# Commercial Real Estate FFO = Net Income + (Depreciation Expense + Amortization Expense + Losses on Sale of Assets) – (Gains on Sale of Assets + Interest Income) *** Automated execution of full loan servicing/administration lifecycle. Stablecoins for collecting mortgage payments, funding escrow accounts to pay property taxes and insurance premiums, and passing principal and interest on to the investor. * Corporate treasury: Instant transfers between internal business accounts can maximize investment of excess cash, free working capital and streamline reconciliation with data-rich ISO® 20022 messaging. * Corporate payroll: Transferring funds between internal accounts at an organization or between an organization and its payroll processor can enable faster funding, negate the need to prefund payroll accounts and eliminate reliance on less efficient payment options, such as checks. * Vendor payments: Using instant payments to pay suppliers for inventory or services can benefit businesses by improving cash flow management, enhancing operational efficiency and optimizing liquidity management. * Real estate transactions: Immediate clearing and settlement of high-dollar commercial real estate payments, such as escrow account funding and contractor payments, can provide certainty of funds, allow after-hour and weekend payments, and improve transparency during the process. PROBLEM Checks take days to process and can get lost in the mail. Cash payments require in-person drop-offs, which are inconvenient. Money orders cost tenants extra fees and require a trip to buy one. Mortgages Life Cycle 1. Origination 2. Processing 3. Underwriting 4. Closing 5. Warehousing 6. Delivery 7. Secondary market 8. Loan servicing MORTGAGE LIFE CYCLE 1. ORIGINATION The lender helps the borrowers complete the loan application. 2. PROCESSING The lender documents the loan file. 3. UNDERWRITING The lender evaluates the loan file. 4. CLOSING The borrowers sign loan documents; the sellers transfer the title. 5. WAREHOUSING The lender may temporarily warehouse closed loans. 6. DELIVERY The lender packages and sends the loan to an investor 7. SECONDARY MARKET Lenders and investors buy and sell mortgages. 8. LOAN SERVICING Third parties collect the borrowers’ monthly mortgage payment. ### Real Estate Cash management COUNTERPARTIES * Owner * Renter * Renter bank * Owner bank FLOW OF FUNDS 1. Renter sends USD. 2. Owner receives USD. 3. Owner pays utilities. 4. Owner pays repairs/vendors. 5. Owner pays insurance. 6. Owner pays property taxes. 7. Owner pays mortgage. 8. Owner pays management fees. COUNTERPARTIES Borrowers\ Lenders Servicing means receiving any scheduled periodic payments from a borrower pursuant to the terms of any federally related mortgage loan, including amounts for escrow accounts under section 10 of RESPA ([12 U.S.C. 2609](https://www.govinfo.gov/link/uscode/12/2609)), and making the payments to the owner of the loan or other third parties of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the mortgage servicing loan documents or servicing contract. In the case of a home equity conversion mortgage or reverse mortgage as referenced in this section, servicing includes making payments to the borrower. Settlement service means any service provided in connection with a prospective or actual settlement, including, but not limited to, any one or more of the following: (1) Origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of such loans); (2) Rendering of services by a mortgage broker (including counseling, taking of applications, obtaining verifications and appraisals, and other loan processing and origination services, and communicating with the borrower and lender); (3) Provision of any services related to the origination, processing or funding of a federally related mortgage loan; (4) Provision of title services, including title searches, title examinations, abstract preparation, insurability determinations, and the issuance of title commitments and title insurance policies; (5) Rendering of services by an attorney; (6) Preparation of documents, including notarization, delivery, and recordation; (7) Rendering of credit reports and appraisals; (8) Rendering of inspections, including inspections required by applicable law or any inspections required by the sales contract or mortgage documents prior to transfer of title; (9) Conducting of settlement by a settlement agent and any related services; (10) Provision of services involving mortgage insurance; (11) Provision of services involving hazard, flood, or other casualty insurance or homeowner's warranties; (12) Provision of services involving mortgage life, disability, or similar insurance designed to pay a mortgage loan upon disability or death of a borrower, but only if such insurance is required by the lender as a condition of the loan; (13) Provision of services involving real property taxes or any other assessments or charges on the real property; (14) Rendering of services by a real estate agent or real estate broker; and (15) Provision of any other services for which a settlement service provider requires a borrower or seller to pay. RE TXN COUNTERPARTIES * Real estate broker. * Real estate agent. * Seller. * Buyer. * Mortgage lender. * Home inspector. * Title search company or lawyer. Why stablecoins for CRE payments? * Enhance convenience of tenant collections with ‘always-on’ instant payments * Reduce concerns about delays and additional costs with transparent timing of funds * Accelerate disbursements with immediate availability of funds * Automated periodic (recurring) monthly cash distributions to investors * Lump sum large value cash distribution to investors Stablecoin CRE use cases
Development and ConstructionReal Estate FinancingProperty SalesProperty Leasing and Management
Drawdown on construction loansMortgage loan origination and associated feesEarnest money deposit and cash to close from buyerRent payments
Supplier paymentsMortgage loan payoffPayout of seller proceedsProperty owner or investor payments
Earned wage access for subcontractorsHome equity loans and reverse mortgage paymentsOther payments made at closing such as title insurance premiums, real estate commissions, attorney, inspector and appraisal fees, and home warranty policy premiums, among othersTenant collections like utilities
## Taxes Asset sale | Tax Implication | Opportunities for Deferred Capital Gains | | ---------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Any capital gains realized from the sale are subject to capital gains tax. | Through a 1031 Exchange, investors can defer capital gains taxes by reinvesting the proceeds from the sale into a "like-kind" property within a specified time frame. | | The tax rate depends on various factors, including the holding period of the property and the investor's income tax bracket. | This allows investors to defer paying taxes on the capital gains until a later date when they eventually sell the replacement property. | ‍refinancing | Tax Implication | Opportunities for Deferred Capital Gains | | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | | Refinancing generally does not trigger taxable events, as it involves restructuring debt rather than selling the property. However, investors should be aware of potential tax implications related to cash-out refinancing, such as recaptured depreciation or passive loss limitations. | Refinancing does not provide direct deferral of capital gains taxes since it does not involve the sale of the property. | | | | Fannie Mae MBS
*** GLOSSARY FFO Funds from Operations RESOURCES [Real estate transactions and instant payments](https://explore.fednow.org/resources/real-estate-transactions.pdf) [Mortgage lifecycle](https://www.mgic.com/-/media/value-adds/fundamentals/71-42870-book-pdf-fundamentals1.pdf?v=3) [Basics of Fannie Mae Single-Family MBS](https://capitalmarkets.fanniemae.com/media/4271/display) [Surviving the Real Estate "Escrow" Process in California](https://www.dre.ca.gov/files/pdf/escrow_info_consumers.pdf) [REIT Tax Big Brains Conversation](https://www.reit.com/sites/default/files/meetings/REITWise17/REIT%20Tax%20Big%20Brains/REIT%20Tax%20Big%20Brains%20Conversation.pdf) [Real Estate Investment Trusts (REITs)](https://www.smeal.psu.edu/bires/reit-stock-pitch-competition/reit-introduction-lecture.ppt) [HSBC’s Guide to Cash, Supply Chain and Treasury Management ](https://www.hsbcnet.com/-/media/hsbcnet/attachments/products-services/transaction-banking/payments-cash-management/guide_2012.pdf) [Oracle Cash Management User Guide](https://docs.oracle.com/cd/E18727-01/doc.121/e13483/T359831T359834.htm) [The Book of Jargon: Real Estate & REITs](https://www.lw.com/admin/upload/SiteAttachments/boj-real-estate-reits.pdf) [Flow of Real Estate Transactions (in the case of an individual purchasing a home)](https://www.mlit.go.jp/common/001050450.pdf) --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.xft.finance/idn/use-cases/commercial-real-estate.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.