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Parcl review: Invest in a digital square foot of real estate

Sasin Paraksa / Shutterstock

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Updated: November 18, 2022

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2.0

Features3

Fees3.5

Minimum investment2.5

Liquidity2.5

Risk management0.5

Availability0.5

Parcl lets you invest in high-value real estate via blockcahin technology without purchasing the underlying asset.

Parcl is a new blockchain startup that combines crypto with real estate. It's a platform that allows you to invest in the price movement of popular real-world neighborhoods without owning property.

The company says that it's goal is to address structural inequity in the housing market by giving more investors access to high-valued real estate. Blockchain technology allows Parcl to digitize real estate markets and make property values tradable.

In contrast to traditional real estate investing, investors don't use property on Parcl as collateral to secure an asset. Instead, Parcl creates value by tracking the appreciation of real estate markets measured by the price per square foot of properties located within specific neighborhoods.

This article dives into what Parcl is, how digital real estate investing works, and key information you’ll want to know before deciding whether this is the right investment opportunity.

Pros

Pros

  • There's no minimum investment so that all investors can access high-value properties

  • Investors can participate in hot markets without owning property in those markets

  • By using the Solana blockchain, Parcl maintains low gas fees

Cons

Cons

  • Investing in digital square feet of real estate is highly speculative

  • Parcl is in the early phases of release with limited user access

  • Parcl has yet to release its white paper

What is Parcl?

Parcl is a digital real estate protocol built on the Solana blockchain. It allows users to invest in specific geographic real estate markets without actually owning property in those markets. Investors benefit by capturing value from price movements rather than directly from property value appreciation.

Parcl measures the value of a geographic area by the price per square foot of property in that area. This metric is digitized and captured in Parcl’s proprietary Parcl Price Index. This index dynamically changes as the market shifts, turning real estate values into a commodity market.

How does Parcl work?

Parcl gives high-value areas a digital representation of the price per square foot for properties in that neighborhood. These values are tokenized into “parcls.” A parcl’s value is based on each neighborhood's market appreciation.

Investors benefit from property value appreciation without ownership

Parcl allows anyone to invest in rising property values without owning a home in that area. When real-world property values in that neighborhood increase, the investors' Parcl portfolio increases. Conversely, their portfolio would decline if property values were to decrease.

Parcl investors aren’t actually investing in real estate. Instead, they're investing in the likelihood of future property value appreciation in certain areas. Parcl commoditizes properties in popular neighborhoods into a digital index where property values are likely to increase. Users are essentially investing in the likelihood of that happening.

Parcl tokens are considered a high-risk investment because they aren’t collateralized by physical property. Instead, they're a tokenized derivative of existing real estate markets.

Should you take a chance?: Investment risk 101

Turns neighborhoods into commodity markets

Parcl creates tokens that turn different geographic real estate markets into digital commodities, giving geographically dispersed investors access to hot real estate markets. This is similar to how physical goods like corn or wheat are traded on futures markets.

Parcl is a highly speculative platform since portfolio growth is based on the future of anticipated returns. This is similar to investing in the future performance of athletes. Investors can do this by betting on an athlete via a sports betting platform or purchasing a collectible tied to that athlete, such as a rookie sports card.

Investing with Parcl is similar in that both don't have an underlying asset backing them. An injury or failure to meet expectations could devalue a sports-related investment. Likewise, a decline in a neighborhood’s collective value could decrease your return on investment on Parcl.

More on riskWhat are the risks of investing in real estate?

Investors front crypto assets as collateral

Parcl investments use crypto as collateral, which investors provide upfront. They deposit the collateral into a digital vault. Investors essentially borrow parcls from the vault, which are then minted as digital tokens representing a share of the Parcl Price Index. As the index value increases, Parcl investors repay their debt and build equity in their parcl.

The way Parcl calculates value adds risk to the investment. The Parcl Price Index is based on the aggregate price per square foot of all properties within a neighborhood. So a change in the value of just a few key properties could have a significant impact on the valuation of the entire parcl.

Read more: What's the best way to determine the value of my property?

Parcl tokens are tradeable

Aside from holding parcl tokens in specific neighborhoods and waiting for those neighborhoods to appreciate, there are other ways to earn money on the platform.

You can trade Parcl tokens on the Solana-powered decentralized Serum exchange. This allows investors to profit from price arbitrage as the value of specific parcl tokens increases. Parcl tokens can also be staked in Parcl’s Automated Money Maker, allowing token holders to earn passive income from trading fees.

What are the fees and limits?

Parcl doesn't require a minimum investment to start. However, there are a few barriers to entry.First, Parcl is in the initial stages of development. Currently, only token holders of Parcl’s Homeowners Association (HOA) NFT project can mint parcls and thus access the platform.

Additionally, you can’t invest on Parcl without first depositing crypto. Investors stake their cryptocurrency as collateral in a vault maintained by the Parcl protocol. From there, an investor can borrow parcls and manage their portfolio.

There isn’t a fee to get started, but Parcl takes fees out of the vault’s collateral balance when debt is repaid. Transactions on Solana’s blockchain also incur gas fees. Market demand for Solana determines these fees, which are independent of Parcl.

Is Parcl legit?

Possibly, but it’s too soon to tell. Parcl launched the Parcl Protocol Mainnet for HOA NFT holders in July 2022. As of right now, there is no white paper for prospective investors to read, and its HOA roadmap is not updated to reflect timelines for future launches.

According to Crunchbase, Parcl has received $11.5 million in venture capital funding since it was founded in 2020. The most recent fundraising round took place in May 2022. Interested investors can join Parcl’s Discord channel to ask questions and get updates on launches.

How to start investing

Before you can start investing in Parcl, you have to own one of 7,777 HOA NFTs. You can purchase them on secondary exchanges like OpenSea.

Even if you obtain an HOA NFT, however, you still might not be able to start investing. According to Parcl’s Terms of Use, individuals or entities residing in the United States are not eligible to use the platform at this time: “The Services are not offered to persons or entities who reside in, are citizens of, are located in, are incorporated in, or have a registered office in the United States of America (collectively, “US Persons”).” This includes using a virtual private network (VPN) to mask your geographic location.

Alternatives to Parcl

Parcl is one of many emerging blockchain (and non-blockchain) solutions that allow users to reap the benefits of investing in real estate in hot markets without owning any property. They all aim to solve the same problem: increasing access to real estate investing.

Lofty

Lofty is a marketplace connecting property owners who want to sell their properties with buyers. With Lofty, investors invest in real rental properties using the Algorand blockchain.

The buyers are individual investors who buy fractional shares in a property. You can trade the tokenized shares on the blockchain. For $50, investors can begin investing in revenue-generating real estate properties without committing to owning one. Investors earn rental income and benefit from the property value appreciation.

Read more: What is fractional share investing?

Fundrise

Fundrise is a real estate investment company that allows investors to pool their investments together to buy commercial and residential property sharesWith Fundrise, you own fractional shares in a portfolio backed by tangible real estate assets.

At $10, Fundrise has one of the lowest minimum investments in the real estate crowdfunding industry. That could make it a great option if you're wanting to dip your toe into real estate investing without making a large commitment of capital.

Read more: Fundrise review

My personal take on Parcl

To be honest, Parcl feels a lot more like gambling than investing to me right now. Investors bet on the prospect of future real estate appreciation the same way someone might bet on their favorite team making it to next year’s Super Bowl.

There isn’t a tangible real estate asset behind a Parcl investment which makes it very risky. In fact, it kind of feels like investors are paying to play with Parcl. Cryptocurrencies locked in as collateral are also used to repay debt incurred by purchasing parcls. That turns your collateral into debt, making it hard to pull out if your “investment” doesn’t pan out.

There's no doubt that crypto-backed real estate investment opportunities will continue to grow. Some of these opportunities will be fully digital, while others, like Lofty, will integrate crypto into investing in physical properties. I think many of these opportunities are still early, and it might be best to wait and see where things go before investing in this space.

My best advice: be patient and manage your expectations. Dabbling in new crypto investing opportunities can be a great way to learn new platforms while developing a new investing strategy. But betting on an untested platform to be the next big money maker is probably riskier than it’s worth. Invest only as much as you’re willing to lose.

Further reading:

Amanda Claypool Freelance Contributor

Amanda Claypool is a writer, entrepreneur, and digital nomad. She writes about wealth, blockchain technology, consumerism, and the future of work

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