How investors and owners benefit from tokenization
Tokenization removes the middle man, making it easier and cheaper for investors to buy/sell real estate and for owners/developers to raise capital. Investors can trade tokens almost instantly and for a very low fee (similar to stock market trades). For owners, tokenization makes it possible to raise capital without financial intermediaries to underwrite the project.
Real estate has historically delivered attractive returns, but it has high barriers to entry because the assets involved are so expensive. Investors in tokenized real estate assets get the best of both worlds: the high returns of real estate investments (even with a very small investment), and the liquidity of the stock market.
It’s also important to note that because real estate tokens are backed by real assets, they carry far less risk than cryptocurrencies or ICOs, which are highly volatile and speculative assets. What’s more, stabilization measures can be put in place to ensure the value of the security token does not deviate too far below the underlying net asset value (NAV) of the property.
The future of commercial real estate tokenization
The global real estate market is valued at US$228 trillion. Before the tokenization of real estate, only accredited and institutional investors had access to the most exciting projects. But now asset owners and developers can market their projects globally to retail investors as well as institutions.
Tokenization also brings much-needed liquidity and transparency to a traditionally opaque industry. The ability to trade shares in real assets, in real-time (the same way public companies are traded in stock markets) should attract more investor attention and unlock the potential for more ambitious and unique real estate developments.
Of course, investors can already buy and sell real estate investment trusts (REITs), but these often have high minimum investments and represent a large portfolio of companies rather than a single property or new development.
The tokenization of real estate is giving investors and owners alike the freedom to raise/invest capital how they choose. Tokenization will also impact other illiquid asset classes, like private equity and venture capital.
Read more about the future of tokenization in this Medium article written by predecessor, SolidBlock’s co founder Yuval Wirzberger.