Benefits of Tokenized Real Estate
April 13, 2023
With the rising popularity of cryptocurrencies and the tokenizing of different types of assets, it should not come as a surprise that real estate tokenization has finally made it to the market and it could make it big. The traditional real estate investment models like real estate funds, sole ownership and REITs have worked well in the past but this new model is allowing more investors to get in on the action.
Let us get into more detail about the benefits of tokenized real estate.
The most challenging aspect of real estate investment is that your money is locked in or tied up for a certain period of time. It could mean a lower level of cash and the transactions could become much slower. However, with real estate tokenization, you can enjoy fractional ownership which means freeing up the cash whenever you need it.
Low Cost of Entry
When it comes to the traditional real estate investment, you will be purchasing a physical structure and it will require a significant amount of money. However, there are many crowd investing platforms where you can find the minimum investment amounts but they are sometimes higher than what investors are willing to contribute. Hence, when you invest in real estate tokens, you can invest small amounts of capital across a range of properties and this can help achieve your goal of diversification.
Transparency & Security
There is a distribution ledger technology (DLT) in the blockchain technology which uses an advanced security technique and ensures trust in all the transactions. So, whenever a token undergoes a transaction, everyone will be aware and investors can easily view the specific token’s history, including the pricing and other details whenever they want to.
Lower Transaction Costs
When you invest in tokenized real estate, you will not be subject to many of the fees or costs that are attached with the traditional real estate investment transactions. Since there are fewer “middlemen”, as well as less regulations to deal with, you will enjoy an overall lower cost of investment.
As you can see, there are several benefits of investing in tokenized real estate but the truth is that it is a new technology and does not have a lot of history to prove the concept yet. While diversification is the key, you must be very careful and do your due diligence about the model you choose to get in. That said, the traditional real estate investment models like funds and REITs are here to stay and will continue to provide diversification at low costs.