Are you interested in investing in real estate in a more accessible and profitable way?
The tokenization of real estate is an innovative process that could revolutionize the way that we invest in properties. In the BlockchainX tokenization process, the economic aspects behind property exploitation are represented by digital tokens recorded within the blockchain. What does this do for investors? With higher ease of entry, liquidity levels increase as well as returns.
Should you be interested in learning more about real estate tokenization, the most engaging way to understand the investor benefits to it is through this article. In this article, we will give you an outline of the tokenization process and discuss the advantages and tips for investing in real estate tokenization.
Don’t miss a chance to hear more about an innovative way of investing in real estate. Continue reading to find out everything you need to know about real estate tokenization!
What is a tokenized property?
Let’s simplify it. Consider a tokenized asset as an asset that has been converted into digital tokens that can be traded on a blockchain based tokenization platform. Every token signifies a part of the property’s ownership. Instead of buying the whole property tokenization enables investors to purchase property tokens.Real estate tokenization also allows for the division of ownership across multiple owners, making investment easier and lowering the cost of entry.
But what is a token?
On the blockchain, a token is a digital object representing a value or asset that is registered. Tokens come in various forms, from cryptocurrency to physical asset tokenization such as real estate and artwork, among other financial assets. In simple terms, digital coins have the value of store units and payment mediums that exist nowhere else but in online environments made for them.
What Advantages Does Real Estate Tokenization Bring Us?
Real estate tokenization has several advantages and benefits, which we detail below
Investors can now purchase a part of property by tokenizing it. This way, through an online platform, anyone, regardless of income, can invest in much smaller amounts. Our company, BlockchainX, facilitates such investments starting at one hundred euros.
Tokenization helps increase liquidity by enabling investors to deal in a secondary market, thereby boosting the liquidity of the asset while facilitating instant & easy profits compared to conventional real estate. Despite the requirement that this be secondary within BlockchainX accounts only, discussions have been going on at the European level as regards regulating secondary markets for security tokens. So it is foreseeable that in the coming months we will see an important evolution in this sense.
Reduced transaction costs: Tokenization eliminates the need for intermediaries and reduces the transaction costs associated with investing in real estate.
Flexibility in financial structuring: Tokenization allows for greater flexibility in financial structuring, meaning that investors can choose the type of token and smart contract terms that best suit their needs and objectives. Such as immediate liquidity In projects, receive the income when selling the property, or receive the exploitation monthly.
Investment transparency: Tokenization provides a transparent and verifiable record of ownership, increasing investor confidence.
Property fragmentation: Tokenization allows real estate to be divided into smaller parts, lowering the barrier to entry for investors and increasing portfolio diversification.
Eliminating the Middleman: Tokenization eliminates the need for middlemen like real estate agents and brokers, reducing costs and increasing efficiency.
Investment diversification: Tokenization allows investors to diversify their investment portfolio and reduce risk by investing in multiple tokenized properties instead of a single property.
Internationalization of investment: Tokenization allows investors to buy real estate anywhere in the world, increasing investment opportunities and reducing dependence on local markets.
Increased security and confidentiality: Tokenization uses blockchain technology to ensure the security and confidentiality of investor and transaction data, reducing the risk of fraud and improving security.
How to tokenize a property
Tokenizing a property may seem like a complicated process, but it is actually quite simple if you follow the right steps. Below are the steps necessary to tokenize a property:
Evaluate the value of the property
Before starting to tokenize a property, it is important to evaluate its current value and income potential. This involves conducting research on the real estate market and the property itself.
One way to evaluate the income potential of a property is to analyze the rental market in the area where the property is located. You can search for similar properties in the same location and compare rental prices to get an idea of how much you can expect to make in rental income. In addition, it is important to take into account factors such as the expected occupancy rate, the property’s appreciation potential, the cost of maintenance, and any other expenses related to the property. For example, if the property is in an area of high tourist traffic, the occupancy rate can be expected to be high during the high season, which would increase rental income.
It is also important to consider the expenses associated with the property, such as taxes, insurance, and maintenance costs. For example, if the property needs major repairs or renovations, the cost of these improvements and the impact they will have on rental income must be taken into account.
Once the value and income potential of the building has been assessed, it can be decided what percentage of it should be tokenized to offer to investors. Once the percentage is established, you can proceed to the next stage.
Structure the token
The next step is to structure the token. At this point, the blockchain platform for issuing the token must be chosen. There are several options available on the market, each with different features and costs. It is important to choose the appropriate structure that meets the specific requirements of the project. In the case of BlockchainX, the blockchain used is the BSC (Binance Smart Chain).
The issuance of BlockchainX tokens falls under security tokens, since it is a regulated financial product.
The terms of the smart contract that governs the token must also be established, including the rights and obligations of investors, the terms and conditions for the payment of dividends and the sales process.
White Paper validation
Each property has its own business or exploitation model, which must be reflected in a whitepaper, which must be validated by an ESI (Investment Services Company) under the regulations of the CNMV (National Securities Market Commission).
Token issuance
Once the token has been structured, it can be issued. The token must be created and issued on the selected blockchain platform. This process involves the creation of the smart contract, the assignment of the token, and the verification and confirmation of the token issuance.
Manage the token
Lastly, it is important to establish a process to manage the token and provide regular updates to investors. This includes maintaining an up-to-date record of token holders, managing dividends, and providing regular financial reports. It is also important to comply with applicable legal and regulatory obligations, such as issuing annual reports and complying with KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements.
Conclusion
In short, real estate tokenization is a process that involves converting real estate into digital tokens that can be bought, sold, and traded on a blockchain platform.This process offers several benefits, such as greater liquidity, transparency and accessibility for investors.To not miss out on any of the opportunities we present, we recommend joining our Discord or Telegram group to meet the other BlockchainX and the entire team. Of course we invite you to take a look at our blog articles to continue informing you.
