Real Estate Tokenization
Real estate has always been considered one, if not the safest investment available. The problem is that in the past decades, it has become increasingly difficult to obtain for the average, retail investor. The barrier of entry has become exceedingly high because salaries have not been increasing at the same rate as real estate values have been increasing. This is due to several factors, but we won’t go into that.
Real estate Tokenization to the rescue!
By now you have surely heard about blockchain and tokenization (if not, please check the links). What you might not have heard about, or had a clear understanding of, is how you and everyone around you can benefit through tokenization, and in particular, Real Estate Tokenization.
How would you feel if you and everyone else you knew, could start investing in the same real estate properties as multimillionaires? Yes, even luxurious, prime residential or commercial real estate is literally at your fingertips now that tokenization is a reality here at Brickken.
What is tokenization? Tokenization is the process by which a business or an asset is divided into tokens of equal rights and value. The tokens can be purchased by anyone at any time, with no geographical boundaries. Using a platform like Brickken, anyone is able to participate in one of the safest investments of the past few thousand years through tokenization.
Real estate tokenization is one of the best use cases, in our opinion! The tokenization of brick-and-mortar assets benefits both the asset owners and retail and institutional investors alike.
The main benefits of real estate tokenization for asset owners or real estate developers looking to generate extra assets to their portfolio.
- Possibility to create liquidity. As you may know, real estate assets are not the most liquid. This means that the value in that asset is locked and not readily available to be traded or used as cash, generally in order to get liquidity, traditionally you would have to go to a bank and get a mortgage, or a loan against the equity in your real estate. This process is long and arduous, many times not providing the liquidity fast enough. With real estate tokenization, through a platform like Brickken, an asset owner can issue tokens that represent equity, a portion of the asset, or debt, a loan with a given annual percentage return to all token holders on a pro rata basis. The issuance on the platform can be done in a matter of minutes, and investors are then able to purchase the securities, giving the asset owner instant liquidity.
- Decrease in limitations to raise capital. The traditional methods of raising capital as mentioned can be arduous, and the success rate is lower based on specific circumstances of the developer such as their credit rating, terms of the deal, prepayment assumptions, etc.
- Ability to attract new investors. Through real estate tokenization, asset owners and real estate developers are able to attract a new, diverse group of investors from all walks of life, from all parts of the world. There is a huge wave of crypto investors, that have made outrageous returns in the past 5-10 years that are now interested in putting their profits into some old school, brick-and-mortar assets, and they are definitely the most open to investing and acquiring in those assets through new school methods. These new investors can come from anywhere in the world, there are no more geographical boundaries, and there are more millennial investors today than at any other time in history. High net worth family offices are also showing a lot of interest in investing on real estate tokenization platforms.
- Automation of processes. With Brickken, real estate tokenization makes it possible to digitise and automate many processes related to the financing and management of investors. From allowing shareholder meetings and voting electronically, to having the audited smart contracts have ‘rules’ built in and locked on the blockchain. Depending on the investment form, token-holders have a direct claim on the cash flows from the real estate that has been tokenized and also can earn the corresponding capital gain on their tokens when the property is sold.
The main benefits for the Investor using real estate tokenization
- Digital, safe ownership of your stake in the form of tokens that can be issued, transferred, recorded or stored on a blockchain system. The security tokens are transferrable as they are held and exchanged along distributed ledger technology.
- Liquidity. Investing in real estate security tokens also allows for rapid liquidity if needed, by selling on a platform like Brickken. If you invested in a real estate development project, you can sell your tokens at any time if you need that investment money back before the project is built. This is not possible if you invest in a real estate development through the traditional means.
- No geographical boundaries. With real estate tokenization, anyone from anywhere in the world can now invest in their dream properties in any location globally. From investing in condos in the beaches in Tulum, Mexico to investing in a 5-star hotel in prime, central London, real estate tokenization makes every asset attainable.
Advantages of Real Estate Tokenization using Brickken
- Brickken is your own real estate crowdfunding platform
- Allows investing in most currencies (fiat & crypto)
- Uses audited smart contracts for the highest level of safety and security
- Offers instant liquidity through our OTC marketplace
- Electronic signatures
- Ease and speed of transactions
- No geographic boundaries
If you liked this article, please have a look at our guide to invest in real estate. The combination of this advice and investing through tokenization will make you one of the investors of the new generation! And also take a look at this other article on real estate investment through tokenization to dig deeper into the subject.