Advanced fractional real estate ownership is being recreated through the process of “tokenization.” Breaking down the value of the investment into smaller chunks is a crowd-funding tactic that helps overcome most of the investment barriers.
Tokens are created for each and every part of the asset that can be sold. An investor’s stake in the property, expressed as a percentage, is encoded into each of these cryptographic tokens. For example, $100 million worth of real estate can be broken down into 100 tokens, each worth a million dollars. The value of the tokens can then be determined and they can even be traded on a secondary trading platform.
In terms of total investment, real estate is one of the largest asset classes in the world. In contrast to the staggering $280 billion in global assets, the number of real estate investors is significantly lower.
This happens due to the fact that small investors cannot afford the amount of money required. Secondly, real estate necessitates a lot of paperwork that is time-consuming. Concerns about transparency in asset management are growing.
The establishment of Returns in the early 1960s was an attempt to attract investors and change the illiquid asset status of real estate (Real Estate Investment Trusts).
A single property was divided into multiple parts, each of which was owned by a group of investors who pooled their funds, setting a precedent for tokenization in real estate.
Is Tokenization Important in Real Estate?
The pandemic has had an impact on economies. Money supply protection is a top priority for both institutional and retail investors. In the current economy, the only surefire way to stay afloat is to increase your investments in scarce assets, with real estate being the most lucrative of them all. Most retail investors cannot afford the capital required to invest in real estate.
Real Estate Tokenization is a Capitalization advancement that aims to use blockchain technology to solve most of the problems associated with this model. For the time being, tokenization appears to be the only viable option for most investors.
The following are some of the great reasons for tokenizing real estate:
Increasing Cash Flow of Tokenization
Overcoming financial distress is one way to increase the value of any asset. Tokenization can improve real estate liquidity by removing middlemen and heavy transactions.
NFTs have a bright future.
Many people do not take NFTs seriously. It’s hard to blame them.
Thankfully, despite the absurd million-dollar sales of frivolous GIFs and memes, it appears that NFTs have found their place in the real estate industry. Having an NFT token deed simplifies the process of escrowing a home, transferring ownership rights, securing loans with collateral, refinancing a mortgage, and more.
Working Model of an NFT real estate marketplace
NFT transactions becoming and quickly by blockchain technology. Users can even create intelligent contracts tailored to their specific requirements, defining the rules and nature of the trade. Users of many blockchain technologies can mint NFTs on their networks. Ethereum, Flow, and other well-known ones are examples.
When we NFT, we receive a certificate stating that the NFT is now their property.
These wallets allow for the transfer of funds from the buyer to the seller as well as the storage of NFT. Metamask, Trust Wallet, and Enjin, are some of the most well-known crypto wallets.
An NFT for real estate marketplace, like any other, should have some basic features for listing and purchasing NFTs.
Consider including the following features in your MVP if you want to build an NFT real estate marketplace.
Many people instantly claim that NFTs cannot be linked with physical assets. It’s true that legislation still needs to catch up in order to provide a sound regulatory framework for asset tokenization.
It is completely false to claim that it is not possible today. Tokenization is possible; it just needs some additional structuring to make it work in the “real” world.
We believe that real estate tokenization is one of the industries that will benefit the most from NFTs and that some truly innovative business models will leave many people speechless.