Real estate tokenization is a new type of property investment. It uses high-end blockchain technologies to modernize the way we think about investing in real estate, how we do it, and how it profits you. In this article, you will learn the basics of real estate tokenization and its mechanisms.
What is a token?
A real estate token is a digital share of real estate assets.
Say, there is a flat in a Dubai skyscraper. The flat is like a giant pie. To buy it in full, you need a lot of money. The majority of retail investors would find it difficult to engage in such an investment project due to their restricted capital.
But what if this giant pie was divided into many pieces? It would mean that each of them costs much less.
This is what a real estate token is, a small piece of a real estate pie that costs less than the property itself but carries all of its original features. Though it is digital, it is inextricably linked to the real physical property.
What is a tokenization?
Tokenization is a process of dividing a property (e.g., an apartment, house, or villa) into digital shares powered by blockchain technology. In tokenization, a property is divided into a number of tokens. A token can constitute 1/1000th, 1/2000th, or an even smaller unit.
This token information is written in a smart contract, a program stored on the blockchain. Smart contract automates tokenization, saves full data on tokens and their owners, and eliminates the human element from the process. Every investor can study their smart contract on the blockchain explorer, transfer tokens to personal wallets, and be in control of their investment.
How does real estate tokenization work?
On NOVA, tokenized real estate is available for easy and affordable investment. Users can purchase any number of real estate tokens and create a unique investment portfolio.
Once all tokens for a specific property are sold out, the investing project starts. The project is a period when you will be in the right to receive profits from this property, i.e. from its long-term appreciation and rent.
While the project is running, the property can be rented as a holiday home or as a long-term accommodation. As an investor, you receive regular dividends from the property use. The amount of your dividends corresponds to the size of your investment in the property’s initial price.
When the project ends, investors receive the final dividends for property appreciation plus their initial investment.
NOVA offers properties from the ever-growing real estate markets from around the world. It ensures that property appreciation is high (over 10%) and the investment returns surpass the regular ROI available in traditional investment, e.g. bank deposits (around 2-5%).
Why tokenize real estate?
The tokenization of real estate solves many of the market issues. Having properties tokenized, investors know that their investment is transparent, affordable, and stable. Technologies help to lower the barriers to entry for retail investors and protect their investments and personal data with smart contracts.
Investing in tokenized real estate relieves investors from the necessity to be liable for their property. Everything related to repairs and maintenance – finding the tenants, collecting rent, monitoring the property’s conditions, etc. – is beyond the investor’s duty.
Still, the industry of real estate tokenization needs further development. It has to promote the formation of new regulations and provide a platform to ensure the liquidity of tokens as digital securities.
NOVA is a unique investment service developed by Headway, an international broker regulated by the Financial Sector Conduct Authority (FSCA). When you invest in tokenized real estate on NOVA, you can be sure that your investment is legally transparent and secure.
In a nutshell, tokenization introduces the property to many new retail investors. It is a positive trend that has a long way to go in the upcoming years.
Join NOVA to learn more about tokenization and make your first investment!
