WIN 55 - Buying Homes with Blockchain with Natalia Karayaneva

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Welcome to another exciting episode of the Women Investing Network where we help women win in investing and in life. My guest today is Natalia Karjanova and she's the CEO and founder of Propy.com. natalia, welcome.

Thank you so much. Hello to everyone.

So, Natalia, propy. Com. For the people that are driving in their car at this point, they can't look it up. What does Propy.com focus on?

Propy.com is focusing on providing the opportunity investors to buy properties entirely online, real time, in global cities worldwide.

Great, so it's international platform.

Yes, it is an international platform. Imagine kind of Zillow plus the facility to execute transaction entirely online and receiving a title deed, electronic title deed, powered by blockchain.

That's fantastic. I'll tell you, as I've purchased properties, I'm in the process of selling some properties and just coordinating all of the paperwork. It's such a hassle. I love the idea of being able to do this all online in a secure transaction.

Yeah, yeah, I know your pain. And we knew the pain of many international buyers in Europe and Middle east for many years. In the US there are between 18 to 20 middlemen for each transaction. This is why the process is very slow. There is no enough trust between sellers, buyers, escrow agents, title companies, recording offices. And so blockchain smart contracts are able to fix this problem with trust and to avoid that huge amount of middlemen.

So for the people that aren't familiar with the term blockchain, can you break that down?

The simplest way to describe blockchain is to imagine a database that is decentralized. So nobody has control over this database. And this database is distributed over thousands of computers. So everything that is recorded on blockchain is immutable. It's impossible to hack it, almost impossible to hack it. And blockchain is the technology that is able to transfer value. So Internet is the technology that allowed us to transfer information. And then blockchain is the new era of the technology of the data transfer which allows to transfer different assets as money, different values, property rights as well.

Very cool. So you mentioned that this is international and I saw on your site, you know, you have a click for, I think it was Chinese. So are these foreign investors purchasing in the U.S. or could a U.S. person, for instance, purchase something in Dubai if they wanted to? How international is this?

Yeah, so we're focusing on a couple of corridors in the beginning. But of course our vision is to make it available globally. Like imagine Airbnb. You can rent out a place anywhere in the world from anywhere in the world. So the first corridor that we're focusing on is the Chinese investors acquiring properties in global cities in the U.S. london, Dubai, couple of other cities. And then the next corridor is Americans buying properties in Europe because annually Americans are spending $70 billion in European properties.

Very cool. So do you have a picture of, you know, the avatar of your typical buyer?

Yeah, sure. We have two profiles. The first profile is the businessman aged from 40 to 50 years old, woman or a male that is willing to diversify their portfolios. Those are mainly from China, Russia, Middle east, where the governments are not that stable. They are controlling the money outfloor and other issues. So these people are normally willing to park some amount of their family budgets abroad so that they have them in stable currency. So let's say the property is located in the US Then it's could be always resold in dollars. So that's the normal profile of the first example. The second example are families. They could be US couples or European couples that are again willing to have something abroad as an investment. Could be Dubai. It could be a resort somewhere where this property could both bring them the revenue from rentals as well as they could visit this this property and spend some time in a second home. So it's both for pleasure and diversifying the investment portfolio for a family.

Very cool. So is this a one way, is it only for purchasing or can you also sell properties through your site?

Yeah, sure. It's both ways. So if you are willing to sell your property to foreign investor, and normally people have the perception that the foreign investor could offer more money for the same property. And usually it's a cash buyer so the process of the sale is faster. And this is why the seller could list the property with us and sell it to get several offers from foreign buyers. And there is a functionality available on our website mobile app where you can list your property, download the pictures, provide the necessary information. Then we take care of the translation into Chinese, Russian and Arabic languages.

Very cool, Very cool. So one of the things that I think that gets kind of intimidating when people are first trying to buy their real estate, you know, investment properties or maybe that property that they can use as their Airbnb alternative family vacation places. You know, the process is pretty, pretty complex. And as you said, there's so many players involved. You don't know who are the good ones and who are the bad ones. It just gets very complex very quickly. So I love the idea that you can just kind of enter into this transaction through the portal and kind of bypass that. But is it really just that simple that you can just bypass all these middlemen and get connected direct to a buyer and have all the legal things that need to happen happen?

Yeah, yeah, it's a great question. And it's not that simple as it looks like. It looks simple for the buyer, for the user. But on our back end, we are engaging with many middlemen still. Yes, we're avoiding to some of the middlemen, but in order to comply with all the regulations and with all the current real estate framework, we invite those middlemen in our platform. Namely, these are the money transmitter and title companies for the users. They will have a great experience of not needing to contact all of them personally. They will just be notified@propy.com with all the steps that other middlemen have done. And this avoids the risk of fraud that could be executed by those multiple players that we don't know who they are. And then we are working with some recording offices to record our title deeds directly without some of the middlemen. But it will come in place probably in a year or two. So for now, we're working with almost all the same participants.

So it sounds like it really helps advise you on the workflow, the transaction workflow, that you might have to interact with these various players. It's kind of identifying them and helping to, in essence, do business by, like you said, doing things on the back end. But does this replace needing an agent or do you still have an agent involved?

We do have the agent involved and we believe that the brokerage in real estate will not die that easily. It's like in Uber case they have Uberized the taxi industry, but still there is a need of driver, right? So broker plays a very important role in real estate deals where they give their personal advice on the neighborhood and the community and the house. But technology will allow those brokers to transact entirely online without them to explain all the legal processes. So we expect the broker fee to be drastically reduced over time thanks to the technology. But the need of the communication with someone who knows the neighborhood. We believe it will remain just the fees and the entire real estate market will be affected and will be a bit more affordable. As again it happened to taxi industry. Now the transportation services are much cheaper than they were before. The same with the tourism industry. They were tourism agents that were charging 20 to 30% from each trips, maybe for 10, 20 years. Now there are websites like booking.com or tripadvisor that are still charging, but they charge less. This is the goal of propy to allow people to rely more on technology rather than to an agent, a middleman that cuts off like 6% of each transaction.

So do you think that this is going to get into the regular domestic marketplace where for instance, I just sold my home in Seattle. I had an agent who handled not only all the preparation of the paperwork, but she also did things like marketing and connecting my property and doing video drones of the property and all those types of things. Do you think that this will eventually replace me selling my personal residence to other people, not just investors? Or are you just focusing on that investor?

Yeah, in a long term perspective, we do envision our product to be used domestically, but the initial focus is the foreign investor because they have much more pain. They have to travel to the destination several times. They don't know anything about the process, anything about the real estate market, anything about the. Even the large real estate brokerages. Because in the US there are different real estate brokerages that are leading. In the uk, European Union, there are other brokerages that are leading. So it's really difficult for a newcomer to navigate. However, if you want to buy property, if you're living, let's say in New York right now and you're willing to buy a property in San Francisco, again, you don't know all the local brokers. You don't know how long is the process of the recording is. And if you learn for example, that in San Diego currently the process takes two months and people are really very nervous about this recording longevity, then using propy will give you one more level of trust. You will be notified what is happening with your deal. You will be able to transfer money entirely online. You will be able to see if the broker has already done other deals on our platform, other transactions. Every step of the transaction is being hashed on blockchain. This will allow all participants to have the evidence that is applicable in the court which step has happened at which stage. So the fraud is almost impossible with this scenario and unfortunately, with 20 million licensed brokers in the US we see some quantity of those getting licenses just in order to execute fraud. And very often there are some websites that are reporting these cases. They put additional data on purchase agreement that gives them the right to make a title transfer on their name. And this case is very often unfortunately and it's impossible with propy application because propy application generates the purchase agreement automatically. So the broker cannot interfere with the purchase agreement with the offer. And all the parties, they know that they sign the reputable source and then the blockchain record gives the right for the participant to go to the court and claim who did a wrong step, for example.

So I'm thinking about this transaction flow from the foreign investors perspective. And so some of the things that they have to do that make in essence the barrier to entry into the US market. They have to have like a US based bank account. They have to have an id, you know, transactional id. I can't remember if it's a business ID or eid, something like that. Does your company help them do that or are there prerequisites that they have to have in order to start that you validate in order for them to start the transaction?

For now, everything what they need for the transaction in California is to have a bank account no matter which country in and they need to provide bank statement from their bank that they have the eligible amount of funds. They don't have to have an id, but for some particular deals they have to provide additional declarations. So in our case we are focusing now on cash buyers from other countries and our system requires from them to send a PDF with a bank statement that won't be accessible by any participant besides the seller. This way the process is quite simple. We help them to have an account with our partner Money transmitter. So the money transmitter calls them, verifies that they are the same persons and then logging into our system, this buyer states the bank account, their own bank account and they can transfer the entire amount for the property entirely online with propy. And once the system gets the notification that the money are transferred, our smart contract makes it possible to transfer the ownership on blockchain. That's the main innovation. It's like with Bitcoin. Bitcoin became such a demandable coin because it solves the blockchain behind. Bitcoin solves the double spending problem. Once the sender makes the transaction, blockchain verifies that the amount could be received by the receiver without any risk the the funds to be transferred twice. This is why there is no need of bank and the same we are aiming to do with property ownership. Right, where blockchain will handle this transaction from one person to another. And there is no need of local recording office to execute this transaction.

Okay, that makes a lot of sense. I wanted to get to a specific question that I think might impact the industry as a whole. In Vancouver, Canada, they have implemented a 15% additional tax for investors that are purchasing properties that they're remaining dormant. Their investment properties from a growth perspective, but not from a cash flow perspective. They don't have renters, people aren't actually living there and along the coast, or at least in Washington state, they're talking about implementing that same 15% tax. Do you think that that'll have an impact to your business, to the industry as a whole?

No, I don't think that. We will see see a huge decline of foreigners investing abroad. There were several global cities introducing this foreign tax. Singapore and Hong Kong also with 15%. London has been discussing it, but they didn't implement this new tax because many countries and global cities as Dubai and London, they are heavily dependable on foreign investment into their real estate. Because of the taxes, those foreigners are paying more money for the properties and the municipality receives more property taxes. Yes, they do influence the demand and the prices of the properties in particular areas. However, it directly affect the economic development of the region or of the city. This is why normally it's a discussion for each region whether to implement it or not. However, foreign investors will always remain in the market. And if they see that there is a new tax like in Vancouver, then they stop investing in Vancouver and they start investing, let's say in Seattle or other cities. And of course other cities are more in favor of this new flow of investment. So I believe that with 13% growth of this huge market, which is $340 billion market in cross border real estate deals, we will see further increase of foreigners willing to buy properties in other locations due to globalization, due to affordability of flying from one country to another country. This will further increase as well as introducing the technology that will allow you to invest in properties real time. Again, more people won't hesitate and will just buy properties all over the world with the idea that they can always resell it if needed, as easy as they bought a property.

So Natalia, I know that it's an exciting time for you. You've got a lot of activity happening within the growth of your business and so I know that you've got to run soon, but is there anything that we haven't talked about yet? That you think it's important to our listeners. Yeah.

There are two news that I'd like to share. First one is that within the next 20 hours we're launching our token sale where we gonna sell pro token that will allow unlock the smart contract for asset transfer at Propy registry. And the second news is that we're receiving huge interest from not only the real estate brokerages all over the world but also from the governments that are willing to replace their land registries with this blockchain ledger. And we have just signed an agreement with Ministry of Justice in Ukraine. It's an MoU to make a pilot to allow Ukrainians to sell their properties to foreigners. They had a moratorium recently for the land sale and soon the land will be available. They going to use PROPY to promote this investment to foreigners. And very very soon we believe in couple of months the residential and commercial properties in Kyiv, the capital and also on the Black Sea coast as Odessa will be available for sale@propy.com Very cool.

I've heard Odessa is just absolutely gorgeous so that would be very cool. How do people get a hold of you?

If they want to learn more please Visit our website propy.com or download the mobile app Propy from App Store. As for the token sale, there is a website tokensale.propy.com Register subscribe for our news. Our community of property investors is growing really fast. We are seeing more than 6,000 of participants so we are welcoming all the people that are interested in this transformation of the real estate and new age of real estate investing.

Well, Natalia Karjanova, CEO of Propy.com thanks so much for your time.

Thank you. Thank you so much.

Thank you so much for listening to the Women Investing Network. Be sure to subscribe, rate and review the show on itunes or the platform of your choice. You can find the show notes and resources for today's episode at womeninvestingnetwork.

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Remember that guest opinions are their own and information is of general nature, so be sure to consult appropriate tax, legal or other professionals for specific advice.