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There is no doubt that real estate has a history of service as a viable option for investors to generate and store wealth. However, while commercial and residential properties are known for income generation and historically appreciated over time, there is no fundamental characteristic that differentiates them from many common investment vehicles, such as shares: liquidity. Liquidity is a concern of the old world, one that has irritated many product sponsors and kept many types of investors at the margins, but this may soon change when the tokenisation of real estate through means such as cryptocurrency becomes a reality. If done successfully, investors could buy and sell real estate faster than ever through asset-backed currencies (ABCs). This vision is what many consider the "new world" of investment.
In the concept of the new world of tokenisation of real estate assets, a currency supported by assets can represent a share of ordinary shares in a property through indirect ownership, thus allowing real estate investments for a much wider audience. Those who had previously invested in real estate just as a means of buying a home now have the opportunity to access liquidity and accumulate wealth through an asset-backed supply of coins.
Manage the real estate appeals to those who have been apprehensive about the cryptocurrency process, since many currencies have arbitrarily fluctuated according to demand and supply. While the traditional currency is usually linked to a given country and issued by a government and the exchange rate fluctuates based on this, the digital currency is decentralized. The use of real estate as a resource to support the currency gives stability to the market, which works well for traditional real estate investors, as well as for cryptic investors who consider this opportunity an opportunity to generate long-term wealth and at the same time maintenance of liquidity.
Tokenization compared to other real estate investments
As many real estate investors know all too well, direct investments in commercial real estate often lead to a mountain of paperwork and time spent trying to get bank loans or compiling and revising legal documents and dealing with brokers, as well as a host of other tasks. extended and burdensome. This process is often very confusing for investors, since private property transactions often lack transparency and liquidity and, in some cases, accessibility. The advantage of an asset-based offering (and asset-backed coins) is immediate and direct access to an investment product that simplifies the whole process and often also reduces commissions by cutting intermediaries. . This option to invest in an asset-backed currency also allows you to invest in more than one project at the same time to effectively diversify your assets, which may not be possible in a direct investment of commercial real estate.
Some may argue that a REIT is the safest and most consolidated option, but with a publicly traded fund it is possible that extra spending incurred to manage this type of investment would lead to lower dividends for investors. With regard to a non-negotiated REIT, there is the obvious disadvantage that this is not liquid and the fund's operations tend not to be transparent to a private fund and the increased levels of sales at the intermediary and wholesaler level often generate expenses. significant for the investor. Furthermore, with an unreported REIT you are tied to a certain period of time before seeing any return of capital, usually at least five years. For those looking for real liquidity, a real estate agreement with an asset guarantee can be a welcome addition to their real estate investment portfolio. Just like with a REIT, there are risks to consider when investing in real estate through a symbolic offering, such as the type of property in which you invest. A REIT is a promoted resource pool that creates an exposure strategy rather than a particular resource. Obviously, properties in highly demanded areas such as large cities may involve less risk in general, so this depends on your style of real estate investment.
Coin-based properties blend the old world, the more traditional real estate investment benefits such as the protection of wealth and creation with the new advantages of liquidity, representative of the new world. As digital currency becomes more common in our daily transactions due to the spread of blockchain technology that makes these transactions transparent, real estate investors should pay attention to how their potential partners see cryptocurrency. Getting an understanding of the benefits offered by real estate deals with tokens will soon be an issue to which all members of the real estate investment category are familiar.
Stephane De Baets is the founder and president of High returns, an asset management company.
