Real Estate has always been considered a profitable and safe investment option, but it has also been known for its high barriers to entry. Historically, investing in real estate has required a large upfront capital investment, and property management can be a slow and complex process. However, the rise of real estate tokenization is changing the rules of the game by allowing investors to buy and sell fractional ownership stakes in real estate assets in other parts of the world.
What is tokenization in real estate investment?
Tokenization is the process of representing real-world assets, such as real estate, artwork or stocks, in digital units called tokens, which can be stored and transferred through virtual wallets via a blockchain network. In the real estate context, tokenization consists of dividing a property or a portfolio of properties into smaller, more manageable parts, which are represented by tokens. Each token represents a fractional interest in the underlying real estate asset, which can be bought and sold on a secondary market.
Tokenization offers several advantages over traditional real estate investing. The most significant is increased liquidity. Because tokens can be traded on a secondary market, investors can buy and sell their holdings in real estate assets much more easily than with traditional real estate investments. This increased liquidity makes it easier for investors to diversify their portfolios and exit investments when they need to.
Benefits of tokenization in real estate investing
In addition to increased liquidity, tokenization offers other benefits to real estate investors. One of the most significant advantages is reduced transaction costs. Traditional real estate investments can be expensive, with high fees for brokers, lawyers and other intermediaries. Tokenization eliminates many of these costs, making it a more cost-effective investment option.
Another benefit of tokenization is greater transparency. Because each token represents a fractional interest in a real estate asset, investors can see exactly what they are investing in and how much they own. This level of transparency is not possible with traditional real estate investments, where holdings are often opaque and difficult to quantify.
Finally, tokenization allows investors to gain exposure to real estate assets that would otherwise be inaccessible. For example, a small investor might not have the capital to invest in a large commercial property, but could purchase a fractional interest in the property through tokenization. This increased accessibility allows investors to diversify their portfolios and gain exposure to a broader range of real estate assets.
Tokenization process and how it works
The tokenization process involves several steps. First, the real estate asset is valued and a legal structure is established for the tokenized units (vehicles such as trusts or limited partnerships are typically used, depending on the jurisdiction where this is done). The token is then issued on the blockchain and the various units (fractions) are allocated to the various investors.
The blockchain network provides a secure and transparent platform for token trading. Each token is unique and cannot be duplicated or counterfeited, ensuring the security and transparency of the holdings. In addition, through what are known as “smart contracts”, many processes, such as dividend payments and shareholder voting, can be automated.
Briken: Complete solution for real estate tokenization
Real estate tokenization is still a relatively new concept, and many investors may not be sure how to get started. Briken is a complete solution for real estate tokenization, providing end-to-end services for tokenization projects.
Briken provides a turnkey solution for real estate tokenization, so that leading real estate companies can have their own platform (with their own brand, domain, etc.) through which to issue and market tokens, while also facilitating various placement, rental distribution, voting and secondary sale mechanisms.
Briken’s platform is built on Polygon, an Ethereum scalability solution. This ensures that issuance information is public and auditable, and that its transactions are secure and transparent through smart contracts and without the need for an intermediary. With Briken, real estate developers and investors can access the benefits of tokenization without the complexity and regulatory uncertainty of launching a tokenization project from scratch.