Are Tokenized Properties the Future of Real Estate Investing?

Tokenized properties, real estate and blockchain
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By Gabriel Negrin

Let’s be honest… younger generations can’t invest as easily as their parents did. Inflation rises every day and money is worthless and less. For this reason, millennials are often unable to purchase a house — they can only rent. 

Here’s the good news: The nascent world of blockchain technology may help to change this narrative through tokenized properties.

A New Era of Real Estate Tokenization? 

Say you want to invest in a property but don’t have enough money. Sadly this is a reality for many, if not most people. But what if you could invest in a part of a property?  In other words, while you are not the full owner, you still receive dividends from it. 

This is known as real estate tokenization. This process involves the creation of tokens on the blockchain that are then assigned to existing or upcoming real estate properties. It’s a tool that allows you to invest in a house or maybe an apartment through the use of cryptocurrencies validated by the blockchain.

According to DigiShares, a company that helps build bridges between traditional finance and blockchain technology, the process of tokenization is as simple as four steps: 

Step 1: Determine the specific property or properties to tokenize. Here, the jurisdiction needs to be considered along with types of shareholders and relevant regulations.

Step 2: Dictate the legal structure. Various options are available to achieve this. The owner can choose to tokenize the equity via a Special Purpose Vehicle (SPV) or other forms of participation.

Step 3: Choose the blockchain protocol and token configuration. In this step, the token custody solution must be set up along with a custody provider. And of course, the right blockchain network must be selected for token creation.

Step 4: This step involves the creation of a distribution plan and payment method for potential investors. Here, the owners will get access to a dashboard where they can see how much money they’ve raised in real-time.

Benefits for Buyers and Sellers

So here’s what we know so far — The property is transformed into digital tokens; All this is done via blockchain platforms designed especially for real estate; Each token represents a share of a real estate property.

When these tokens are sold on the market, investors buy and receive fractional ownership of the property. These investors can then sell or buy as many tokens as they want or need.

Tokenized properties have an immutable nature — just like crypto. In other words, once a transaction is on a block, nobody can change it and thus contracts can’t be falsified.

Since it has a lower entry cost, a greater number of people can have access to it. And more people having access to it can only mean one thing: more liquidity.

Democratized Real Estate Investing Through Smart Contracts

Since smart contracts are being utilized, there is no need to negotiate every contract individually. The terms and conditions are put in place automatically. Everything is transparent — no shady deals behind the curtain.

This is the new future, the democratization of real estate investing — all done with crypto, of course.





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