How Exactly Can Real Estate Be Tokenized
Tokenized real estate is becoming a popular investment opportunity, but most people still don't know how it works. There are 4 main methods of turning real estate into digital tokens. Let's compare them, then determine where to buy tokenized real estate.
Security Tokens
A security token offering (STO) offers securitized tokens to prospective investors in tokenized real estate. By buying a token, an investor gets a stake of ownership in the property.
STOs are generally regulated as securities in key leading international centers, including the US, the UK, Japan, Singapore, and Hong Kong. They can be used in connection with a vast array of different types of assets and to carry a broad range of rights for token holders.
NFTs
NFTs can represent both physical real estate in the real world or digital plots of land in the metaverse.
NFTs in real estate represent properties (or shares of properties). A buyer pays in crypto and receives an NFT in their digital wallet. This NFT represents ownership of a particular real estate property. One non-fungible token normally represents one property or one square meter / square foot.
Let’s compare these two options to find out which is better.
There are minor differences, so it’s hard to tell if there's a favorite. Both methods are widely used.
Other Tokenization Options
Both security tokens and NFTs are related to fractional ownership tokens. They represent a small percentage of ownership in a real estate asset. This allows investors to own a piece of a property that they could not afford to buy outright.
There are two more, less popular, but still interesting options:
- Real estate debt tokens represent ownership in a loan secured by a real estate asset. This allows investors to earn interest on the loan without taking on the full risk of owning the property.
- Real estate investment trust (REIT) tokens represent shares in a REIT, which is a company that owns and manages real estate assets. REITs are a popular way for investors to get exposure to the real estate market without purchasing particular properties.
Where to Buy Tokenized Real Estate
Tokenized real estate can be bought through specialized marketplaces, investment platforms and projects. Here are some of them:
- RealT — a platform that specializes in tokenizing real estate properties, primarily in the United States.
- Propy — a blockchain-based real estate platform that also dabbles in tokenized real estate.
- Home Key — a smart house building business offering house construction and real estate investments. Modern construction technologies and tokenization make it more profitable than traditional properties. Buyers can get a new house for the price of an apartment, and investors can earn 73%+ annually.
*Do your own research before investing in anything!