22 March 2022

Five Reasons to consider Investing in tokenized Real Estate

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Real estate is a long-standing market constituting about two-thirds of global wealth, according to McKinsey & Company.

However, despite its many benefits, investing in real estate is capital-intensive. The good news is that tokenization lowers the entry barrier and makes it possible for virtually anyone to enter the real estate market with a modest amount of money.

Advancements in Blockchain technology have sparked a surge of interest in its potential applications in real estate. While this technology is still misunderstood by many, its legitimate application will become visible to everyone over time.

Blockchain technology is best for transparency, security, and speed. If you couple that with real estate, you’d be investing in a secure, convenient, and frictionless space. Without further ado, let’s take a look at some benefits of investing in tokenized real estate.

Five Reasons to consider Investing in tokenized Real Estate

If you are new to Blockchain, it is essentially a digital ledger. This ledger records and distributes copies of transactions across computer networks. Blockchain technology makes transactions safe and difficult to hack.

Implementing Blockchain technology in real estate is one of the most exciting of its applications. The truth is, the opportunities are endless if you invest your money in it. Here are five reasons you should consider Blockchain real estate as a viable investment option.

1. Transparent and Secure Transactions

Via blockchain technology, you can buy digital tokens that represent ownership of an asset. Because every transaction is securely listed on the blockchain, it is very easy to verify ownership of an asset, but also to trade it easily with other market participants. This adds an unprecedented amount of transparency, security and ease when it comes to making transactions.

2. Buying Fractions of a Property

Buying an entire property on the ‘traditional’ market may not be friendly to your pockets. Real estate can be capital intensive, despite its wide range of offerings. 

This is where the Blockchain brings an alternative solution: you can now buy a fraction of real estate and grow your holding gradually. You don’t have to worry about maintenance costs or leasing issues. It allows you to purchase properties using digital tokens that represent ownership of an asset. If you decide to sell it, you can locate a buyer on the digital market and receive your profits without the long-winded processes typical to the traditional real estate market..

3. Diversification of Properties

Putting all your eggs in one basket comes with a certain degree of risk. However, in the traditional real estaet market, it is likely your capital will be placed exclusively in one property, and growing a diversified portfolio is prohibitively expensive. A property that has costly issues or is simply not profitable can drag you down and severely impact your investment journey. 

A key benefit of being able to purchase ‘slices’ of different properties, or to invest in a professionally managed portfolio of properties, is that you can diversify your stake among several properties and therefore reduce your risk exposure.

4. Reduction of fees

Fees are endless in real estate – agent commissions, legal fees, registration fees, notary fees, taxes, maintenance fees … These add up very quickly and create a significant barrier to entry for the average investor.

Being able to purchase ‘slices’ of real estate in the form of tokens dramatically reduces fees and makes real estate more accessible to the average investor. That’s not to say the fees are entirely removed, but they are split up among investors according to the size of their holding. In addition, the ability of market participants to trade directly via tokens also reduces the need for middlemen such as estate agents.

5. Liquidity

Purchasing an entire property can be both expensive and time consuming. For instance, if a homeowner wants to sell their property, they need to sell the property in its entirety. Finding a buyer with the right budget and criteria takes time. There could also be delays from either party due to personal constraints, and a need to secure financing from banks. There could also be delays as a result of needing to get approval and going to a notary to do the ownership transfer paperwork.

An advantage of being able to buy ‘slices’ of a property and trading directly between users with few middlemen dramatically reduces those issues and provides unprecedented liquidity to the real estate market. Ultimately, there is more cash flow in a safe and secure network. With ease, you can buy, sell, and secure your profits.