Tokenization of Real Estate

Psoted on: October 11, 2021 at 7:02 am, in

Tech Trend that Changes the World of Finance

Investing in real estate has always enjoyed great popularity and is often recognized as one of the best ways to increase capital.  

Tokenization using blockchain technology will soon bring real estate investments to a completely different level, and take it to the digital era. It will create efficient mechanisms to increase the liquidity of real estate, simplify the procedure of buying, maintaining, and selling the property. What is also important, is that the buying group changes dramatically: tokens can be offered to a much larger international investor group. Also, assets can be divided into smaller assets parts and therefore investors with a smaller budget also have the chance to partake in large projects that were previously inaccessible because of high capital requirements. 

Tokenization of Properties: Peculiarities 

Real estate tokenization is the “transfer” of real estate assets from the real world into a digital format, preserving all of their significant indicators (value, class, and profitability). It is done through the creation and issuance of smart tokens (digital units) on a blockchain (Ethereum, Cardano, and others) by dint of an STO (security token offering) launch. In turn, these originated tokens may be of different nature and purpose. Thus, they can be equal to: 

  • Equity in real estate; 
  • A share in a company that holds the property; 
  • A claim secured by real estate; 
  • The right to a part of the profit generated from the real estate ownership, and others. 

Any type of real estate can be tokenized, both residential and industrial. As of now, there are several property tokenization mechanisms, among them are: 

  • Ownership of real estate through an equity interest in a specially created (vehicle) company; 
  • Equity in a real estate fund; 
  • Equity participation in a real estate property; 
  • Investing and lending for real estate development; 
  • Creation of tokenized real estate investment funds. 

The technology itself is extremely promising and experts worldwide confidently call it the tech trend of the future, which will redraw the whole global investment market. It will relieve investors from hateful paperwork and expand the pool of possible investors as such. 

Advantages of Real Estate Tokenization 

Tokenization of any kind of asset is a promising and offering great opportunities tool. If we talk about tokenized real estate advantages, we can specifically highlight the following points: 

  • Overall flexibility   

One of the notorious advantages of tokens is their flexibility. When a property is tokenized, it can be digitized for later fractional sale or exchange. This also allows investors with little capital to enter the market. That is even an entrepreneur with little funds can invest in a tokenized property and become its partial owner obtaining dividends from the potential earnings. 

  • No geographical boundaries or restrictions 

Tokenization of property tools literally erase geographical boundaries in the investment world, thereby expanding the pool of investors and potential targets for funding capital. All activities take place in the digital format, thereby providing the opportunity to invest in tokenized real estate on a global scale at any time convenient for the entrepreneur. 

  • Cost optimization 

When tokenizing a property, it is possible to significantly reduce the typical organizational costs of conventional real estate investing, such as notary fees and bank fees (paying for your property in cryptocurrency helps you bypass them). Plus, the procedure is completely automated and eliminates redundant red tape formalities. 

  • Possibility of high diversification of the investment portfolio 

Nowadays, to participate in a luxury real estate investment project, for instance, an investor needs to have quite large funds at their hands and pay out a big amount at once. However, thanks to tokenization, it will no longer be necessary to buy the entire property and give a large amount at once, because it will be divided into tokens. This or that property can be split into hundreds or thousands of tokens with a designated value. That is, you can purchase only a small part of this or that house, office, warehouse, etc. It, in turn, means that you can do it with several properties, thereby adding variety to your investment portfolio. 

  • Exclusion of intermediaries 

Thanks to smart contracts prepared in the process of tokenization of assets it is possible to excrete the intermediaries such as notaries, brokers, etc. 

Smart contracts are computer code that exists in a blockchain that ensures the automatic execution of agreements between users without interference. Because smart contracts operate in a blockchain environment, these algorithms cannot be changed once launched. 

Final Thoughts 

Tokenization is a fairly complex process from a legal and technical standpoint. Companies/entrepreneurs interested in launching tokens upheld by real estate face a wide range of challenges in preparation, designing, originating, and promoting real estate tokens. This is why those who have the intention of starting their token project should trust professionals who have the necessary skills, knowledge, and resources to do so. ClevverCrypto is the new brainchild of our company which was created for this very purpose — to provide professional qualified assistance in launching your token campaign. Visit our website to find out more. If you have any questions, please, be free to contact us immediately. 

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice. 


Global Real Estate Investment. What to Expect in 2021?

Psoted on: March 9, 2021 at 10:25 am, in

Overview:

  • Experts predict that despite the Covid-19 pandemic, the global real estate investment market will remain at a decent level in 2021.
  • Industrial and residential real estate types have shown enviable resilience to the global pandemic crisis. They experienced a subdued drop in transaction volume.
  • According to reputable experts, the main countries for investment in real estate in 2021 will be Germany, the USA, Canada, Australia, and Great Britain.

In 2020, the world has experienced unbelievable events and major changes. The pandemic and subsequent lockdowns around the globe have caused uncertainty not only for the average person but also business people who are involved in real estate investments have felt strong fluctuations in this area.

As for 2021, the use of the Covid-19 vaccine and the anticipated overcoming of the global pandemic gives good reason to think that the world economy will enter a phase of a strong recovery during this period. This fact in turn directly affects the real estate investment market and should boost property investor confidence in “tomorrow”.

A large number of developed countries are trying their best to keep their economies at an as acceptable level as possible. To do this, they are taking drastic measures to support economic development through ultra-low interest rates and quantitative easing programs. These low-interest rates will be able to support real estate investment in 2021.

Lockdown restrictions and widespread economic uncertainty have caused deal volumes to decrease in 2020. Experts estimate that global investment volumes have fallen by about 28% in 2020. However, it should be noted that the 2020 crisis did not affect all types of real estate in the same way. The industrial and residential divisions experienced more reserved drops in transaction volumes, increasing the market share, which accounted for 21% and 28% of total investment, respectively. The resilience of these sectors to changes in the past year of pressure gives strong hope that this inclination is likely to persist in 2021.

2020 was a challenging year in every way, and it didn’t spare the real estate investment sector. This is a truth that is hard to argue with, but despite the short-term uncertainty associated with the pandemic, real estate has been and remains an attractive capital-raising tool for investors in the long term.

What Real Estate Sectors Should Investors Pay Attention to in 2021?

  • Experts predict that office real estate will remain one of the largest property sectors for investment. The focus is expected to be on lower-risk assets with stable yield characteristics in the world’s best locations.
  • The residential sector will be able to attract an ever-increasing share of global investment, subject to the support of strong fundamentals and the growth and consolidation of portfolios of cross-border investors.
  • Elderly housing and healthcare are operating asset classes with long-term income potential. The accent on health and wellness in 2021 is expected to drive the investment share.

Where to Invest?

For those who are planning to make real estate investments in 2021, we have prepared a shortlist of countries that would be comprehensive for this purpose. You’ll be happy to know that there are many potential countries where you can invest your capital in residential property.

Germany

Growth in real estate prices in Germany will continue despite the pandemic and temporary economic difficulties, experts predict. The housing market in Germany is surprisingly resistant to the negative effects of the Covid pandemic. Only a slight slowdown in price growth is expected: apartments and houses will rise in price by about 4% in 2021 instead of the 5-6% forecasted earlier.

Reputable real estate investment specialists claim that the factors that influenced price increases earlier will persist in 2021: demographics that support the high demand for housing, a shortage of land for construction, as well as low-interest rates and a lack of alternative investment opportunities amid the instability of other markets.

The United States of America

The economy is showing good signs of recovery from the 2020 crisis: an overall unemployment rate is low and businesses are generally booming. These factors can’t but encourage new investment in real estate. Attention should be paid to cities such as San Diego, Los Angeles, and San Francisco, which are additional major destinations for real estate investment.

Australia

The Australian residential real estate market has seen extraordinary changes in property value over the past few decades. It has skyrocketed in significant and expensive cities like Sydney, Melbourne, Adelaide, Perth, Brisbane, and Hobart. Despite the recent tightening of credit policies, the country is recording a surge in investor interest.

Canada

Canada’s real estate market has shown great momentum and can even be said to have prospered recently. Home values rose about 10% last year in major cities, twice the long-term average. Metropolitan areas such as Toronto and Vancouver have consistently high real estate prices. Low-interest rates, moderate currency value, and tax abatements are factors that urged foreign venturers to increase their investments in real estate in 2020.

The United Kingdom

Great Britain’s real estate market has always been stable and has attracted the attention of global investors. At the moment, it is still a great place to invest in a stable asset for long-term benefits. The interest rate on the prime rate of the Bank of England has dropped to 0.1%. This in turn has increased investment opportunities. To give a necessary boost to the real estate market, the UK government has modulated the size of the temporary Stamp Duty Land Tax (SDLT) on real estate sales in order to attract new buyers.

Bottom Line

Investing in residential real estate is one of the most reliable ways to increase capital with a low risk of losing the assets invested.

Clevver always works with its clients in mind. We have released a comprehensive whitepaper on residential real estate investing and the taxation associated with it. Don’t hesitate to check it out absolutely for free!

DISCLOSURE NOTICE: Any legal or tax advice in this communication (including any attachments) is for information purposes only and is not intended to be used, and cannot be used against Clevver or its Sender. The sender is neither an Accountant nor a Lawyer and cannot be made liable. Please, contact your tax accountant for individual consultation. Clevver does not provide any legal advice itself. Clevver works together with a network of lawyers and tax advisors that provide all necessary individual legal advice.