Tokens reach the real estate sector.
From the metaverse to tokens, the world appears to be moving too fast. This is an example of home tokenization. We first explore what it is and what it consists of. Next, we examine its risks, to end up discussing whether it is a booming phenomenon, or is it still something residual.
What is Real Estate Tokenization?
To tokenize is to digitize an asset so that the token (a digital representation of an asset on a Blockchain) captures and represents the value of that asset. In other words, deeds represent ownership of a property. Therefore, in the digital world, the token can represent, for example, the exploitation rights over a property and the capital gains generated if the owner sells it.
The token would therefore be a unit of value issued by a private entity. The particularity of the tokens is that thanks to their cryptography we can prove that the owner is the sole owner of a certain product.
When investing in a property in a traditional way there are some barriers to entry. The first thing is to have enough capital to acquire that asset, either to obtain profitability or to sell it after its acquisition. This is where tokenization breaks with the established since by tokenizing the asset you are dividing the asset (in this case the property) into digital shares. Thanks to this, we achieve more accessibility and ease of transmission of the properties. With small shares, small savers could actively participate in the real estate sector.
The tokenization of real estate would also have an impact on the transparency of the housing transfer process since the owners of the properties would have more facilities to liquidate them. In addition to this, the owners would have the possibility to finance the tokens of their assets.
Before we engage in this type of investment, there are a few steps to consider, explained below.
Open a Wallet
Anyone who knows about cryptocurrencies will already be familiar with what a wallet is, which is a cryptocurrency purse. It is like a bank account, but for cryptocurrencies; they can be stored in it.
“The best known, ETH, BNB, and real estate tokens or that represent any other tokenized asset. The wallet par excellence is MetaMask,” they explain in Reental.co, a startup dedicated to the tokenization of real estate.
How to Buy and Sell Tokens
The wallet is the medium through which people can buy and sell tokens. The wallet will ask us for authorization to carry out the transactions. To sell, you locate the token in the wallet that you want to sell: select and choose the exchange to the currency that interests you. This way you get an amount of the chosen currency for each of the tokens sold.
An investor who invests in cryptocurrencies buys the tokens from us. Each token is worth approximately 100 euros, so regardless of the crypto you use, at the time of purchase the change is to euros, which is the capital you invest.
During the project, you receive monthly dividends in USDT (which are dollars but represented on the Blockchain). In addition, when we sell the property at the end of the project, the capital and capital gains return in USDT.
“The advantage of USDT is that you can use it to reinvest or for any other crypto project and it is also very easily convertible to euros at any time through the exchanges that send the euros to your bank,” explains Eric Sánchez, from Reental .co.
The Risks of Real Estate Tokenization
“The intrinsic of any property. In this case, it is not rented, or there are defaults (although we work with guarantee insurance). Or that in the future the property would lose value”, explains Sánchez.
The interests offered, in the form of Reental tokens, are highly speculative in nature, involve a high degree of risk and the people interested in purchasing them must be those who can afford to lose their entire investment.
“There can be no guarantee that the Company’s business objectives will be achieved, whether through the Reental website or through third-party registered investment advisers or otherwise,” according to the Reental.co expert.
“Investing in placements like this requires a high tolerance for risk, few concerns about liquidity, and a long-term commitment. The Interests sold are not insured, they may lose value and they do not have a bank guarantee or any other type”, Sánchez warns.
Is it a Residual Phenomenon?
On February 10, 2021, a tokenized property was sold in Spain. Although a priori it might seem like a relatively residual phenomenon, it is becoming increasingly important among people interested in the world of decentralized finance. The processes of buying and selling real estate, like those of renting, are evolving but they do so more slowly than technologies. It is up to those interested in exploring this area to get properly and thoroughly informed before making important financial decisions.
By Audy Castaneda
