4 Things You Need to Know Before Investing in ICO’s

Rusty Tweed

Rusty Tweed

ICOs are the cryptocurrency form of crowdfunding. Crowdfunding provides an alternative method for companies, startups, charities, and individuals to raise money. In some cases, the crowdfunded projects go to a cause, such as wildlife preservation. In other cases, crowdfunding provides the buyer with an investment vehicle. An individual investor can research different crowdfunded investment opportunities until he or she finds one with a product and business model he or she believes will succeed.

Investing in crowdfunded business products gives average individuals the chance to become venture capitalists. Like the panel on Shark Tank does every week, the key is separating the winning opportunities from the losing opportunities. A product may be inventive, provide tremendous benefits to users, and be something the investor likes, but a great product is never enough. There must also be a plan for making and marketing the product at a price that allows for profitability. A solid business model must be in place, or the enterprise, regardless of its brilliance, will fail to generate profits, which means your investment will fail to appreciate and may even disappear entirely.

With the rise of bitcoin and other cryptocurrencies, entrepreneurs discovered that blockchain technology could be harnessed to create a more efficient method of crowdfunding. The company simply creates an electronic token using blockchain. Interested parties can then purchase the token and trade it to other investors, just like a stock.

ICO Mechanics

The initial sale of the tokens is called the Initial Coin Offering (ICO), which works much like an Initial Public Offering (IPO) of stock. ICOs, however, provide individual investors with significant advantages over IPOs. Before stock shares go onto the open market, they are sold to institutional and wealthy individual investors included in the underwriter’s inner circle. These connected investors make most of the money on an IPO because they are able to fully take advantage of any price increases. Individual investors who get in on the IPO too late miss out on the gains or even lose money. With an ICO, any investor willing to do some research can find opportunities to truly get in on the ground floor.

The Initial Coin Offering period usually lasts for a week or longer. During that time, the coin is available to all interested parties. The coin must be purchased using a cryptocurrency, such as bitcoin or Ethereum. The ICO issuer may have a funding goal or funding limit. When a goal or limit is employed, the price and number of tokens issued remain static for the ICO period.

Some issuers employ a changing funding goal with a static supply of coins. In that case, the more investment the ICO receives, the higher the token’s value. The issuer can also keep the coin price level and simply issue as many coins as demanded during the ICO period.

What Drives ICO Success

For an ICO to succeed, it must be based on strong fundamental technology, advises Antonio Madeira of Cryptocompare. For example, an ICO based on duplicating bitcoins provides no new innovation to provide value. With investors finding no reason to prefer the new ICO to bitcoin, the ICO is unlikely to become profitable. When an ICO based on an innovative technology with a broad market comes up for sale, it may be a great investment. For example, the ICO for Ethereum made investors big money.

Why Ethereum succeeded

Madeira points out that Ethereum, released in 2014, provided an innovative smart contract feature. The smart contract feature provides a way for buyers and sellers to exchange goods without fear of the other party failing to live up to its end of the bargain. It uses blockchain technology in a new way that makes cheating impossible.

In the future, Ethereum’s technology may become the most efficient way to do business, especially overseas. It’s easy to see the potential. This technology could make all the paperwork of business contracts obsolete.

Not surprisingly, Ethereum enjoyed record investor enthusiasm during its 42-day ICO, held between July 20th, 2014 and September 2nd, 2014. The ICO raised over $18 million. 60,000,000 coins were distributed. The profit rose to a whopping 3900 percent.

Where to find the next Ethereum

Blockchain technology expert Jean-Etienne Durand stresses the importance of making wise selections between the ever-rising number of ICOs. He recommends using ICORating and TokenData to research offerings. These services provide ratings and research material to help separate the winners from the imitators.

ICOs are issued to fund specific projects. When you find a project you believe in, before committing your money, Durand recommends researching the company behind the project. To do this, start by studying the ICO’s whitepaper. This will give you pertinent information about the company, its strategy, plan, and team members. A project needs to be backed by a solid company. It also needs a solid team, so Durand recommends researching the team members as well. Finally, Durand recommends checking on the company’s and project’s presence on social media, through outlets like Facebook, Reddit, Slack, and LinkedIn. Strong candidates publish extensive information about their products and services.

Real Estate Investment and Development: “Secondary” Cities Offering First-Rate Growth Potential in 2018

Shrewd real estate investors are looking to 2018 as a year in which several so-called “secondary” cities feature minimal risk as well as exceptional return potential, an ideal combination in any investment opportunity.

While major cities across the United States — such as New York on the East Coast and San Francisco on the West Coast — continue to post record numbers while drawing increased interest from international and domestic investors alike, there is ample evidence suggesting investments in a secondary city will yield a greater return along with minimal risk.

As secondary cities continue to attract new residents with booming job markets and exceptional living costs, expert analyses continue to identify cities that top out around 3 million total residents as featuring the conditions necessary for a robust return on an investment in real estate. These cities appeal to a broad section of the population, particularly those seeking a tangible sense of community as well as all the benefits of big-city living.

In rankings of the best real estate investment markets nationwide, major markets like Los Angeles and Boston are now being joined by secondary cities such as Austin and Salt Lake City. Of course, the performance of any real estate investment is conditional on a wide range of factors that go well beyond population density.

When it comes to a real estate investment in a secondary city, the success of the investment hinges on several key issues: cost of living and quality of life; indicators of economic strength such as job creation and growth; a quality education system; and sound local infrastructure. As it stands now, a growing number of secondary cities feature the conditions necessary to yield a substantial return on investment.

In addition to cities like Austin and Salt Lake City, several cities from the Carolinas to the Pacific Northwest are poised to perform exceptionally well for real estate investors. In North Carolina, investors are expected to yield substantial returns on properties in Charlotte and Raleigh/Durham. Farther south, Charleston, South Carolina, and Orlando, Florida, provide the kind of opportunities shrewd investors typically seek.

In Texas, the Dallas-Forth Worth area joins Austin among secondary cities expected to perform well for real estate investors, but it is Seattle that has piqued the greatest amount of interest from real estate experts. In fact, in an annual survey published in Emerging Trends in Real Estate, it was Seattle that earned the top ranking for providing the best prospects for investment and development in the year that follows.

Balancing Real Estate Investment Risk and Reward: 2017’s Best Markets for ROI

Investors are always interested in securing investment opportunities featuring the ideal balance of risk and reward, and rightly so. In the real estate market, there are several still-emerging trends influencing where investors are most likely to find properties in which the potential return on investment greatly exceeds the potential risk associated with that investment. In 2017, at least in a general sense, the best and most balanced investment opportunities can be found in cities located in the southern half of the United States, with a few notable exceptions, of course.

Each of the following cities selected earned its placement on this list through an analysis of a number of factors most likely to be predictive of future value relative to the likelihood of investment risk. The cities are limited to those featuring a population density of at least 500,000 residents, with the future price forecast and current level of affordability representing the most heavily weighted of the various factors used in evaluating the best limited-risk, high-ROI real estate markets.

Dallas, Texas

Dallas tops the list of cities in which real estate investments feature a significant return on investment along with a minimal potential for risk, as the Texas city is currently underpriced by 3 percent relative to historical averages. In the past year alone, home prices have gone up by nearly 4 percent, but that rate is expected to accelerate rapidly over the next three years mostly due to gains in job growth as well as overall population growth. Based on these trends, home prices are expected to increase by 31 percent by 2020.

Jacksonville, Orlando, and West Palm Beach, Florida

The financial crisis hit Florida hard, but the state’s real estate market has proven to be among the most resilient in the country, as Jacksonville, Orlando, and West Palm Beach feature all the conditions necessary for yielding a significant return on investment that involves minimal risk. Consistent job growth throughout the state, combined with a renewed commitment to restraint among builders, has made several cities throughout the state among the most undervalued in the country, with some undervalued by as much as 20 percent in recent years.

Seattle, Washington

In Seattle, Washington, the Pacific Northwest real estate market features at least one city representing the ideal balance of investment risk and reward. At a price of more than $400,000 on average, Seattle’s average home price is the highest of the five cities listed here, but the expectation of a 26 percent increase will push home values over the $500,000 threshold by 2020, making the iconic Pacific Northwest city one of the most balanced investment opportunities for investors seeking to maximize ROI without courting any unnecessary risk.

Chinese Investors Continue to Invest Heavily in US Real Estate Market

Over the past few years, countless real estate industry headlines have focused on Chinese investors and their ongoing and genuinely staggering level of involvement in the commercial and residential real estate sectors. According to our own independent analyses, the past five years of data indicate Chinese investors are responsible for putting well over $100 billion into commercial and residential real estate properties throughout the United States.

While most of the attention has focused on the more high-profile efforts made by foreign investors to secure safe assets offshore — including, for example, the $2-billion sale of the Waldorf Astoria to the China-based insurance group Anbang as well as its failed attempt to secure the Starwood Group for a sum of $14 billion — a great deal of the activity taking place during the past five years reflects a high-volume effort inspired by a number of economic factors. It is these same economic factors that point to the likelihood that foreign investment will double over the course of the next five years.

The fall of the yuan is one of the primary motivating factors pushing Chinese investors into the US real estate market, as the projected stability of the US real estate market serves as a vehicle for wealth preservation in the face of growing concern regarding the yuan. With few limitations on foreign-based real estate purchases in the US, Chinese investors are essentially free to enter the real estate market, often with the goal of investing in a rental or resale property. Of course, many foreign investors also rely on a real estate investment as a vehicle for securing legal entry into the US via an EB-5 investor visa.

It’s worth noting that any analysis of Chinese activity in the US real estate market is quite likely to be underestimating the full extent of investment activity over the past five years. This is due to the simple fact that a large volume of foreign investments can be executed through front companies or trusts that are not necessarily subject to public disclosure. As a result, the historical data, as well as the predictive analyses based on that historical data, does not necessarily provide a comprehensive view of the sizable Chinese real estate investment activity in the US.

Although it is not possible to understand the complete extent of the investment activity undertaken by Chinese investors, it is clear that the activity is indeed substantial enough to have an impact on some of the nation’s largest and most expensive real estate markets. In fact, the bulk of the activity from investors based in China has focused on markets that include San Francisco, Miami, Chicago, Seattle, Los Angeles, and New York.

During the next five years, it is possible and perhaps even quite likely that Chinese real estate investments will account for a sum approaching $220 billion or more. While the bulk of that investment will likely be directed toward commercial properties, the residential real estate market in the US will also experience a continued rise in activity from foreign-based investors, with investors based out of China accounting for the majority of that activity.

With Increase in Home Deliveries, Lennar Corp. Exceeds First-Quarter Expectations

Lennar Corp. posted profit and sales numbers that greatly exceeded expectations for the first fiscal quarter, and it appears the homebuilder is currently poised to continue to outperform expectations in the second quarter after trending upward by almost 1 percent according to recent premarket trade analyses. Of course, it is worth noting that although the homebuilder’s quarterly net income fell compared to one year ago, it still exceeded the earning-per-share consensus and experienced an increase in revenue growth from $1.99 billion to $2.34 billion.

According to our own recent analyses, a renewed economy featuring the promise of sustained growth is part of the reason homebuilders like Lennar Corp. have been able to exceed performance expectations during the early part of 2017. Even though the supply of real estate is limited nationwide — in many cases requiring an increased reliance on off-market expertise — Lennar Corp. was still able to exceed expectations in homebuilding revenue and home deliveries.

In the case of homebuilding revenue, Lennar Corp. succeeded in generating $2.02 billion despite expectations indicating just $1.95 billion. As for the total number of home deliveries, Lennar Corp. again outperformed expectations, increasing home deliveries from 4,806 up to 5,433. In addition to the impact created by early indications pointing to a renewal in economic strength as well as sustained economic growth, the fact that Lennar Corp.’s home-buying incentives increased by $1,100 (up to $22,700 from last year’s average of $21,600) might have also factored into the homebuilder’s ability to outperform its first-quarter expectations.

The increase in the average incentives provided to homebuyers also paired with relatively static average home sales prices, with first-quarter analyses showing an average home sales price of $365,000. Even so, Lennar Corp.’s first-quarter performance is clearly the driving force behind the homebuilder’s stock price rising by 27 percent thus far this year. Lennar Corp.’s year-to-date stock spike of 27 percent compares with a 10 percent increase in the SPDR S&P Homebuilder exchange-traded fund and a 6 percent gain in the S&P 500 SPX.

As Lennar Corp. continues to exceed performance expectations while also outpacing both the SPDR S&P Homebuilder ETF and the S&P 500 SPX, it is fair to wonder whether the homebuilder will be able to sustain its impressive first-quarter performance numbers. Should Lennar Corp. succeed in doing so, it will be interesting to conduct an analysis that properly explores the role of all the different factors enabling the homebuilder to outperform expectations while increasing home deliveries and consistently generating greater homebuilding revenue.

 

References:

http://www.marketwatch.com/story/lennar-beats-profit-and-sales-expectations-as-home-deliveries-increase-2017-03-21?siteid=bnbh

https://seekingalpha.com/article/4056950-lennar-corps-len-ceo-stuart-miller-q1-2017-results-earnings-call-transcript