Tokenization of real estate opens new opportunities for small investors and makes real estate investments more efficient and cost effective for everyone.
Real estate market size
The size of the professionally managed global real estate investment market increased $7.4 trillion in 2016 to $9.6 trillion in 2019.
Small investors interested
71% of americans wish real estate investment was easier. 48% would be more likely to invest if technology made it easier.
Property development firms face interest rates of up to 29% when financing via banking institutions as single source loan providers.
Real estate investments require high investment minimums, which prevent smaller investors from participating in the market. At the same time, property development companies face difficulties in finding financing.
Real estate is an illiquid market, which makes it less palatable for investors in general. On top of that, inefficient property management adds unnecessary complexity for smaller investors.
- High costs
- Too complex
Not suitable for small investors
The current system wouldn’t handle the volumes small investors would bring in, and the marginal costs might even be higher than marginal revenue, leading to an economic loss.
Outdated data management
Data is often stored in silos, and registries are usually paper-based, making operations slow and costly and prone to errors and fraud.
Scaling this system to a large, global investor base wouldn’t work.
- Anachronistic tech
- Not scalable to meet current demand
Blockchains allow for tokenization of real estate on one shared, secure ledger. A property is represented by digital tokens with certain rights and obligations that can be automatically enforced via smart contracts and easy to verify on a single ledger. This new architecture is automated, more transparent, cheaper, and faster. It tackles the issues of the old system, enabling a global, liquid real estate market.
Making life easier
Automation is achieved by smart contracts, which, for example, could collect renters’ payments automatically and distribute them to token holders. Using blockchains instead of the legacy financial system, transactions are faster and cheaper with no middlemen.
- Lower costs
Compared to data silos and paper documents, property management firms can accomplish higher operational efficiency with the increased transparency of a shared digital ledger.
- Digitally secure
Open to anyone
Real estate companies benefit from better financing options from a global investor base, including smaller investors, while costs remain low.
Smaller investors gain access to real estate investments through tokenized fractional ownership.
- Wider investor base
Another advantage of digital assets, here in tokenized real estate, is their high liquidity in secondary markets. This unprecedented liquidity may attract new investors that weren’t interested in real estate before.
- Asset monetization