The Most Attractive Aspect Of Tokenized Real Estate

The Most Common Selling Point

Tokenization is yet another way blockchain is busy reshaping the business and financial world. I have previously addressed tokenized real estate, addressing some benefits and potential pitfalls. For many, the most attractive aspect of tokenized real estate is that it removes barriers to entry. Real estate has always been a bit of a “rich man’s” game.

Investors are now able to invest as little as $50 and subsequently become owners of real estate. This is enormous in terms of creating opportunities for those who have been previously excluded from this particular market. Traditionally, investors would need to purchase an entire piece of real estate, which could cost anywhere between $200K and $500K.

Tokenization removes this barrier and ultimately creates an entirely new “class” of real estate investors. Those looking to eventually own their own home, now have a practical way to get started in the real estate market. A real estate investment via platforms such as could eventually become a down payment, or eventually, capital to purchase an entire property.

An Extremely Powerful Advantage

This brings me to the point of what I believe is even more powerful than the removal of barriers to entry. Housing prices are dropping, and are expected to drop further in 2023. However, what is the benefit of a “lower price” if the interest rate is higher? Many people speak about the “profit” they made when they sold their homes. Interesting, how they only consider the buying price versus the selling price.

They never factored in how much more they paid over the years via their mortgage. As interest rates continue to rise, the settlement amount increases significantly over the period of a traditional mortgage. This is where tokenization smacks a blazing ace. Tokenization removes the dynamic of a mortgage. In other words, investors are spared the additional cost that a mortgage incurs over decades, which is significant, especially now.

This ultimately reduces the purchase price in real terms, as well as generates speedier returns. In other words, the tokenized model leverages the current drop in prices, as well as increasing interest rates in favor of the tokenized real estate investor. Of course, there are other benefits to utilizing a mortgage. However, if your investment allocation is not that large, you don’t really require those benefits and can use the tokenized model to your advantage.

Final Thoughts

The majority of tokenized real estate platforms allow a single investor to own as much as 10% of any given property. This can sometimes be increased to approximately 15% under certain conditions. Investors can begin building a real estate portfolio by owning fractional amounts of multiple properties. This is also a way to diversify against the risks involved with the tenant market and non-compliant tenants. As with any investment, research, and due diligence is always essential practice. This is not financial advice or an endorsement of any companies mentioned.

Leave a Reply

%d bloggers like this: