Benefits of Real Estate Tokenization

[Julio Gonzalez]

“Buy land, they aren’t making it anymore” said Mark Twain. While real estate is considered a fairly safe investment, it has previously been relatively illiquid. That is a thing of the past thanks to the tokenization of real estate.

Real estate tokenization is where digital securities are created that represent ownership in an entity that operates and/or holds the underlying real estate assets. This is done using blockchain technology such as Tezos or Ethereum. There are many benefits of real estate tokenization versus traditional methods of investing in real estate.

9 Benefits of Real Estate Tokenization

1. Increased Transparency - Investors are able to know the property’s value in advance since there are regular updates to the blockchain-based system.
2. Access to Capital - There is an increase in capital flowing into a project since the property can be fractionalized more efficiently allowing for more investors to participate.
3. Diversification of Portfolio - Fractionalized shares allow investors to invest in multiple properties as well as internationally.
4. An Investment backed by Collateral - Real estate tokens offer considerably less risk than cryptocurrencies since the tokens are financially supported by tangible property.
5. Constant Oversight - The real estate token’s value shouldn’t fall below the net asset value (NAV) of the real estate assets due to regular checks and balances to ensure stability.
6. Increased Pricing Accuracy - Since discounts due to illiquidity will be largely decreased, the price of the asset will approximate its real market value. Additionally, investors have the ability to trade assets at low fees in the secondary market easily.
7. Faster Settlement and Reduced Overhead - Tokenization eliminates intermediaries including agents and brokers since the operations are converted digitally and are now automated.
8. Reduced Opportunity for Fraud - No changes can be made to a transaction that is recorded on the blockchain network, increasing investor confidence.
9. Real-Time Pricing Information - Investors can quickly find better trading deals since the paper-based systems where data is shared asymmetrically have been eliminated.

Have you utilized Real Estate Tokenization or do you have any properties where you think this could be beneficial?