FAQs
Last updated
Last updated
Like any other market, the price of real estate can rise and fall based on a number of factors. However, unlike crypto or equities, the real estate market is significantly less volatile. The drops occur over a much longer timeframe and are generally less substantial in terms of the loss of value.
Here are three indicators we can use to project a decline in the housing market based on the last housing market crash:
A drop in the value of the vault's underlying assets does not automatically mean a loss of yield for holders. Basket yield is derived from rental income, not the valuation of the assets themselves. As such, we expect to continue collecting the projected rent from tenants in managed properties, despite any paper loss on the underlying asset itself.
Baskets cannot fall under collateralization. If the price of the underlying real estate declines, the TPV will reflect that and holders may sell until the market price reflects the asset values.
Basket assets are purchased in cash, not financed, they're completely unleveraged.
However, falling real estate prices can result in the liquidation of on-chain leveraged positions using Baskets as collateral. If real estate prices fall, causing Basket tokens to sell-off, lowering their price, this can trigger a liquidation of the on-chain loan if the collateralization ratio isn't maintained. In this situation, we would expect to see a steep decline in the price of Baskets, below the TPV (true property value) as they're force liquidated. Market makers would be able to arbitrage the situation, buying cheap Baskets, redeeming for the underlying assets and minting new Basket tokens at the correct TPV.
With an expanding market cap, Tangible will have the opportunity to DCA into new property purchases, adding assets to Basket vaults at or close to the bottom of their recent valuation. The more assets that are added towards the bottom, the greater the increase in valuation will be when the market turns around.
This is no different to what institutions like Blackstone are doing, preparing $50 billion vehicles to buy up residential property during a potential downturn.
Tangible has a team who identify high-yield properties which are added to the marketplace as TNFTs and subsequently minted into Basket tokens. These properties are typically already tenanted with an established high yield. This yield also helps insulate the properties from price volatility as the markets move.
The earliest traunch of high-yield assets came from the UK where our real estate team, property management team early realtor relationships were established. That said, we don’t have any geographic restrictions and plan to continue diversifying, adding to our expanding portfolio of US assets.
2% of the property value is held in a vacancy reserve. This supplies yield in the event of a vacancy. Once the property is tenanted again, a percentage of the yield from that location will be used to resupply the reserve. Many of our current properties have tenants on government aid meaning the rental reliability is extremely high, over 99%.
