Through tokenization, physical assets, such as real estate, can be transformed into digital tokens that can be bought, sold, and traded on a blockchain platform. This technological advance has opened a range of possibilities in the real estate sector, offering benefits such as fractional access to real estate investments, greater liquidity, and portfolio diversification.

In this article, we will explain in detail what tokenizing a real estate asset is and how it can revolutionize the way we invest in and access property. We will discover how this process is carried out, analyze its advantages, and some notable examples of companies that are already using real estate tokenization.

WHAT IS TOKENIZATION OF AN ASSET?

Asset tokenization is a process by which physical assets, such as real estate, artwork, stocks, and even intellectual property rights, are converted into digital tokens represented on a blockchain.

This process is based on the use of smart contracts, which are intelligent contracts that establish the rules and conditions for the issuance, transfer, and possession of the tokens. A portion of the ownership or value of the underlying asset is represented by each token.

Asset tokenization offers a number of benefits, such as increased liquidity, up-to-date values, lower operating costs, proof of ownership, transparency, collective management, and a more inclusive market.

These benefits enable greater accessibility, efficiency, and security in asset transactions, opening up new investment opportunities for a broader user base.

HOW DOES TOKENIZING REAL ESTATE ASSETS WORK?

The tokenization of real estate assets is revolutionizing real estate investment by leveraging blockchain technology to convert property rights into digital tokens. This process unlocks the value of real estate assets and creates new investment opportunities.

Tokenize real estate assets

To carry out tokenization, a suitable real estate asset is selected, such as a building, land, or commercial property. Next, a contract is drawn up that establishes the terms and conditions of tokenization, including aspects such as the distribution of income, the duration of the contract, and the rights of investors.

Once the contract is in effect, the tokens are issued. Each token represents a fraction of ownership and is backed by corresponding property rights. These tokens can be bought, sold, and traded on specialized exchange platforms, providing liquidity and accessibility to investors.

It is important to note that the tokens remain the property of the original owner of the property. The owner decides the amount of tokens he wants to sell, which makes him an investor in his property. The management of the property, including monthly leasing and sales, is carried out by an independent manager whose objective is to maximize income and protect the interests of investors.

A concrete example would be the following: if a house is sold for 500,000 euros and 10,000 tokens representing that property are issued, each token would have a value of 50 euros. Investors acquire these tokens to obtain benefits from both the purchase and sale and the income generated by the property.

ADVANTAGES OF TOKENIZING REAL ESTATE ASSETS

The tokenization of real estate assets offers a number of significant advantages for investors and market participants. Below we detail some of them:

EXPAND THE USER BASE AND FACILITATE ACCESS TO ASSETS WITH LOWER INVESTMENT:

The tokenization of real estate allows companies and individual investors to access investment opportunities in the real estate market that they did not have access to before.

INTRODUCE NEW CAPITAL:

Property tokenization attracts new investors and generates a flow of fresh money into the real estate market, which can boost economic activity and property development.

INCREASE EFFICIENCY AND SIMPLIFY THE PROCESS:

Tokenization of real estate assets improves efficiency and simplifies the investment process by removing obstacles and complications from the traditional real estate market. With tokenization, transactions are streamlined and become faster and more efficient.

ELIMINATE BUREAUCRACY AND REDUCE COSTS:

Real estate tokenization assets reduce bureaucracy by using blockchain technology, which avoids the need for intermediaries and red tape in the investment process.

OVERCOME GEOGRAPHICAL BARRIERS:

The tokenization of real estate assets opens the market globally, eliminating the geographical barriers of the traditional market. This expands business opportunities by allowing investors to access and trade real estate assets in different parts of the world.

MORE SECURITY AND GREATER TRANSPARENCY:

Blockchain technology provides security and transparency through immutable records and smart contracts. Ownership details and transactions are securely recorded, ensuring the integrity of the assets and providing transparency in the terms and agreements between the parties involved.

GENERATES GREATER LIQUIDITY:

Real estate tokenization can improve the liquidity of the real estate market. Tokens are easier to buy and sell compared to traditional property sales. This makes it easier to enter and exit the market, which in turn increases liquidity and gives investors the flexibility to adjust their portfolios as needed.

DIVERSIFY THE PORTFOLIO:

By adding real estate assets to their portfolios, investors can diversify their holdings through real estate tokenization. By acquiring tokens of different properties, you spread the risk associated with investing in real estate.

USES OF TOKENIZED PROPERTIES

The tokenization of real estate offers various possibilities in terms of investment and access to the real estate market. Let's look at some of the uses that can be given to tokenized properties:

GENERATION OF INCOME THROUGH RENTAL:

Owners of real estate tokens can earn profits by renting out the properties. This provides the opportunity to generate passive income and diversify sources of earnings.

Additionally, by increasing the supply of rental properties, downward pressure can be placed on rental prices. This benefits tenants by making housing more accessible and reducing the cost of living in urban areas.

COLLECTIVE FINANCING OF REAL ESTATE PROJECTS :

The tokenization of real estate also allows crowdfunding of real estate projects. Developers can split ownership into tokens and sell them to investors interested in backing the project. This can help developers raise capital to finance the construction, renovation, or rehabilitation of properties.

REVITALIZATION OF ABANDONED PROPERTIES:

Property tokenization can give life to abandoned buildings and properties. By allowing multiple investors to participate in the property through tokens, the resources needed to rehabilitate and revitalize these properties can be pooled. This not only benefits investors but also the community by improving the urban environment and increasing the supply of housing.

FOUR NOTABLE EXAMPLES OF REAL ESTATE TOKENIZATION IN COMPANIES

As real estate tokenization gains popularity, more and more companies are adopting this innovative technology to offer more accessible and efficient real estate investment opportunities.

Next, we will see 4 cases of companies that are giving investors the possibility of participating in the real estate market in a more fluid and diversified way.

A leading blockchain technology company has ventured into the tokenization of commodities, including real estate, in collaboration with financial and government sectors. Its solution combines the tokenization of real estate with the use of a digital currency and lending protocols, facilitating its purchase, sale and negotiation.

An American company specializes in the tokenization of residential properties. Through its platform, investors can acquire property-backed tokens and earn passive income through the rentals generated.

A New York-based digital platform is revolutionizing real estate investing. It allows investors to purchase fractions of properties rather than purchasing entire portfolios, eliminating fees associated with traditional investment models and offering greater transparency and profitability.

A European company specializes in investing in real estate assets using Ethereum technology. This platform allows investors to participate in real estate investments with an initial amount of only 200 euros. With this solution, investors can affordably access the real estate market and take advantage of the advantages of asset tokenization.

As we have seen throughout this article, the tokenization of real estate assets is presented as an exciting and transformative opportunity in the world of investments. This innovative technology opens new possibilities by allowing the fractional purchase and sale of properties, providing greater liquidity, diversification, and accessibility to investors.