Tokenization: The Future of Real Estate
Have you ever sold a piece of real estate? How does it compare, say, to selling stock? Did you notice any difference between the two?
Why is there such a contrast? How come real estate is a total nightmare?
While there are many factors in this discussion, the main premise comes down to liquidity. As an asset class, real estate is one of the most non-liquid ones out there. This makes it extremely difficult, especially from the investment perspective. It serves as a most for others to get into.
This is all about to change over the next decade. Blockchain is going to upend the real estate market. At stake, roughly $300 trillion.
At the core of this is the tokenization of real estate. This is where the future of this industry lies.
Adding Liquidity Where There Is None
How would you like to trade real estate as easily as a stock?
This was a concept that stood little chance until recently. With the introduction of blockchain, along with cryptocurrency, this is looking more like a coming reality.
Cryptocurrency allows for any asset to be broken up and traded on blockchain. This is a revolutionary concept when it comes to real estate. Therefore, we will approach a time when real estate is traded similar to stocks. There one will enter a wallet and make a purchase for a token. This is done daily these days. However, in that instance, the token will be tied to a piece of real estate.
Of course, this opens up the market to enormous change. To start, it will explode in size. The number of players will grow exponentially. Consider the fact that millions of people with minimal amounts of money will be able to buy these tokens. In many instances, the purchase might be as small as a dollar or two.
Being able to engage in a market in such a matter means there will be tremendous liquidity brought to the table.
Consider the possibilities for commercial real estate. These are often multi-million dollar properties, especially when in major cities. The ownership structure is usually some type of general partnership agreement. This means there are a number of limited partners, typically the ones who put up the money.
However, on deals of this size, the buy in is healthy. Few are in the class to even consider an investment of this type.
With tokenization, this is not longer an issue.
Going Global
Blockchain and cryptocurrency are global in nature. They do not exist in any country. Hence, whatever is put on the blockchain is transmitted around the world.
We can already see the implications of this on the real estate market. Suddenly, there are no geographic constraints. Do you want to have holdings in the far east? It is as easy as buying something in your hometown. What the token represents, or more accurately, where, is of no consequence to the system. Whatever is located on blockchain is there. What is represents is up to the individual tokens.
Keep in mind, this is a $300 trillion market. With a global population of roughly 7.5 billion, there are a lot of people who will no longer be excluded.
Of course, as the infrastructure is built out, we will see a massive shift towards automation. These applications and platforms that this will be built upon is going to radically alter the entire industry. With automation comes the ability to push down costs. Again, the present system is, for the most part, archaic.
People will need to be careful though. Under such as system, it is easy to buy some tokens of properties in St. Petersburg, Russia when Florida was desired.
It is really amazing how much is going to change over the next decade. We are witnessing the foundation of something will affect most industries.
Real estate is no exception.
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