Tokenized real estate investment makes it possible to invest with low capital into the property market. Tokenization based on the blockchain technology can also be used for other assets such as art. It enables access for private investors, starting with small capital funds.
Understanding tokenization: an example
Tokenization of assets is suitable for difficult accessible investment areas, such as high valuable art paintings or even land. An example to explain tokenization is a painting by the most valuable artist still alive: Gerhard Richter. His painting is worth several million euros and its just available for a few art lovers. The value of the painting is tokenized: it means it is divided in token. It has a value for which millions of tokens can be issued. All tokens issued for it have the same value, since the total value of this painting is divided equally into tokens. The number of tokens issued is determined before the tokenization, and before the tokens are available for investors. Anyone who purchases one or more of these tokens owns shares of this painting in the value of the bought tokens. If the value of the painting increases in value also the value of the tokens rises.
Digitalized financing: tokenized real estate
Digitalized financing in other areas, like for example tokenized realestate works in the same way. By investing in tokenized realestate, even those investors whose capital would otherwise be insufficient may have access to the real estate market. A property is divided into security tokens. Tokenized real estate financing is also available for properties that are still under construction or just planned. The financing processed via the blockchain is available for existing buildings. It is completely digitally. With a small capital investment, every investor can acquire a token and thus invest in a tokenized real estate.
Blockchain and the property market
Blockchain and tokenization is already considered by various experts to be the financial instrument of the future. There are a lot of news about this topic. It is important to understand, how exactly the process of tokenization works.Tokenization means a breakdown or division. A property is divided into tokens. In a digital securitization process a division into tokens takes place. The security tokens get divided in parts, divisions of ownership of certain goods or assets. Thus, a tokenized realestate represents the digital securitization of shares of an investment property.
Startups can use tokenization methods to fundraise capital. Tokenization can be processed for many sectors like properties or other bureaucratic stuff, as well as for other assets such as art objects or sustainable projects. These can be for example for environmental protection or charitable purposes.
It represents a very big potential for the digital future, as many processes can be massively simplified. Even smaller investors can invest in property or land with tokenized realestate. If you also see this potential or if you have any questions about the topic or the blockchain feel free to visit us in our Investment4Insider Telegram group!
Tokenized real estate for investment based on the blockchain technology
When it comes to the topic of tokenized real estate, you maybe wonder how property investments and tokens and cryptocurrencies or the blockchain can work together. If you are interested in these topics and you want to invest in a share in a property, you do not have to invest in a cryptocurrency. But an existing blockchain can be used to invest in real estate. Tokenized real estate can be bought for example via the Ethereum blockchain. The Ethereum blockchain is suitable for tokenization of different assets. The blockchain represents a kind of database in which the information is recorded with a timestamp. Tokenized property shares and investment, based on the blockchain is still in its early stages. The technical requirements for it need to be more established. However, several properties have already been tokenized. In this field of usage of the digital tokenization it is amazing because it allows short codes, smart contracts, to be written. These smart contracts contain a lot of information:
- Rights associated with the purchase of a token
- Number of tokens issued
- Public key for the token.
In the future, smart contracts could contain much more information related to properties and land investment.
Protected against manipulation
The absolute key advantage applies also to the use of tokenization in other assets and projects such as art objects or the funding of startups. It is the main point of the tokenized realestate: the blockchain cannot be manipulated. Digitalized assets have thus a huge potential for the future. If you want to discuss with us about it feel free to visit us in our Investment4Insider Telegram group.
Investment in digital divided and secured properties through the blockchain allows investors to access the real estate market with little effort. It is possible with a low capital investment and without much paperwork. Owners of the properties could tokenize their own property in the future to provide capital for maintenance or modernization. The tokenization of properties for investment and financing would then be similar or comparable to a loan that is available at low cost. Transaction costs can also be low if the token are issued at an exchange. In future, there could be different models for this. The tokens are distributed on the basis of the blockchain technology, so each investment can be tracked and cannot be manipulated.
Broad risk diversification in realestate investment
Realestate investment funds have already proven the worth for private and institutional investors who want to gain access to the real estate market with a small capital investment. You can invest into real estate from different countries or in residential properties, hotel chains, commercial properties, and public buildings if you buy the tokenized real estate. Tokenized real estate gives you access to properties in worthy locations with a small or big investment. Real estate and other investment properties can be made accessible to any investor via tokenization.With tokenized real estate you can access the property market with even lower investment. Diversification is important in financial investments to spread the risk. But also to take advantage of the opportunities and new trends tokenized real estate has a huge potential. In the future, this can also be achieved with tokenized real estate by acquiring tokens for different properties.
What might this look like in the future?
Blockchain-based tokenized real estate is already available for a villa in a suburb village of Paris. Also for some buildings in the US, Germany and Switzerland tokenized real estate investment is available.
Tokenized real estate takes place fully on the blockchain. It stores a digital image of a property. Details such as building plans, location, property rights and investor rights are saved and secured in a smart contract – completely digital. The value of the property is determined and distributed among a pre-assigned number of tokens. Investors who want to benefit from tokenized real estate do not need to be on site to purchase tokens. The initial issuance of tokens can be done through a digital exchange. As mentioned before, it can be done with tokenized real estate and other assets. This shows the great potential for the future. In case that you feel to discuss or talk about this amazing potential and tell us your impressions, feel free to join us in the Investment4Insider Telegram Group!
Once you acquire tokens, you can hold them as an investment. You can also sell them through the secondary market. You are always liquid if you sell all or some of your tokens. Tokenizing real estate thus allows better liquidity than acquiring a complete real estate. You can sell existing tokens whenever you need money. Both institutional and private investors can invest if it is a tokenized real estate. While institutional investors purchase a large number of tokens, private investors may purchase also only a few tokens according to their financial situation.
Fazit: benefits and potential of tokenized real estate
You benefit from the increase in value of a property. Usually you may also get rewards from the rental income for that property. Selling a complete property is nowhere near as easy. Through the digital processing it is possible to sell the token or the real estate without being geographically at the place.
Those, and many other possibilities of a potential passive source of income are given by the decentralized finance sector and blockchain technology. If you want to learn more about this, are interested in the topic of blockchain and DeFi or would like to exchange ideas feel free to visit us in our Investment4Insider Telegram group!
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