Learn About Real Estate Tokenisation
hat Does It Mean to “Tokenize” a Real Estate Asset?
Tokenization, a relatively new term, refers to a cryptocurrency fundraising method where investors exchange fiat or cryptocurrency for “tokens.” Essentially, tokenization is a way to securitize real assets.
Securitizing an asset involves dividing it into shares that can be sold to investors. Similarly, to “tokenize” an asset is to divide it into shares or “tokens,” representing a predetermined share of the underlying asset—often referred to as “security tokens.”
These tokens are secured through the immutability of blockchain technology and can be traded on crypto exchanges or Alternative Trading Systems (ATS).
Creating a New Real Estate Token
When an asset owner decides to tokenize a property, they create an Ethereum-standard (ERC20) real estate token, also known as a security token, representing shares of the property. The total value of all tokens corresponds to the total value of the securitized asset.
Consider a 100,000 sq ft property valued at $30M. One approach is to offer one share for every square foot, resulting in 100,000 shares, each valued at $300. Alternatively, dividing the property into square inches would make each token worth $2.08, broadening accessibility to a wider range of investors.
Owners may also choose to limit the share offering to a specific percentage of the asset, such as 20%, to maintain majority ownership while raising funds for specific purposes like new construction or renovations.
The subsequent step involves selling these tokens to investors, marking the beginning of the tokenized real estate investment journey.”
Streamlined Benefits of Tokenization for Investors and Property Owners
Revested revolutionizes real estate with tokenization, delivering key advantages:
- **Simplified Transactions:** Tokenization cuts out the middleman, making real estate transactions easier and cost-effective.
- **Efficient Capital Raising:** Owners and developers access capital swiftly without financial intermediaries.
- **Instant Trading:** Investors enjoy almost instant, low-cost token trading, akin to the stock market.
- **Accessible Investment:** Tokenized real estate offers a low-cost entry point for investors, combining high returns with stock market-like liquidity.
- **Lower Risk:** Real estate tokens, backed by tangible assets, provide a more stable investment compared to volatile cryptocurrencies.
Revested’s commitment to tokenization transforms real estate, offering efficiency, accessibility, and a balanced risk-return profile for all stakeholders.