First thing’s first: What’s a token?

In a nutshell, a token is a digital asset in the blockchain that represents another object. There are many types of tokens, but we will focus on their real estate application.
In real estate, tokens are fragmented equity rights of a specific property. This way, the property can be divided into equal parts to let people invest with smaller amounts of money. And if they would need or want to cash out before the project is finished, they can easily sell their tokens.

What does tokenized real estate mean?

Tokenization of real estate is the process in which a property is fragmented into a specific amount of digital tokens of equal value. Every token, or fragment, represents direct ownership of a share of the property.
Tokenization is an emerging trend that is becoming increasingly popular among investors. In real estate, in particular, it has brought new ways to expand investments and lower the barrier to a broader, more diverse audience.

Why invest in real estate?

Real estate is one of the most stable and secure assets. With well-chosen projects, investors can enjoy excellent returns, passive income, and build equity.
Overall, real estate investing has a wide range of benefits:

• Long-term stability: Even in high-volatile periods, real estate is one of the best, most secure investments in the long run.
• Protection against inflation: While other products and services raise prices, they generally reflect on property values.
• Diversification: Smart investors always include real estate in their portfolios since it is a well-balanced investment in terms of risk/return.
• Passive Income: Real estate is known for bringing a steady cash flow that can give you income predictability. Allowing you to safely design a roadmap to plan your next investment.

When you combine the benefits of real estate investing with the possibilities that blockchain technology brings to the table, tokenization of real estate is not a matter of if but when. Being ahead of the curve will give you a competitive advantage in a field that keeps getting bigger.

Smaller investments & low transaction costs

Backed by blockchain technology, platforms of tokenized real estate allow for lower transaction costs. Traditional products markets like real estate investment trusts (REITs) usually imply higher amounts of investments and fees. Tokens enable investors to buy and sell their equity share of any project avoiding traditional closing costs of real estate.

Liquidity

One of the most challenging things to deal with in the real estate market is the liquidity of assets. In any traditional transaction, several parties are involved besides the buyer and seller, namely: the broker, legal assistant, among others.
Tokenized real estate simplifies this issue in many situations, as it skips the intermediaries and third parties, allowing ownership to be immediately transferred from investor to investor and guaranteeing proof of ownership.

Property availability

Real estate investors have to deal with a very common yet time-consuming process: searching for new properties.
Just like cryptocurrencies, tokenized real estate properties can be centralized in a marketplace, making the property hunt a pleasant, hassle-free exercise. As such, tokenized crowdfunding erases all geographical limits and enables people to invest in real estate projects worldwide.
It is important for any investor to have a diverse property portfolio to invest into. Using a platform that specializes in managing large-scale tokenized properties is the best tool to start your journey as an investor.

Traceability & transparency

Thanks to blockchain technology, every token has an undeniable proof of ownership linked to a specific person. Allowing a level of transparency and security that no other asset can provide.
Each token transaction is as secure and traceable as any cryptocurrency operation, as every token holder will be registered in the corresponding token.

Smart contracts

Every traditional transaction involves an agreement between two or more parties, and all are compelled to fulfill their obligations. Blockchain technology in tokenized real estate allows the automation of the terms and conditions of a smart contract.
Smart contracts are developed to implement a sequence of steps established beforehand. In tokenized crowdfunding, once the contract ends, the smart contract is set to automatically deliver the payments to investors according to their equity share on a project.

Bonus: Patience, another essential key

Every real estate investment implies a certain amount of time to be completed. In this sense, real estate tokenization is no different. As such, your biggest ally will be patience. The smart contracts will execute the payments with interest once the project is complete, but every person can sell their tokens before that.
Cashing out in earlier stages of tokenized real estate will let you recover your initial investment without interests or earnings. So, the intelligent thing to do is to know the amount of capital you would be able to invest in a project and understand that patience could be your strongest ally or enemy, depending on how you manage your emotions.