Three Promising Benefits Of Tokenizing Real Estate
Tokenization is on track to be the next big thing for real estate. By running on blockchain technology, tokenization enables investors to easily capitalize on properties of all kinds, from houses to land.
Throughout the process, the ease-of-access, transparency, and liquidity are the ultimate benefits of tokenizing real estate. This new approach is starting off strong and is ready to shake up the industry in the coming year.
1. A Simplified Process
The traditional real estate market, as it is now, is growing steadily. The industry is likely to grow by 0.7% in 2021 alone. However, this traditional approach involves countless steps. With more people involved, transactions and ownerships become more complicated. Technology can boost that growth while making the process more efficient.
An intermediary links together the seller and investor, which the blockchain can now completely avoid thanks to tokenization. Due to its decentralized nature, blockchain networks store each transaction in a ledger, and they do so without the need for an intermediary. As an investor, you’d receive a form of digital currency or assets directly through the blockchain system.
This simplification creates a more efficient real estate industry. From initial construction steps through to selling, each member of the team can use tokenization as a form of payment, verification, and ownership.
Investment platforms like Harbor and Galaxy Digital Holdings are already moving forward with integrating digital assets in the real estate field. Just as cryptocurrencies developed their own platforms, real estate tokenization is now doing the same.
2. More Transparency
A lack of clarity and financial transparency is one of the biggest setbacks in real estate. Investors want to know exactly where their money is going, and they want to make sure they will profit from their real estate investments. Without transparency, deals fall through and conflicts arise, sometimes leading to legal battles.
On the blockchain, no one can alter a transaction at any point. The network holds a record of each movement of every token. While you can continuously add transactions or make notes, this immutability adds significant layers of security to prevent fraud and breaches.
Through tokenizing real estate, you’ll have a clear visualization of where your digital assets are and where you’ve traded them. The automatic logging happens instantly — there’s no waiting for the owner to accept the investment. Instead, the investor is part of each step.
This kind of transparency and security is ideal for an industry that moves fast to buy and sell properties. Tokenization is becoming such a growing trend that major fintech companies are taking part in the action. PayPal recently announced it now accepts digital assets, which will be a major step in normalizing tokenization.
3. Liquidity of Ownership
Standard investments in real estate are rigid. They only allow a certain amount of flexibility, with strict contracts sometimes holding investors from selling or trading. With tokenization, the same investors get much more leeway and liquidity with their ownership.
Here, decentralization plays the biggest role. Blockchain’s distributed availability and ease-of-access make it so you can purchase shares of a real estate property at any time with your digital assets. Moreover, you don’t have to worry about rigid restrictions. Instead, you can sell your shares or purchase more with ease.
This new dynamic brings up the idea of fragmented real estate, where partial ownership is more common rather than an inaccessible market. In place of only a few, exclusive investors having shares, instead, more people can now participate with blockchain.
Fluidity and Blockchain App Factory are two startup enterprises that focus on the liquidity factor, helping investors profit off their decisions. They’re examples of what’s to come for tokenizing real estate.
Upcoming Trends
Tokenization of real estate is just getting started. Based on these three benefits, new trends are already getting their footings today.
On a foundational level, tokenizing is going to grow in 2021. With widespread collaboration between developers and investors, blockchain can become even more useful and necessary for trading and selling, as well as helping motivated parties capitalize on capital gains and dividends all across the world in a convenient but decentralized way.
However, on a more profound level, tokenization could change ownership and how you invest.
Single Earth is one major example. This venture capitalist group is tokenizing properties in unique ways. Instead of the traditional idea of real estate, Single Earth allows you to invest in natural plots of land, like forests or ecologically rich areas. However, while you’ll have ownership of the land, it’s the carbon offset programs that generate money.
Single Earth sets out to protect and help the environment. Through tokenizing biodiverse lands, this enterprise can now benefit investors and the earth at the same time. You’re likely to see other startups looking for ways to tokenize real estate in unique ways too, letting you own property like never before.
Moving Forward
The main necessity moving forward for the United States is to normalize the use of digital assets. Right now, the Internal Revenue Service considers virtual currencies as property instead of actual currency. New regulations that change this will help bring blockchain and tokenization into the limelight.
Regardless, tokenization is moving forward quickly. It’s a new, innovative force that changes how people invest. With more attention and use, real estate could be a launching point for tokenization.
