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The Ultimate Guide to Investing in Tokenized Real Estate

Posted on by Shipra

The Ultimate Guide to Investing in Tokenized Real Estate

For a very long time, investors have found real estate to be among the most alluring investment opportunities. The conventional negatives of real estate investing, however, continue to exist, and there haven’t been any notable adjustments. But given that tokenization is here to address and resolve these problems in the real estate sector, it won’t endure for much longer. tokenized real estate companies will greatly increase transparency and flexibility in real estate investing, supported by blockchain technology & smart contracts.

You might be wondering at this point how real estate tokenization functions and whether it really has a long-term future. But don’t worry; we’ll cover everything related to tokenized real estate in this blog. Therefore, let’s begin.

Tokenized Real Estate in Brief

Real estate has traditionally been defined as an illiquid asset. It has always required a significant expenditure and a drawn-out legal & financial process to buy and sell. There are various real estate tokens that can be used to denote the ownership and value of the in-question property, whether it’s residential or commercial. The rights and liabilities attached to any piece of real estate are represented by a token.

A smart contract holds the details of every real estate token. As a result, any transaction involving the tokenized real estate in issue can happen instantly and automatically if a contract provision permits it. Anyone who purchases a real estate token related to the property will now possess a portion of the actual real estate in question. That implies that they are accountable for any loss it experience as well as any gains that result from the transfer of ownership.

As soon as you understand the idea of their ownership, the opportunities expand almost instantly. Each of us may think of a sizable industrial property or a sizable commercial district that could potentially benefit from the use of real estate tokenization. Let’s now look more closely at how tokenized real estate can benefit individuals who own it and those who invest in it.

Different Types of Real Estate Tokenization

Different Types of Real Estate Tokenization

Real estate tokenization mostly has three types. So let’s examine each one in turn.

  • Residential-type Real Estate Tokenization

The practice of tokenizing a residential real estate property is known as residential real estate tokenization. The fact that investors can own a portion of residential property anywhere in the world from the comfort of their homes makes this type the most popular among the others.

  • Commercial-type Real Estate Tokenization

The tokenization of commercial real estate is very similar to that of residential real estate. Tokenizing commercial real estate properties are involved. But in this case, special care must be taken to guarantee that all legal requirements are completed and that the business property is not subject to any criminal activity.

  • Trophy-type Real Estate Tokenization

The most recognizable kind of real estate tokenization is trophy tokenization. It is the practice of tokenizing prominent, upscale venues that are extremely significant & prestigious in both terms of money as well as their intrinsic value.

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How Tokenized Real Estate Investing Works

Special purpose investment vehicles, which are often set up as limited liability corporations (LLCs), are used to invest in real estate in both conventional and tokenized deals. The ownership of the LLC is fragmented into security tokens for real estate transactions based on blockchain technology.

The creation of public security is a complex and expensive process, and since the offering is a security, it is typically registered under an exemption.

The creation of a private placement offering (PPM) that includes information on the investment’s nature, potential risks, sponsors, and other pertinent factors is one criterion for gaining the exemption. The SPV’s operating agreement and subscription agreement both outline the managers’ and investors’ responsibilities as well as the rights and obligations of both parties.

Read Our Blog Post: Top 12 Real Estate Tokenization Companies in USA

To maintain compliance with securities laws, real estate tokens are coded by the underlying smart contracts. Smart contracts have the ability to automatically enforce any buy and sale limitations required by the world’s securities authorities. Smart contracts can also be used to impose restrictions regarding who can buy tokens and holding periods for those tokens.

Real estate tokenization platforms conduct know-your-customer (KYC), anti-money laundering (AML), and investor accreditation checks in order to enforce these requirements. These examinations lead to the “whitelisting” or pre-approval” of specific buyers.

Processes Involved in Tokenized Real Estate Properties

Processes Involved in Tokenized Real Estate Properties

Structuring the Deal

The categories of shareholders & assets, the applicable jurisdiction, and the pertinent legislation are all significant considerations in this first step. Prior to raising capital to launch a new business, issuers frequently decide to tokenize a prior deal at this stage, largely to give liquidity to current investors.

Digitization

Information that was previously stored in paper/document form is uploaded to the blockchain at this point. This procedure makes use of smart contracts, and the kind of fund/fund structure is also chosen. The following are the most popular fund structures:

The most common fund structures are as follows:

  • Real Estate Investment Trust (REIT)
  • Real Estate Fund
  • Single asset Special Purpose Vehicle (SPV)
  • Project Finance 

Read Our Blog: What is Real Estate Tokenization and How Does it Work?

Selection of Technology

At this stage, a number of crucial technological choices can be taken, including:

  • Choose Blockchain 

Given that the transaction will be added to the blockchain ledger, it is important to choose the appropriate blockchain depending on your requirements and requirements.

  • Chose Custody Solution

It is necessary to choose a custody solution that can hold real estate tokens securely and safely.

  • Chose Marketplace 

It is necessary to choose the marketplace where investors can purchase real estate tokens. Depending on your company’s needs, you can select either a primary or a secondary market.

Read Also: Why Dubai, London & New York Lead in Real Estate Tokenization?

Marketing & Distribution

The creation & distribution of tokens are indeed the primary areas of concentration at this stage. Real estate tokens can be purchased using a number of different payment methods, such as stablecoins, cryptocurrencies, fiat money, and others. These tokens are available to investors through:

  • Primary Distribution
  • Secondary Trading

Additional Support

A real estate tokenization company now provides additional support to investors, such as developing a corporation code and helping with legal and mortgage issues.

Tokenization Advantages for Real Estate Owners

Real estate owners, sponsors, as well as investors can all gain from tokenization. The following are some of the main benefits for sponsors & owners:

  • Tokenization gives real estate ventures exposure to plenty of investors. A real estate project might not even be known to many investors until it is tokenized. A real estate tokenization platform inevitably increases marketing and awareness, enhancing sponsors’ access to financing.
  • In addition to automating investor communications, payouts, purchases & sales, tax accounting, as well as (where necessary) investor voting, smart contracts that underpin real estate tokens can also automate compliance with securities legislation. Real estate sponsors can handle numerous investors with the help of automation, which also creates a robust audit trail across all property actions.

Check Our Blog Post: Top White Label Real Estate Tokenization Platforms & Firms

  • Tokenization enables sponsors to provide investors with more liquidity, potentially improving investor returns and enabling investors to reallocate funds to the sponsor’s upcoming deal. Sponsors may immediately profit from increased liquidity among investors.
  • A real estate owner may use tokenizing an asset to resolve complex problems like how to terminate a partnership or distribute an estate among heirs. Real estate token owners are free to decide whether to buy, sell, or leave at any time. Tokenization, while not resolving every property-related conflict, can assist with many potential issues.
  • Numerous new possibilities for using and maintaining a property’s equity are made possible by tokenization. Real estate owners who tokenize their properties can raise short-term financing, receive debt secured by their tokens, sell a portion of the equity (perhaps with a buyback option), and exchange their real estate tokens for other tokens.

Disadvantages of Tokenizing Real Estate

Sponsors do need to change the way they approach real estate because of tokenization. For sponsors of tokenized real estate, the following cons might be present:

  • Many operations are automated by tokenization, which may worry sponsors who like complete anonymity and control.
  • Sponsors might be concerned about losing a dependable investment base now that investors can swap tokens more readily. However, strong sponsors can continue to work with investors, plus their track record might even help them draw in more money. Additionally, there are programs for rewarding devoted investors (like early purchase, for instance), which help sponsors build and expand their own investor base.
  • Managing more investors may intimidate some sponsors because it necessitates a variety of communication strategies. Sponsors might make use of a real estate tokenization platform’s assistance to keep investor communications going at scale.
  • Sponsors must establish and uphold rigorous guidelines regarding the information that is disclosed to investors as well as the secondary market. Primary investors need in-depth information, which might not be suitable for a wider audience. A good tokenization platform will make these restrictions easier and more automated, assisting sponsors in finding the ideal harmony between privacy and openness.

What is the Future of Real Estate Tokenization?

You might be surprised to learn that the real estate investing industry has a far larger market than a number of other businesses. In comparison to other investment vehicles like equities, mutual funds, and bonds, it is also regarded as a safe investment. But some of the market’s elite participants, who are significantly wealthier than others, control it. Real estate tokenization is therefore not only urgently needed but also has the enormous potential to completely transform the sector. Additionally, according to Prophecy Market Insights, tokenization income in the global real estate market will soar and reach $4.3 billion over the course of the following five years. The future of real estate tokenization thus appears to be quite promising based on the aforementioned points and the unmistakable numbers.

If You Need Help

Our company, SoluLab, is a market leader in blockchain development. Our team members are highly skilled and experienced in creating real estate tokenization solutions. You may securitize real estate, raise money more quickly, and reach a wider audience of investors with the assistance of our highly qualified team. Consider your options even now. Get in touch with us so that we can address all of your questions.

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Conclusion

SoluLab offers a comprehensive range of real estate tokenization development services, guiding individuals through the complex landscape of property investment and development. Whether one is a property owner seeking capital through tokenization or an investor looking to diversify, SoluLab paves the way for the future of real estate investment. Their team of dedicated professionals is committed to delivering top-tier tokenization solutions, unlocking the full potential of real estate assets. SoluLab provides a tailored white-label real estate tokenization solution, supporting multiple blockchains, to redefine the experience of trading tokenized real estate. By launching a white-label platform, clients can establish a digital presence in the crypto trading world, offering a space to list commercial or residential property tokens and configure prices as desired. To embark on this transformative journey, contact SoluLab today.

FAQs

1. What is investing in tokenized real estate?

Real estate with a fractionalized ownership structure based on blockchain technology is known as tokenized real estate. Tokenized property investing is structurally identical to purchasing real estate through a syndicated transaction. 

2. What is the price of tokenizing real estate?

Legal, governing, and technological costs are typically incurred during the process. Tokenizing a property typically costs between $30,000 and $100,000. Including legal costs, developing a blockchain, smart contract implementation, and regulatory compliance. 

3. Is tokenization in real estate the way to the future?

The future of real estate tokenization, which will be driven by blockchain technology and smart contracts, presents a tremendous opportunity for expansion, with the ability to improve stability and accessibility through rational ownership.

4. What is the process of investing in tokenized assets?

Firstly, you would be required to select the asset and the regulation that is put into the asset. Afterward, select a platform and proceed with the organization process. Once this is complete, search for investments and acquire, and invest investments. Put your attention on the plants and strategies, after which you should take care of trading and liquidity.

5. How to buy tokenized real estate?

To buy tokenized real estate select a trustworthy platform or marketplace before purchasing tokenized real estate. Make an account, finish the KYC process, and add money to your wallet using Bitcoin or Fiat. Choose a tokenized asset from the list of available properties, then by tokens that represent fractional ownership.

6. How can SoluLab help you with the tokenization of real estate assets?

In the field of real estate tokenization, SoluLab specializes in the process of transforming real estate assets with digital tokens that are stored on a blockchain. This procedure makes it possible to have fractional ownership, improves liquidity, and expands access to investment opportunities. 

A Beginner’s Guide to Real Estate Tokenization

Posted on by Shipra

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

The adoption of blockchain technology in real estate has led to a radical transformation of the industry. It has made it easier for people to own digital real estate, allowing people who were previously excluded due to a lack of resources to participate and hiding problems such as a lack of transparency and trust.

Real estate has historically been a very illiquid asset, requiring substantial financial investments and drawn-out transaction procedures. However, tokenization has changed the situation. Additionally, the blockchain technology that underpins it has enabled previously unheard-of transparency. Having stated that buyers can now complete transactions utilizing tokenized real estate in an immutable manner.

This article debunks real estate tokenization development & answers concerns about the question of what is the tokenization of real estate, the practical operation of real estate tokens, tokenized ownership, and the amount of real estate that has been tokenized. Let’s first examine how real estate has changed as a result of its fractionalization and subsequent tokenization as we go through this guide to real estate tokenization.

Tokenization of real estate

Real estate is referred to as being tokenized when a piece of property is broken up into digital tokens that represent the underlying value of the asset with all of its rights and liabilities. Contractual details are defined via smart contracts. If a predetermined contract condition is met, the algorithm stored in the digital contract initiates the actions described in the code.

For example, a smart contract can operate without the involvement of a human to effectuate a transfer within a land register. It verifies the operations and automatically creates a new block, adding it to the blockchain.

ERC-721 tokens are applied to fractionalize NFTs. On the Ethereum (ETH) blockchain, ERC-721 denotes a predetermined standard and is linked to a smart contract that records the transactions where these tokens are involved. The traceability, as well as security of the transaction, are to be improved by the ERC-721 standard.

How does real estate tokenization work?

Real estate is fractionalized into tokens and maintained on a decentralized database through the process of real estate tokenization development. The term “blockchain” refers to this decentralized database, which functions as a kind of electronic ledger for information storage. NFTs and real estate tokens are comparable. A real estate token might stand for any of the following:

  • ownership of a portion of real estate
  • ownership of the whole piece of real estate
  • an ownership stake in a company that manages real estate
  • a stake in a loan with real estate as security
  • a claim to a portion of the earnings derived from real estate

Real estate tokens differ from Real estate investment trusts (REITs) in that tokens allow a specific investment to link a specific real property, as opposed to REITs which typically support investment into pools of varied real estate assets. In a security token offering, the digital tokens are produced and distributed on a blockchain (STO). To award ownership, each ownership portion is transformed into a token and then encrypted.

Read also: How to Buy Real Estate Using Cryptocurrency?

The sale of Aspen Coins, one of the first profitable commercial real estate STOs raised almost US$18 million in 2018. These digital tokens represented fractional ownership of the opulent St. Regis Aspen Resort in Colorado, USA.

There are numerous such instances, like a project in the United States that aims to fund $100 million by issuing 100 million tokens at $1 each for a 24-story, 374-unit multifamily residential building in downtown San Jose that is being constructed by Alterra Worldwide.

Benefits of real estate tokenization

  • Lower barrier to entry

Real estate tokenization facilitates small-scale investor engagement and decreases entry barriers for retail investors by permitting investing in fractional pieces of real estate.

  • Ability to create liquidity

Blockchain technology makes it simple and safe to transfer real estate tokens, enabling investors to diversify their portfolios, lower risk, and increase liquidity in the real estate market.

  • Lower transactional costs

Blockchain technology offers the ability to simplify investment transactions and reduce transaction costs through automated procedures and a permanent, unchangeable digital record.

  • More transparent and efficient transactions 

Blockchain transactions are transparent and irreversible because of the decentralized nature of blockchains, which makes them perfect for the real estate industry with its many parties and intricate processes. Smart contracts that are automatically generated do not include any humans in the transaction process, which makes unfair trades impossible. There is no paperwork or waiting period for transaction completion in a blockchain-based system. Quick decisions and transactions are the outcomes of this. When using blockchain for real estate transactions, there are no set office hours like there are in traditional banking. Instead, the system operates transparently and continuously.

  • Opportunity for small-scale investors 

Real estate is typically regarded as an exclusive class of investment. However, tokenization has made real estate investment possible for smaller investors as well. If investors don’t have vast funds, the excessive cost of real estate assets sometimes discourages them from participating. But things have changed since real estate is now available to small-scale and individual investors thanks to the tokenization of the industry. Tokenization breaks up enormous assets into smaller fractions, making them more inexpensive and available to individuals who are interested.

  • A free-flowing market 

Overly regulated and frequently prejudiced centralized banking systems are harmful to market freedom. The real estate industry now has access to a decentralized, bias-free financial system thanks to blockchain-based tokenization. Each stakeholder has some degree of control over the outcome, and they decide as a group. A market that is streamlined and offers all players an equal chance to flourish results from the removal of unjustified barriers.

  • Decrease in counterparty risk 

It is difficult to track longer transaction chains. The pre-tokenized real estate age presented a dilemma since third parties complicated and distorted the situation. Things are improved from a regulatory standpoint by smart contracts, a crucial component of blockchain-based transactions. The chain of transactions is kept short and free of hazards brought on by weak links with minimal human involvement. Because of this, there is a greatly diminished, if not entirely gone, danger of counterparty participation.

Limitations of Real Estate Tokenization

  • Smart contract security loopholes

The blockchain network is well secure. But in smart contracts, you can find loopholes that need to be fixed. Hackers are always trying to sneak into the code and steal money from smart contracts. If the smart contract has been diligently audited, the money isn’t secure. A simple hack or a system glitch could rob the assets of real estate investors. In the worst case, once these assets are lost, their recovery is impossible.

  • Complex licensing requirements 

The tokenization of real estate assets needs licensed platforms for the operations and management of STOs (security token offerings) to be regulated. The process of achieving a license is a bit complex. Even before the licensing stage, you need to go through multiple phases of trial and error and recurrent tests so they can be successful.

  • Regulatory issues

Many people who are working in regulatory authorities and real estate employees have no idea how blockchain technology works and eliminates the issues the sector is facing. These things lead to a poor regulatory environment and generate hurdles for all stakeholders. Regulatory uncertainty dampens the investors’ trust, resulting in poor growth.

  • Tax complexities

Many Tax regimes haven’t clear cryptocurrency tax legislation, which is an issue for stakeholders. Despite the fact that the benefits of tokenization are acknowledged on a worldwide scale, a sound taxation system has not been implemented. Everyone concerned has doubts because there isn’t a single tax system in place.

Some points to be considered!

  • Securities law implications

Generally, the tokenization of real estate will be considered security but an analysis of each specific token should be considered at the outset. If the token is a security, the issuance of such a token will be subject to the applicable prospectus requirements or reliance on an exemption, such as the “accredited investor” exemption. In addition to the prospectus requirements, the issuer must consider the applicable registration requirements.

  • Reconciliation with the land registries

Real estate tokenization requires reconciling the applicable transaction with the current systems of land registration. Each jurisdiction of Canada has its land registration system, and an issuer of a real estate token will be required to reconcile the transaction with the land registration systems of the jurisdictions where the underlying real estate is located.

Top 5 Real Estate Tokenization Companies

Blockchain App Factory

One of the first businesses to tokenize real estate as more than just a qualified Web3 service was Blockchain App Factory. The company is among the top tokenization platforms in real estate across both the physical world and virtual worlds. The business is present throughout the world, it should be noted. Since the company’s professionals are familiar with the real estate tokenization factors, they make sure that all necessary procedures are followed before distributing client project tokens. The business is a wonderful fit for any startup hoping to succeed in the Web3 real estate sector because it has expertise in consultation, legal matters, programming, testing, and promotions.

Appwrk

A Web3 company called Appwrk is engaged in the tokenization of real estate among other real estate token platforms. The company has established a professional strategy for its real estate asset digitization projects that guarantee the project turns out as planned for clients. The business offers its skills in transaction structure, digitization, technology, distribution, and marketing, as well as post-launch assistance to tokenize real estate. If desired, one might even acquire a platform like a token marketplace in addition to tokens. The company’s blockchain developers have completed a number of noteworthy projects on Web3 real estate, and as a result, they have established a solid name in the rapidly increasing Web3 community.

SolidBlock

SolidBlock is a unique company that mostly operates in Israel and provides real estate tokenization development services. It describes itself as a company that offers tokenization as a service. The company helps entrepreneurs turn their real estate into blockchain-based tokens and makes it possible for them to raise money using those tokens. SolidBlock has quickly expanded in a specialized industry thanks to the ideal group of luminaries in development, analysis, legal issues, marketing, and leadership. These services are offered in an admirable manner. For asset fractionalization & security token offering campaigns, the company excels in producing real estate tokens.

Somish

For startup enthusiasts looking to tokenize real estate assets, Somish has been another option. Young people with extensive experience working with Web3 apps make up the organization. Commercial, residential, & trophy real estate tokenizations are the company’s areas of expertise. Additionally, it provides partner networking services, compliance insurance, Web3 real estate advice, and security token offering (STO) services. Additionally, Somish has received other honors, such as hackathon victories, ongoing open-source programming partnerships, as well as technological contributions to the Web3 community.

Blockchain Firm

Blockchain Firm, a seasoned player in the Web3 market, provides excellent real estate tokenization development services. The business offers a wide range of services on the domain, such as the creation of platforms for real estate listings, hybrid tokenization, fractional tokenization, crowdfunding, leasing and rental assistance, and loan & mortgage facilitation. For Web3 real estate, teams at the Blockchain Firm also work on planning, smart contracts, NFT development, website development, platform development, & marketing services. The company has offices across a few nations, a substantial global presence, and extensive expertise working on certain well-known Web3 projects.

Tokenization’s role in the future

Tokenization offers a practical and affordable way to invest in real estate assets, but because it is a relatively new venture, regulators have not yet established a clear set of regulations. Which regulatory frameworks will be used depends on the type of asset being tokenized.

Real estate tokenization has the potential to revolutionize real estate investment by increasing liquidity in a predominately illiquid asset class, lowering entry barriers for retail investors, and lowering transaction costs. However, market participants currently face challenges related to clear market regulation, reconciliation with land title registries, and the requirement for centralized reporting of transactions.

Read also: What is the Future of Crypto Real Estate?

Real estate professionals, including those in the legal, financial, and real estate fields, should be consulted if investors or owners of real property are interested in profiting from the trend of real estate tokenization.

Conclusion

As the guide to real estate tokenization is coming to an end, A decentralized, bias-free financial system has been brought to the real estate sector thanks to the blockchain as the guide to real estate tokenization is coming to an end-based tokenization. Liquidity increases during tokenization as real estate is fractionalized. People sell tokens rather than the entire property at once, which causes a fast shift of ownership. Tokenization is bringing about some truly amazing changes to the real estate sector. A wider variety of participants and developers are drawn to the process of participating in or investing in real estate.

SoluLab Developed A Real Estate Tokenization Platform For Mogul

Posted on by Akash Guha

SoluLab, India, Dec. 20, 2022 – SoluLab is absolutely thrilled to share the successful partnership with Mogul, which launches this week. In this strategic partnership, SoluLab developed a Real Estate Tokenization platform for Mogul that allows investors to purchase liquid fractional ownership in high-yielding rental properties and earn daily dividends from it. The platform passes along all benefits of traditional real estate investing (appreciation, leverage, tax benefits, and cash flow), while adding additional benefits through the implementation of the blockchain (real-time appreciation, daily dividends, flexible hold periods with liquidity, frictionless transactions, and low capital & time commitments). The platform also enables users to participate in decision-making using a DAO-based voting mechanism.

The four major components on this platform include-

  • Investor Panel
  • Admin Panel
  • Microservices
  • Smart Contracts

Considering that real estate is one of the most lucrative sectors in the world of investing, SoluLab created the Mogul platform to stand out by incorporating unique features, such as allowing users to make instantaneous trades using a custody integration. They can use multiple payment methods to purchase the tokens. And by using a well-integrated custody solution, any users, even when unfamiliar with the blockchain ecosystem, will find investing and earning dividends in properties easy-to-use. Integrating a decision-making system allows owners to participate in the operational process of the property.

The SoluLab development team put scalability and usability first. Therefore, they built the platform using a microservice-based architecture making use of serverless infrastructure and queue-based token system along with the Polygon chain to ensure that system is highly scalable and will account for any errors from the network. 

About SoluLab 

SoluLab Inc is a leading Blockchain, AI, & IoT solutions provider company, started by the former VP of Goldman Sachs and former principal software architect of Citrix.

  • We have 1500+ clients across 30+ countries with a 97% success rate.
  • Ranked 33rd on Deloitte’s 2020 Technology Fast 500™ list.
  • Top Blockchain development company by Goodfirms, Clutch, and Gartner in 2020 and 2021.
  • Microsoft Silver Certified Partner, Google Developer Certified Agency, and Hyperledger Certified Service Provider.
  • Video Testimonial of AnrKeyX COO, whom we helped in raising 2.2M USD funding through our MVP development – https://drive.google.com/file/d/152-PZYEecRN1-vafzEHSnZiL2nNhCGk7/view 

About Mogul

The mogul mission is to provide ALL investors with direct access to real estate for as little as $1, and property owners with cost-cutting, equity-unlocking blockchain-based solutions. Through strategic implementation of blockchain, the platform drastically lowers the barriers-to-enter of real estate investing and provides everyone the ability to directly invest in cash-flowing rental properties. As they scale their offerings, Mogul is the blockchain oracle for real estate, connecting on-chain events with off-chain assets.  

Website: https://www.mogul.ooo/

Crunchbase profile: https://www.crunchbase.com/organization/mogul-ac66

Media Contact:

Darshi Shah, Marketing TL

[email protected]

How to Buy Real Estate Using Cryptocurrency?

Posted on by Shipra

 

How to Buy Real Estate Using Cryptocurrency (1)

Before diving into how do you know that you can Buy a House with Cryptocurrency? Yes, this whole Bitcoin-meets-penthouse is undoubtedly real. Cryptocurrency is quickly escalating as the new preferred peer-to-peer payment method. Many favorable investors want cryptocurrency to become a mainstream asset. And sure, it looks that way; everything will soon be bought via virtual currency, from parking spots to high-end mansions.

According to the famous US magazine Business Insider, in 2018, luxury apartments were sold in exchange for cryptocurrency. Several real estate developers express their desire to sell their properties for cryptocurrency; this is especially popular among online brokers(buyers, sellers, and investors)

For example, global real estate firms such as Kuper Sotheby’s International Realty and Glen Oaks Escrow of the Pango Group started using bitcoin for real estate transactions in 2017 and 2021, respectively. If one searches for examples of such real estate properties, Madinat Jumeirah Living and Port De La Mer Le Ciel are among the top.

So how can you buy properties with cryptocurrency?

There are two different options for real estate and doing transactions & buying properties with cryptocurrency.

The first option is Bitcoin- USD real estate transaction. 

This option implies that a seller wants to trade only with dollars, not bitcoin. Hence, in this case, you can exchange your cryptocurrency for cash and pay as required.

Next option is All-Bitcoin real estate transaction 

Here, the seller is willing to accept bitcoin. So, the purchaser will transfer the Bitcoin from his digital wallet to the seller. Thus, in this case, you can negotiate the price and freely pay with your Bitcoin.

Regarding real estate transactions, Bitcoin rules over every other cryptocurrency. It can be and already is an alternative to standard, long-established real money. Due to its wide reception and integration, many states have equipped an online payment system or the property you buy at its expense with a digital property or a commodity.

You can also borrow against cryptocurrency. For instance, companies like Nexo accept using your cryptocurrency as security/assurance to obtain a loan in authorized money, which you can use to buy real estate. However, it’s just that you might encounter higher interest rates than you would with a typical mortgage (8% or more. And there can be issues with the IRS flagging your account when a big chunk of money appears. On the plus side, if you want to use your cryptocurrency as a long-term investment, it will remain in your account, and its value can continue to follow the market trends. 

Read more: A Beginner’s Guide to Real Estate Tokenization

Real estate transactions, even via crypto, aren’t a tax-free procedure so have a proper legal and tax structure in place. Go for title insurance and escrow companies that handle cryptocurrency transactions and don’t just focus on cash. If you find these, the transaction will be in Bitcoin or Ethereum.

Get a more secure asset as bitcoin is highly volatile; the value can drop more than what you paid for it. Or it could also become more valuable. There are daily fluctuations, so opting for a relatively secure asset is crucial. Find a seller with cryptocurrency; chances are they might also offer you a potential discount. 

To sum up, the answer to whether you can buy a house with cryptocurrency is a yes, as long as you can find sellers open to cryptocurrencies. The most glaring drawback when purchasing real estate with cryptocurrency is that people still know little about virtual currency. This payment method has only recently come to light. So there is no wonder people feel nervous making payments with cash they don’t understand. Difficulties with finding a seller

Finding someone who can accept Bitcoin might not be easy if you would like to trade your crypto for a house. You know, this is not about traditional home listing sites. The path will not be so easy.

Some sellers will indicate that they are crypto-friendly. But these are rather exceptions. For cryptocurrency users, security and anonymity are two of its main selling points. However, transactions are difficult to trace, so you could face a sticky legal situation if anything goes wrong. A legal professional needs to be consulted to know how to protect yourself. Also, consult a tax professional to learn about your tax liability and how using cryptocurrency to acquire a home may affect you because the IRS considers cryptocurrency a type of property that must be sold to realize its value in dollars. Having said that, 

Closing remarks

Cryptocurrency deals are legit, legal, enforceable, efficient, and here to stay. While not everyone can be a “Bitcoin billionaire” like Pierce, you can convert your cryptocurrency into real estate. Cryptocurrencies are disrupting several industries, and real estate is one of them. The possibility of these spectacular gains that can earn you a huge fortune is the most exciting quality of the cryptocurrency world. It goes without saying that the first fundamental thing one needs to do before any investment or trading is – research. Get an estimate of the risks involved, and avoid investing in the project if the stakes are too high. The cryptocurrency community is putting its best efforts into regulating token sales. You must conduct due diligence and take the help of useful resources and guides such as crypto exchange guides and wallet guides. All this will help you start your journey in the complex crypto world.

What You Need to Know About Investing in Tokenized Real Estate

Posted on by Shipra

What You Need to Know About Investing in Tokenized Real Estate

BRIKN is often termed one of the best active ICO projects in 2022. Do you know why it is popular? To answer in simple words, it made people realize their age-old dream of tokenizing real-world properties.BRIKN is the world’s first property DAO Ecosystem powered through blockchain. Blockchain has existed for a long time, but now it’s just inescapable. Crypto has infiltrated almost every major industry. One such sector is- real estate. Regarding investing opportunities, the real estate industry remains the safest and ensures the best ROI(return on investment). Now, imagine if the ever-prospering real estate combines with the swiftly growing blockchain technology.

What does tokenization of real estate mean?

Real estate tokenization simply means converting a real estate asset into a token/coin on the blockchain network and setting it up for sale. In a way, these tokens suggest a person’s interest in property/landholdings or can work to raise capital for investment development. The process attracts a broader range of visitors and developers to participate or invest in real estate.

Investing in tokenized property is not much different from buying a syndicated real estate deal, commonly referred to as a private placement or regulation D offering. Just that instead of receiving a paper certificate that showcases your membership interest in the underlying LLC, you, as a tokenized real estate investor, get a crypto token representing that same membership. Blockchain is where this real estate token gets stored. It can be bought, sold, or traded (following an initial holding period) much more easily, unlike the typical syndication, which must be held until the project sponsor refinances or sells. 

There are mainly three key players in tokenized real estate- namely, 

Real estate operators– the owners that provide and manage the property. And are sometimes also responsible for raising the money required to invest in real estate property.

Tokenization platforms- are responsible for issuing tokens, token sales, and secondary token exchanges.

Investors- use tokenization platforms to access investment opportunities, trying to become part-owners of specific properties by purchasing tokens/coins.

Read more: Real Estate Tokenization – Benefits, Challenges and Future

How tokenized real estate investing works.

Tokenised, real estate offerings are somewhat similar to traditional ones in the sense that they both use special purpose investment vehicles (SPVs), which are like a subsidiary company that is formed to undertake specific business activity or purpose. It’s usually structured as limited liability companies (LLCs) to invest in real estate. Structure finance applications like real estate commonly utilize SVPs, whether traditional or tokenized. 

When it comes to blockchain-based real estate deals, the ownership of the limited liability companies is fractionalized or compartmentalized into security tokens. If you want an exemption from the detailed and expensive process of creating public security, you must make a private placement offering (PPM). In this, all relevant details regarding the investment, all the potential involved risks of the investment, the sponsors/partnerships of the investment and others should be mentioned. A subscription and operating agreement for the SPV should also be there that states the rights and obligations of investors and also managers.

Smart contracts are deployed to programme the real estate security tokens to ensure better compliance with securities law.

 Smart contracts enforce applicable purchase and sale restrictions as they are self-executing lines of code with the terms of an agreement between buyer and seller automatically verified and executed via a computer network. Using smart contracts helps mandate the holding time for tokens and better regulation on who can purchase tokens/coins. Smart contracts deployed to blockchains render transactions traceable, transparent, and irreversible.

Tokenization platforms have the necessary tools to enforce these rules and regulations, like KYC and checks for anti-money laundering (AML) and investor accreditation. If a buyer goes through these checks, they are listed or commonly referred to as ‘whitelisted’ as pre-approved to purchase.

Every real estate property can be tokenized, whether commercial, residential or trophy. Expensive shopping complexes or malls(commercial property) can also be partitioned into fractions with the help of smart contracts, which in return makes way for affordable investments. Similarly, the tokenization of residential towers facilitates quick sales. Also, via tokenization, you can liquidate your exceptionally scarce properties, commonly referred to as “trophy assets” (while raising funds for projects).    

Inference

Even when real estate was inaccessible, it was the most preferred sector for investing. Now post-tokenization of this industry, anyone, even small-scale investors, can invest in expensive real estate and be a “landlord”.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. It makes way for more transparent and efficient transactions and eliminates the risk of unfair deals.But in the end, we’ll advise you if you have an inclination in the crypto universe and are interested in investing in tokenized real estate, practice proper precaution before you invest in a company to be safe.