More Benefits of Real Estate Tokenization
Updated: Feb 1
Real estate tokenization has been gaining attention in recent years as a new way to invest in and trade real estate assets. By tokenizing real estate, ownership is represented by a digital token, which can be traded on blockchain-based platforms. This has the potential to bring a number of benefits to the industry, beyond the commonly known benefits of liquidity, diversification, added security and developers access to alternative funding. We list below some of those benefits:
One of the key benefits of real estate tokenization is increased transparency. By recording transactions on a blockchain, tokenized real estate assets can be tracked and traced in a tamper-proof and transparent manner. This can provide more visibility into the ownership, financial performance, and history of real estate assets, which can help to improve trust and confidence in the market.
#RealEstateTokenization can also help to lower costs associated with buying and selling real estate. By eliminating intermediaries and streamlining the process, tokenization can reduce the need for traditional real estate agents, lawyers, and other professionals. This can help to reduce transaction costs, making it more affordable for investors to enter and exit the market.
Real estate tokenization can also make the process of buying and selling real estate faster and more efficient. By using smart contracts and blockchain technology (assuming the blockchain used is efficient itself, not all blockchains are necessarily good), transactions can be completed in a matter of minutes, rather than days or weeks. This can make it easier for investors to take advantage of market opportunities and can help to reduce the time and effort needed to complete transactions.
Additionally, the same blockchain can be used to distribute yields, rents and make other relevant financial transactions much more efficiently. The beauty about tokenization and smart contracts is that everything can be encoded into the smart contract. As long as the smart contracts have been tested correctly and audited before launch, all parties should receive exactly what they are meant on receiving without any mistakes. This removes or reduces the necessity for many redundant functions such as some elements of accounting. Furthermore, users or owners of the real estate tokens are able to receive daily yields as an option rather than wait until end of the month or end of year to receive rents.
Another benefit of real estate tokenization is that it can make it easier for investors to access and invest in international markets. By removing barriers to entry and making it possible to invest in real estate assets from anywhere in the world, investors can access a wider range of opportunities and diversify their portfolios. What is needed however is a platform or a website that provides a seamless access from other places in the world, and perhaps an aggregator platform that aggregates tokenized real estate deals from all around the world and organize them into one location for easy access, it may help with the adoption.
One nice feature that can be enabled with property tokenization is the flexibility it provides to divide the economical interest into as many units as necessary. Is the owner interested in selling to 100 or 10,000 people, all they need to do is just create less or more tokens. Companies have successfully used blockchains like Algorand and Avalanche for real estate tokenization.
What we love the most about tokenization of real estate, is the future potential opportunities of #DeFi and enabling global access and competition between funders, lenders, institutional and retail investors, all of which should be great news for real estate owners.
Araa Market Team with help from AI