Before tokenized real estate burst onto the investing scene, people were of the opinion that investing in properties was something that only particular classes of the society had access to. Now, with the popularity of blockchain technology and the advantages of real estate tokenization, many investors have come to believe that this domain indeed provides a level playing field for all.
What is real estate tokenization?
Real estate tokenization is the process of converting property value into digital tokens which, in turn, are sold to investors. The biggest advantage of investing in fractional real estate is that the investment only represents a specific number of shares in a property and not the value of the entire asset. Of course, the investors have the choice to determine the number of shares they want to buy and sell per their needs and leverage.
Several studies have shown that the advent of decentralized real estate has changed investment prospects in the market, marking a positive upturn. According to market experts, the property investment sector will yield revenues of $4.2 billion in 2025 by tokenization investments alone.
How is tokenization improving the situation for real estate investors during a global pandemic?
In order to pool together resources into a single property, extensive due diligence is required to analyze the scopes of profit over time and compare the returns with the other alternatives before then making an informed decision. However, now with the pandemic creating constraints due to the necessity of social distancing and quarantine, physical property assessments are no longer possible. Without being able to check OUT these properties in-person and with remote working being the new norm, the only viable option in terms of investing in property seems to be through the digital portal that cryptocurrency allows for.
As far as creating opportunities for real estate investors amidst the global pandemic is concerned, it is only fractional tokenization that seems to be heading towards the right direction. In times of such economic turbulence, investors are constantly on the lookout for opportunities that will present them with some degree of certainty, and real estate tokenization does exactly that.
Defi real estate investing is all about dividing a single property into shares and then allowing multiple entities to own it. This automatically eliminates the narrative of risking it all for just one property. Simply put, tokenization takes relieves the burden off of a single entity or individual to fund the investment, and distributes the costs of ownership among several investors and resultantly, reduces the real estate investment cost for each investor.
Additionally, it may come as no surprise that investors find it hard to resist the ease of liquidity. Liquidity has been one of the major drawbacks in the realms of traditional real estate investing. However, tokenization of real estate properties increases the liquidity of properties through fractional ownership while having a low barrier to entry enabled by blockchain technology. This implies that the uncertainty looming large in the sector of real estate is somewhat diminished, thus generating higher and more lucrative opportunities for investors.
