A Beginner’s Guide to Real Estate Tokenization

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A Beginner’s Guide to Real Estate Tokenization

A Beginner's Guide to Real Estate Tokenization (1)

Real estate has always been crippled with certain limitations. It’s tedious, as transactions take weeks or months and are costly because the process is heavily plagued by pricey red tape and intermediaries. And on top of all that, there are also heavy geographic restrictions. Opening up the real estate space by integrating this real-world asset with blockchain technology has addressed all these issues. BRIKN is often termed one of the best active ICO projects in 2022. The reason why it’s popular is that it made people realize their age-old dream of tokenization of real-world properties.

What is tokenization?

The process of fragmenting/ breaking an asset (real-world entity) into tokens which are like virtual representations that digitally exist on a blockchain network, is known as tokenization. Tokens would also be your proof of ownership, representing the underlying property with all its rights and obligations. 

Why opt for tokenized real estate?

Tokenization has benefitted the real estate sector immensely as it makes way for-

Efficient transactions

Real estate is a domain filled with a string of stakeholders and complex procedures. Hence, decentralized structure of blockchains are beneficial as the transactions are immutable and transparent. There is no paperwork and Automated smart contracts eliminate any human role in conducting transactions, thus eliminating any unfair deals.  

Enhanced liquidity 

Lack of liquidity has kept people away from real estate for a long time. Selling the whole property in a single go is always a pain. The tokenization of real estate provides the best solution to this particular problem. High-value properties like commercial real estate(shopping complexes etc.) can be broken down into tokens with smaller values that can be easily sold either in whole or in part by tokenization.

All in all, it makes way for better liquidity and enhances the value of any asset. 

Read more: What You Need to Know About Investing in Tokenized Real Estate

Greater accessibility

investing in real estate was never the most feasible for small-scale investors. But with tokenization, a real estate property worth an exorbitant price, say $10 million, can be broken down into tokens valued at $100 each. Thus, retail investors get a chance to participate and invest in commercial real estate, which is not possible in traditional real estate investing.

Elimination of the third party 

Involvement & need for the third party is eliminated with tokenization, as the entire process is carried out on the blockchain. The technology is further governed by self-executing programs called smart contracts. These smart contracts are trustworthy when it comes to real estate ownership transfer. Also, Blockchain technology ensures a decentralized financial system making way for a transparent free-flowing market.

How tokenization works

Select your asset

Go for an asset that has a sizable market. We suggest ensuring the valuation is done by an auditing or accounting company. Position your token better by reading and understanding your competition(token). Have a solid business model and document the foundations of your vision and idea of the project. Conduct a reliable analysis- identify the sources of revenue, the definition of your customer base and financing.

Token economics

Determining the number of tokens and the token’s value is extremely crucial. You must understand how many tokens would/ should exist and how many needs to be distributed to the users, developers, investors, and creators. Because if the token supply is too high, it will dilute the demand and might deter investors from purchasing the token. On the other side, if the token value is too high, it might damage the liquidity of the asset.

Technical aspect

Suppose you can’t code the platform yourself. In that case, we suggest you entrust the platform development process to a blockchain development company specializing in creating real estate tokenization platforms.

Have an attorney or legal counselor so that you adhere to all the laws. Your real estate tokenization platform should comply with the jurisdiction’s legal requirements. Employ someone with experience in blockchain coding and real estate marketing when creating your white paper because this document entails the ideas about the company and people involved in the project, the concept, its market analysis and value, commercial applications, and everything else. It’s crucial as the whitepaper is like a connecting bridge between people who are into technology and people who are into investments. If everything until now is done right, attracting investors to invest in your real estate token will be smooth.   

Closing thoughts

Blockchain-based tokenization has introduced the real estate industry to a decentralized financial system independent of biases. 

During tokenization, as real estate is fractionalized, liquidity improves. There is a swift change in ownership as people don’t sell the whole property in one go; rather, tokens are sold quickly. Tokenization is bringing in several phenomenal modifications to the real estate industry. The process attracts a broader range of visitors and developers to participate or invest in real estate.

 

By |2022-10-19T23:46:51+05:30October 19th, 2022|Products|Comments Off on A Beginner’s Guide to Real Estate Tokenization

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