Real Estate Tokenization For Beginners

Real Estate Tokenization For Beginners

Ellen Britt for CNT #NFT

Tokenization is already being used for many applications, so it’s quite natural it would come to the real estate space as well. But what is real estate tokenization? Let’s find out!

Investing in real estate has been a popular and for many people, a lucrative way to grow their money. To get some idea of just how lucrative, the market for managed real estate grew to $10.5 trillion (with a T!) in 2020. 

Traditional Real Estate Investing Takes Capital

There are a lot of people who would love to make money with both residential and commercial properties but the opportunity is not readily available to everyone. Real estate investing takes significant capital to get started, plus your return on that investment can be a long time in coming.

Real Estate Investing For Everyone

Real estate tokenization can help to solve some of these problems by simplifying and “democratizing” real estate investments so they are available to more people. It can be helpful to think of tokenization sort of like crowdfunding. This breaks the total value of any one particular real estate investment into smaller pieces. Each fraction of the real estate asset is then converted into a token and encrypted with the complete details on the property that grant ownership.

Any Property Can Be Tokenized

Any property can be tokenized such as an apartment, a commercial office building or even a luxury resort. This makes the minimum you need to invest in the property considerably lower than if you had to invest in the entire property as a single investor. 

Advantages Of Tokenization

Plus, as an investor, your liquidity is better. Let’s say the property value has increased and you want to get out while the price is up. You can simply sell your tokens, either through a private transaction or through a liquidity pool. These pools are the safer way to go, as they are regulated by smart contracts. 

Tokenization For Real Estate Owners

If you are a real estate owner and want to tokenize your property, you have an advantage, in that more investors will likely be interested, as they don’t have to put up as much money and you will likely get your funds faster.

We’ll get a closer look at the actual process of tokenization in another article. So stay tuned!

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By Ellen Britt

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