these things.

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You don't have to worry about, so you sell it and.

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You're done so.

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And then you want to go into another property which is on our platform similar.

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So, you go and just say, OK, I see this property.

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I'm interested.

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Someone is selling it.

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I go and click buy that.

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Now I am in in in that property and and I'm getting it, so all these things happen under the line blockchain.

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So, what blockchain does it is basically do couple of things.

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First of all, it allows you to.

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Other proof of ownership so everyone knows who owns what and it's on the block, so nobody has to like to argue on this and so anyone can go and see on the blockchain that who owns what property.

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Then when we do that, the second part of that is transactions.

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Now it's a much smoother transaction.

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You can do much faster.

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You don't have to worry about, and I can go into detail how why you don't have to update it.

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A title indeed, but you can do multiple of transactions so you can go in and out.

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Apart from that now.

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What else benefit of blockchain is that once you get into this on our platform in this structure you own that asset, so you know that like if you have a 10% stake, you 10% stake is your equity on that property. So, is this a hard acid back?

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We use it and I'll go into that.

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Later on, but.

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Now you can take this and then plug into defy word which is decentralized finance, and you can get a lot of benefit of that.

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Adi five word, but again it will be more technical, so I will go into that detail later. But let's say example will be you have a 10% interest in in in an LLC benefit of doing defy is you can take that 10% and you can collateralize and take a loan on that. You can do a HELOC on that.

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On your membership interest you cannot do in.

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A normal system.

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Apart from that, the other benefit of defy is there's a lot of different ways where you can actually take it and then earn interest on that equity.

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So barely just having that equity, ownership of that equity can also give you interest, so these are the benefit of defy.

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Which you can plug into and start getting benefit of that, so, so that's what it is.

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On a high level, how it all works.

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But we can start deep diving into that.

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Sure, so well, let's just start things off with the concept here.

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Now you're, you're essentially kind of modernizing the syndication kind of concept.

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Do you have to follow the syndication rules because you're on the on a blockchain?

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Do you have to work with?

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Uh, certain investors, for example because of because of the syndication.

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A good question.

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So, the way we have structured at this time it's a non-accredited offering.

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So basically, non-security offering so it's not that it's only for accredited investor as a non-accredited investor you can do that too.

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But still, it's a syndicate you have to work with accounting.

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You have to be responsible for your taxes.

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And all these things, so you have to go through QQ is newer customer.

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So, if you want to do any kind of.

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Of approaches in blockchain world.

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So, you have to go through KYC and then another thing is.

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Email, which is basically called anti money laundering so that we are like you're not.

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Basically, laundering money so those are the two things you have to do, but apart from that, yes, it's open to everyone.

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Anyone can come and participate in this.

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OK, so you don't really have SEC guidelines and requirements.

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To adhere to.

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There is SEC guideline and requirement.

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We are working with that guideline.

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So based on that guideline, the way we have structured it, this is a non-security offering so.

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So, they're not.

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You don't need an accredited investor right now for this thing.

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OK.

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The way we have structured it so, but that's the reason why we aren't going with a specific type of properties right now.

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We're not going with a commercial property once we get into the commercial property, then for that time we will do the regulation license, like Finder licenses and all and then.

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We will enable.

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That so, right now we're not doing.

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We're taking step by step.

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Sure, sure, so the initial offerings that your properties you're trying to acquire are they single family homes, are they?

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Short term rentals only.

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I see an odd, so I'm going to go stop there.

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Single family homes are what you're focused on right now.

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Yeah, single family homes, short term rentals and medium-term long-term rental.

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OK, that that makes sense.

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So, with all of that.

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So just so that I know that I'm following along you.

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You essentially are setting up a uh platform.

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If for lack of a better term.

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If some people, you mentioned earlier before we hit the record button you compared it to something similar to like Coin.

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You can go on there by bit.

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Coin and a variety of crypto currencies.

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Old things.

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For example, you're selling NFTS associated with that property that people could buy and trade and sell in in an environment.

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If you will this.

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This NFT gets a blockchain, which is a unique number identifier that's.

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That's then written to a Ledger so that it's identified, and you people can see the transactions, so there's something there's that going on.

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Are you essentially building then a platform where that type of transaction can occur where people can buy and sell their interests?

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If you will, in in those in those investments.

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Is that it?

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Yeah, so very good actually.

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Let me explain again that same thing which you said.

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So, the way we are building is exactly like a Coinbase, so it's a as a for user.

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Don't have to worry about.

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OK, I need a wallet.

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I need this and that for users of frictionless experience.

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You come in, connect your bank account and you can purchase one.

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Piece of property fraction.

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Those property will be an empty.

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You'll hold it now.

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If you want to sort of empty, you can do the same thing on our platform.

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You say, OK, this I'm selling my interest in this property, which is in someone else, will come and buy it.

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So, you can set up your flow price.

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This is my price if someone.

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Wants to buy it.

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That price they can buy it or something.

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More people are coming so there will be a bid you can go for a higher price too, but that's simple.

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It is so and then for more advanced user.

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So, if you are like more advanced users so you can actually have a wallet so you can connect the wallet and then you can buy it through your stable coins and then you can purchase those through your cryptocurrencies.

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Basically, but if you know advance user.

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Just getting into the web three world.

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So, it's very simple.

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You connect your bank account by it, and you hold it and when you want to sell it, just sell it.

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OK, so with all of that being said, so you're taking U.S. dollars converting it to this to an FT. You're buying an empty just like you would buy a piece.

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Of stock, if you will.

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Yeah, yeah.

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How do the proceeds or you know you were talking about any kind of income generated from these properties?

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How does that come back to the individual then is it come back to them?

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Through a cryptocurrency U.S. dollar. How does that? How does that piece work?

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So, it depends like how people want to receive that in U.S. dollar or crypto used. So, the way it works is.

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So, all these properties go into a DAO, so let me explain what it is out now is like it's called decentralized Autonomous Organization, but it basically is kind of the company LLC literally is spin up an LLC.

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So that down as a treasury is like the bank count further down.

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So, what happens is when the rendering will come into a DAO, basically that money goes into this treasury and from there it is distributed to each member.

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So, each member have a wallet and we do all these in the back end.

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So, we have a custodian wallet.

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Set up.

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For all these.

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So, all the money will go into those individuals' wallet depending on their interest, membership interest, how much they own, and everything runs through a smart contract.

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So, it's basically it's open so you can see what the transaction is happening and then once you hit it goes into a wallet.

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But now if you say hey, I want to get into USD.

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So, it will be.

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Then it will be transferred into your U.S. bank account. But all these taxes we do it, so it's going through your payment rates.

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Sure, OK, yeah.

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So, let's talk a little bit about it.

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But before we do, I wanted to remind everybody.

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I understand this is getting.

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It sounds a little complicated, so head over to the website again, dwell dot FI so it kind of clarifies a few things for you.

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Uhm, so Kumar.

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You know a lot of people when they hear NFT.

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I think if I think I'm safe to say if people are aware of NFZ they think of the apes that are.

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Being bought and sold under.

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These images right now are that what they should have?

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Expected I know this.

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Is a pretty simplified question, but when you say NFT, what do they?

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What does that mean?

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Is it a certificate?

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Is it a?

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What are they?

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What do they get in return?

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I think that's what people are going to think of when there's an NFT involved it, that's it.

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It's an image or so.

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Something but it.

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Could be as simple as just the.

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Ledger number, I mean, it could be anything.

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It could be a pixel for.

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Yeah, no, thank you.

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For asking this question, it's actually pretty obvious.

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People ask when they see it, and so it is actually in a very simple way.

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It's basically a unique number of course, because which is on the Ledger which is.

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Is of representing your ownership in that property, but the way it is basically a piece of art.

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So, when we do it so when you get so each property has a unique art we give and then you fractionalize.

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So, when you receive it, you will.

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It will be a piece of art, so you can actually look into your wallet.

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You say, hey, this is my property.

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It's like and but basically that is representing your ownership interest in that property.

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So, another question people generally people ask us like OK, which is what happens if someone still might like.

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I'll lose my energies.

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Will I lose my house, or we'll lose my equity?

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So, in our case, the answer is.

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No, you will not.

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The reason why, because the way we have done it, it is.

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There's 2 proofs of your ownership.

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One is on the off.

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The chain means which is.

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On top, which physically and then the second is on the chain which is through NFT.

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So, let's say you lose your NFT, or someone steal from your wallet or whatever.

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Like couldn't happen a lot of time then what will happen in that scenario you will come to our platform, and you say because we've done the KYC, so we'll ask you to prove yourself.

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Once you prove yourself what we do is we issue you knew.

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NFT and we burn that old empty so that way you're safe, your asset will always be safe like you will not lose your physical asset and the only thing you lost is your NFT which was stolen.

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Sure, OK.

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So, let's talk about the physical property.

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Then are.

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Are there places where you're focused on?

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Like what part of the country are you buying the real estate?

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Yeah, so we're looking into.

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So, so right now we're we moved.

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Our first property in DC area or Washington.

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DC then we are looking into multiple other places like Arizona, Florida mostly in the Sunbelt area but not so we'll start looking into but right now we're just doing the first PC which is in DC area.

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Once that is done, we are working with like four partners right now.

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So, depending on these where they want to deploy.

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The capital and want to get into market, so we'll get into that market.

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So right now, that's our focus is.

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OK, so.

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So, when you acquire the property then what is your what is your plan like?

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Do you?

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Do you have a team that understands real estate in the fact that what needs to be done in order to convert it to be the rental property and getting the repairs done and the any kind of modifications?

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I would have to think that that acquisition amount that you're talking about that you're accumulating with your initial investors are going to.

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Have some of that capital ready for you so that the renovations and stuff can occur.

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Yeah, so let me clear on this thing, so right so DwellFi is we are a software company.

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What we are doing is we don't like to do the property when we work with partners.

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So as a partner, let's say you have a partner.

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You will come you.

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To syndicate, you'll have your properties.

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We will help you to facilitate all these people, like the entire transactions.

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To explain and the other benefit of define all these things which we do so you are just.

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I would if I had to explain it a much simpler way.

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Kind of the analogy would be we're kind of a Shopify for real state, so shouldn't and then start this indication they can start their own portfolio company and buy more properties.

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Keep increasing their portfolio and we take care of all these so you.

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Real estate investor or real estate fund.

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You focus on your own business that you know.

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What is your core strength is and we come as the company which can support and help you scale it at a faster pace.

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Now I'm following you.

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It's almost.

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I almost want to see you say Shopify, but it's almost like a Kickstarter where somebody starting a project and they can put it on your platform and saying, OK, here's the property.

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Here are the details.

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Here are the numbers.

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If you want to be involved, you can buy, buy and sell your NFT so you're generating the platform in which to create the transaction.

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Yes, we are just making it simpler for people to participate and then and and local meeting because all these people who are doing it basically, we are creating a secondary market so all anyone can come and buy and sell and trade so you don't have that issue.

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OK, so let's say let's say I found a property and I'm going to put my property up there to do this.

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To do the and.

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T's I I'm guessing I have to provide like a background on the property and what I plan to do.

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Yeah, so basically you will come, so we'll set up a web.

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We already have website so basically for example, if you go to right now, surf turf dot XYZ you will see it and then there is an example property listing so you will see how it will look like.

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So basically, you'll give a property you can click and see the property then you see.

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On the right-hand side like OK, what are the fractions you can buy of their property and what is the percentage you will get and detail about the property and then for example, if you are planning to do something.

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You can explain what you're trying to do and all the data we can pull about that property.

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The historic data from MFA and all these from the API and display that.

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So, surf Turf is an example.

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Yeah, and and in that one there.

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Of what you're talking about.

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Sure, yeah, this this.

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Is an example listing.

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Looks a lot like, yeah, I can kind of see this now here.

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So, you have .3% equity, the cost associated with it. Kind of a summary how to buy governance OK?

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Yeah, do you see them.

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Light bulbs going off Kumar.

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I'm getting it.

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So, uhm, so what happens here now, like?

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So, let's say, for example, I would guess, just like a Kickstarter, if you will.

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If it doesn't get fully funded, it just kind of collapses and what the.

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This as a sponsor, you were buying the property so you would say OK, either you leverage bank, and you can buy the property or.

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And then you can still sell it, and then you can pay off the mortgage.

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So, it's up to you as a sponsor how you take.

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Deal that one.

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Oh OK, so as the as the.

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Fellow bringing the property.

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I have the option of like making up the difference or something.

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So, if because what I'm saying is that if the numbers don't jive, I'm not going to invest in this.

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And then you know if it's not fully funded then the property may not get purchased.

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Yeah, so that's the reason why you as a sponsor you will always do your due diligence.

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You come with the right property, and you come with like OK how much you want to raise, how much you gonna you are putting in that property.

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And then you close that property once it closed.

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Basically, every member on the property has their ownership in this property, and if they want to exit, they can do that.

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Basically, sell to someone else that price or higher price, but that's what it is.

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Sure, so let's say I did buy this and now I want to sell my piece of it.

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So, are you going to have?

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So, I have.

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I have an NFT.

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I could basically create a web page on your site as well like similar to this.

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More on that.

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Just saying here these are my holdings.

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I'm looking to sell them off.

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Yeah, so there will be a marketplace.

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Where do we display all the listings, so you have?

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10% you are selling someone is selling 5% so all these things will be available, and anyone can go and buy.

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So, when they go to buy, they basically land on the same page, they'll see all the how much this property is generating.

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What is the yield and everything and?

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Then you can by itself.

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OK, yeah that that makes sense. So, if you want to take a look at to see what we're talking about. Again, this is surf turf, dot, XY.

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Daisy, if you go slash example it kind of takes you right there.

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Two they got Baltic Castle as an example here a little extravagant Kumar.

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But, ah yeah, this is this is really interesting. So how many people do you? I know you said you're working on a POC right now, which is proof of concept for those who might not understand what POC.

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Is so you're pretty early in early stages here.

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Yet, let's be Frank.

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Uhm, what is your plan?

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How is how is DwellFi I gonna be making money at this?

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Yeah, so there are two ways to make money so when people transact on the platform in the secondary market there, we take the basically a Commission and then when you.

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You bring your property and then you only sell the properties.

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People will of course by that is another transaction.

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So that's where we make.

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Money and then if will.

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Do you do you charge for any kind of management of the essential's communication?

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Yeah, yeah, so there is an operation fees which basically we take it from your rental income so it's a percentage of the rental income, so we don't charge you.

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It's coming from, yeah.

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Sure, OK.

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So how many people do you have involved in this right now?

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By the looks of this page you got, it's quite a sizable organization already.

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Yeah, we have a lot of people involved.

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Or seriously looking into the working with us, because yeah, it's a very interesting concept.

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We started and then it's like a DAO.

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We started it and then a lot of lot of people joined because it's interesting and they all want to contribute.

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Sure, OK, well you know I.

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I think this is like I said you're onto something here this is this is kind of an interesting concept you got going on with all of that being said, you know, I, I think we I we did our best here today to try to simplify things as best we.

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Could regarding this we were joking a little bit because let's face it, people, you know when it comes to real estate investors and Realtors and everything, we're kind of behind when it comes to any kind of technology.

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So, with that I would really encourage you to just go to the website, dig into this and try to get a better understanding so.

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Dwell dot FI.

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But in the last few minutes, Kumar is there a question or concept that you think we should have tried to tackle here today?

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Yeah, the I would say one thing is about this.

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The whole real estate market.

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If you think about and you're coming from the real estate, you understand it way better than me.

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Are these two things in the real state one is, it moves very slow.

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And the second thing is there is a. I would say liquidity lock huge. So, if you just compare, do a simple math and you see the size of the real estate market is just in the US is I think $59 trillion. And now compared to crypto.

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Crypto is close to 2 trillion right now, but now if you think about the trading, so crypto trading is $20 billion a daily.

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I guess if I'm not wrong, that's what it is.

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And compared to that in this, this one in the real state is way, way less.

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So, I don't exactly recall the number, but.

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You know, by percentage is 400 X lower, so the problem is so when we start looking into this.

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Yes, there is a like why you buy real straight because you buy and hold it.

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That's fact no one asked that question.

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Definitely you do that, but there is another thing is.

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When you buy and hold the reason why you don't.

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Do these transactions because it's very hard and it involves it, moves slow and involves a lot of things.

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The moment you reduce that fraction and like friction, sorry for doing these transactions then you will start seeing movement in this real estate market and people will be more interested in.

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asset. But still, if you just:

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You try to improve by even a thing like a decimal factor.

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You are looking into billions and billions of dollars transactions.

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So, if you look from that angle then you can see how massive this market and how massive this problem statement is like when you.

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Try to solve it.

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Right, so you do put bring something there is.

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Is the concept of the liquidity and being able to transact I mean.

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You know we talked early on when it comes to real estate investing.

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It is.

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It is a great vehicle in order to accumulate wealth and and to find some way to achieve financial freedom through rents and and a few other aspects.

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But you do bring up a great point.

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It takes.

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Let's say you do need to liquify.

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Need you need to look need the liquidity.

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I'm going to have to edit that piece out the liquidity, but it takes.

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Let's say you put the property on the market that takes, you know it can take how many?

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Three days and then it typically takes upwards of 30 days just to get through the title and and everything associated with it.

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Next thing you know you're:

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In that property, what you're really doing here with Delphi is unlocking that and making a transaction.

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So, it is really interesting how you're doing this.

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And like you said, you know being able to step past the title stuff that that that would be.

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That would be huge.

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I can see what you're what you're aiming for.

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And one more thing I would like to add in this, once again when you see liquidity, we talk about liquidity.

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We see liquidity in the two forms.

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One is of course by itself the transaction wise, and the second thing is.

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You have an equity.

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You're holding equity and that money is today is locked, but that can also be leveraged like people do you.

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You can collateralize and take leverage, but generally when you're in the syndication it's literally locked.

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So as one membership interest, I cannot use that my liquidity.

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And do anything with that so I have a 10% stake that 10% stake is locked, but in the way we are doing now your 10% stake is not locked, that is liquid.

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Either you can sell it, or you can collateralize it and then take a HELOC so those are the two ways you see the liquidity getting in the market.

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So, it's not just the transactions, but also through that that opens up another whole world of finance where people can come and then basically serve this market for liquidity.

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Sure, no, this this.

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This is really interesting.

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Kumar, you can probably tell.

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We could probably keep going down a rabbit hole here because I foresee this being, you know a lot of real estate investors were in real estate because.

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The stark stock market isn't something that we can touch.

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Feel we can actually visualize the upside with real estate.

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We can, like you know, a great example is fixing flipping a house.

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I buy it at a discount.

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It's in terrible condition.

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I put in the resources and time into it.

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I turn it around and make it.

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Twice as valuable as when I started.

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That is something that based on the information that one of your listings could provide.

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I'd people real estate investors could actually see the upside on some of these properties.

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In some of these projects.

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So really interesting concept.

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Kumar I, I appreciate it.

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Maybe once you're launched, we you can come back and we can talk touch base, see how things are going, how things are progressing and and again head over to.

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Dwell dot FI and check out the platform.

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I really appreciate it, Kumar.

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Thank you so much for having me and I.

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Hope this was helpful.

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Yeah, this was great, right?

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You're listening, thank you.

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