Best Real Estate Tokenization Platforms in the World
The best real estate tokenization platforms are:
BinaryX - best for individual investors, small, and medium businesses.
Republic - best for investors and companies of all sizes and experience levels.
Harbor - best for investors and builders.
FIGURE - best for home buying, home refinancing, home equity lines of credit, and personal loans.
Arrived - best for investing in rental and vacation homes.
Mogul - best for investors seeking a low real estate tokenization platform.
Roofstock - best for investing in single-family homes in minutes.
RealT - best fractional investment platform.
According to research, real estate investing is among the best forms of investment because it yields returns of over 70%. Investors enjoy mouthwatering passive income, diversification, and leverage. But with real estate tokenization, there are even more benefits, provided you use the best real estate tokenization platform.
Comparing the term "tokenization" to what you previously understood about real estate investing may be confusing. However, do not worry; this article will educate you on real estate tokenization, including how it functions, benefits, and drawbacks, as well as the top 7 real estate tokenization platforms. Let us begin by thoroughly describing real estate tokenization: So what is real estate tokenization?
Start investing in tokenized real estate now with Bybit!What is real estate tokenization, and how does it work?
The term “Tokenization” in Real estate refers to breaking down assets into smaller, more self-sufficient digital tokens. Real estate tokenization, which has to do with blockchain, is the method of making physical assets become digital tokens. Blockchain, a digital ledger that fulfills this function, offers a safe and open platform for storing and transferring tokens. Real estate tokenization uses a smart contract, an automated program running on a blockchain, to divide assets into manageable portions. Because they only take effect when certain conditions are met, smart contracts automate contract execution.
Following conversion, these tokens are saved on a blockchain, enabling the transfer of fractional shares and digital ownership. Each portion of the tokenized assets is affordable to a wider range of potential buyers. Hence, tokenization of real estate creates liquidity, which is lacking in conventional real estate investment, and lowers entry barriers. Real estate tokenization makes it easier for investors to buy and sell fractional shares of properties, increasing market liquidity.
How real estate tokenization works
A trader owns a portion of the property when they purchase a real estate token. For instance, Mr. A. has a property worth $200,000, but the investors who are coming to look at it are not pricing it at that amount, and he urgently needs cash. So, he decided to involve a real estate tokenization platform. His property is divided up on the real estate tokenization platform, and each unit will be worth $1,000 to $2,000 in digital tokens. The property owner no longer needs to wait for a single buyer because investors can now purchase fractional ownership, which grants them rights to a portion of the property.
Each investor has the right to only a specific area of the property, depending on how it is fragmented. Thus, by tokenizing real estate assets, developers recapitalize a high percentage and provide quick sale assurance.
Top-8 platforms for investing in tokenized real estate and other activities
Real estate tokenization platforms provide fresh and innovative means for individuals to invest and own a small stake in specific properties. Since real estate tokenization is an online endeavor that depends on the blockchain, investors need dedicated platforms for this type of investment. These online platforms make high-quality real estate assets more accessible to investors worldwide.
Real estate tokenization platforms use blockchain technology to guarantee the process is secure and transparent, and they offer a variety of services. This includes asset tokenization and rental programs to allow investors to make passive income. And these platforms are the reason why real estate tokenization is rapidly gaining traction in the digital and real estate spaces. Below are the top 8 platforms for investing in tokenized real estate.
Binaryx - best for individual investors, small, and medium businesses
BinaryX is a popular real estate tokenization platform that ensures the best trading experience for buyers and sellers of real estate properties. This company was established in 2019 and initially served as a marketplace for purchasing, selling, and storing digital assets like cryptocurrencies. BinaryX expanded its services to include a next-generation financial ecosystem with a central focus on real estate tokenization.
The ability to exchange digital assets and provide asset tokenization services on one platform gives this platform a competitive advantage. Real estate investors can convert the value of their real assets into tokens and list them on an exchange. However, retail investors can buy fractional ownership interests in properties on the Binaryx Marketplace starting at $50.
Rent and rising property values can provide investors with daily passive income in USDT stablecoins.
On BinaryX, you can always buy, trade, and sell real estate quickly, profitably, and with ease. Investors who want to diversify their portfolios can buy tokens of different properties to lower the risk of investing in real estate tokens. Investors can confirm ownership of properties after purchase from time to time in the open blockchain database of the investment company.
Republic - best for investors and companies of all sizes and experience levels
Republic is second on the list of top platforms for investing in tokenized real estate. Republic, a New York-based company founded in 2016, gives people access to startup investments they are interested in. They are among the platforms that make it simpler for smaller, non-accredited investors to purchase real estate properties.
Businesses can list on the platform after undergoing vetting procedures (Republic claims a less than 5% acceptance rate). Investors can hold a portion of real estate, startups, and cryptocurrency projects, depending on the framework the company establishes. However, the minimum requirement is only $50.
The Republic offers additional opportunities for investing in various ways, including:
Automated investing - This is a less demanding way to get access to startups. Republic will help you create a startup portfolio using businesses with over 100 investors.
Accredited Deal Room - This is specifically for traders looking for special deals with a net worth of at least $1 million or $200,000 annually.
Harbor - best for investors and builders
Another fantastic digital securities platform where you can invest in tokenized real estate properties is Harbor (launched in 2018), which BitGo purchased. With the help of Harbor, a top tokenization platform, the blockchain issues tokenized securities for between $100 and $200. The traditional financial assets that are shown as digital tokens on BitGo include real estate, stocks, and bonds. So, BitGo's purchase of Harbor most likely aims to combine these services.
Institutional investors interested in digital assets and tokenized securities may find a more complete and secure ecosystem with BitGo and Harbor integration.
BitGo offers regulated, scalable, and secure solutions for the market for digital assets. The business creates decentralized compliance protocols that standardize the exchange of real estate on the blockchain. Given its high level of security, this platform has proven to be a useful tool for large investors and financial institutions.
Figure - best for home buying, home refinancing, home equity lines of credit, and personal loans
The “figure” is another platform whose services are focused on providing a blockchain-controlled marketplace for investors and businesses. This platform provides trading, equity, and capital-raising solutions. With the help of blockchain technology, Figure Marketplace streamlines access to a range of private firms, private funds, and real estate.
Investors can buy and sell tokenized shares of real estate assets on their marketplace, which they provide. Administrators, trustees, and other parties who previously had to verify all that paperwork are relieved because the figure creates an immutable record using blockchain technology.
This makes it possible for people to invest in real estate with less money. It offers home equity lines of credit (HELOCs) with terms of up to 30 years and a range of $15,000 to $400,000. In addition to home equity lines of credit, Figure provides a substitute for reverse mortgages. This real estate tokenization platform is among those offering the quickest and easiest ways to get a home equity line of credit at the moment.
Mogul - best for investors seeking a low real estate tokenization platform
The Mogul is among the top real estate tokenization platforms, allowing investors to purchase fractional ownership in real estate using blockchain technology. Real estate enthusiasts who enjoy buying and selling properties will enjoy trading with business moguls.
They assist smaller investors in taking part in major real estate projects with a minimum investment of $100. Through carefully screened rental properties, you can generate a second source of income, profit from appreciation, and enjoy tax advantages.
Mogul eliminates work-related ownership obligations for owners of investment properties by utilizing blockchain technology. This platform gives real estate investing a new form and increases its accessibility.
The Mogul's mission is to provide investors with direct access to real estate properties for a low amount, make it more accessible, and tear down the barriers stopping you from investing in real estate.
Arrived - best for investing in rental and vacation homes
If you seek a top real estate tokenization platform where you can easily browse properties and purchase them at a low minimum cost, Arrive is the platform to visit. With its streamlined and user-friendly platform, "Arrived" is revolutionizing the way we invest in rental homes and vacation rentals by making real estate more approachable.
This real estate tokenization company incorporates features that will make tokenized ownership and real estate investing desirable. You can quickly filter properties using the browsing feature by criteria like "new construction," "great schools," and "appreciation focused". The Arrival platform is scalable and conforms to legal requirements, among other features that make it easy for businesses to tokenize their assets.
The ability to amass wealth through the ownership of rental properties and vacation rentals is made more accessible by their mode of operation. This real estate tokenization platform gives you control over your purchasing decisions by streamlining the process and lowering the startup costs, regardless of whether you are a novice or a seasoned investor.
Roofstock - best for investing in single-family homes in minutes
Roofstock is another real estate tokenization platform where investors can buy real-world homes on the blockchain with one click. This platform makes it simpler for the Web3 generation to own and purchase real estate. The simple user interface and the speed of operations make Roofstock a popular real estate tokenization platform among several investors.
It offers immediate savings because there are no additional fees and a flat fee of 3% applied to all purchases and sales. Investors can immediately take ownership without the hassle of a traditional real estate closing. This platform is advantageous for cryptocurrency investors because it allows you to pay for your home using cryptocurrency.
With the tokenization model, the Roofstock marketplace makes its services more accessible while simplifying the buying and selling of single-family rental homes. Comprehensive property information and services for property management are available on each property listing page.
RealT - best fractional investment platform
RealT, founded in 2017, is the last real estate tokenization platform in this series that allows users to purchase fractional ownership of different properties.
The development of this platform for real estate tokenization involved a group of professionals in e-commerce, technology, real estate, and blockchain. Using the platform, investors can purchase and sell their tokens using either US dollars or Ethereum, and the properties are tokenized using the Ethereum network.
RealT aims to reinvent the experience of real estate ownership by tokenizing it. It offers one of the lowest entry barriers, and investors can invest in US real estate held by a limited liability company with an investment requirement ranging from $50 to $150. Diverse token owners, who also have voting privileges and the potential to receive rental income, are allotted dividends after sales.
Except for investors in the United States who do not meet the accredited investor requirement and investors from restricted countries, RealT is open to all investors.
How is tokenization regulated?
For both financial and non-financial assets (like real estate), asset tokenization has emerged as one of the most popular applications of distributed ledger technologies (DLTs). Real estate tokens are subject to regulatory requirements under the current regulatory frameworks, which support financial stability and investor and consumer protection. However, different jurisdictions' regulators have their own specialized regulatory frameworks. Consider the example below.
USA
Federal and state securities laws make up the bulk of the regulatory framework that applies to real estate tokenization in the United States. Generally, exchanges for digital assets that provide security tokens must register with the SEC and adhere to the Securities Act and the Exchange Act. The Securities Act of 1933 and the Securities Exchange Act of 1934, in particular, fall under these regulatory frameworks. Real estate tokens are subject to capital gains tax because, for taxation purposes, the Internal Revenue Service ("IRS") considers digital assets property in the United States.
Numerous real estate tokenization projects may make use of the following laws:
Regulation D of the Securities Act.
Regulation A+.
Broker-Dealer and ATS Regulations.
AML and KYC Requirements.
European Union
In many European countries, if tokens represent investments in real estate, they may be subject to:
Markets in Crypto-Assets Regulation (MiCA).
The Prospectus Regulation, which controls the issuance of securities, including security tokens.
Anti-Money Laundering (AML) and Know Your Customer (KYC).
Offshore jurisdictions
Real estate tokenization regulations can vary significantly depending on the specific offshore jurisdiction. Among the regulations are those pertaining to securities laws, investor protection, and anti-money laundering (AML). The tax incentives for blockchain or tokenization projects will determine the precise tax ramifications of real estate tokenization.
If the real estate tokenization project involves investors or properties in various jurisdictions, additional legal and regulatory considerations regarding cross-border transactions come into play. The bare minimum that issuers must do is ensure that security tokens follow KYC/AML regulations.
How much money do you need to invest in tokenized real estate?
On many real estate tokenization platforms, the total cost of the real estate asset being tokenized determines how much you need to invest. So no two real estate properties might have similar prices. For example, if the property is valued at $1 million and you want to own 1% of it, you would need to invest $10,000.
How much can you earn from real estate tokenization?
If you paid $10 to purchase real estate tokens, you would receive 0.0002% of the sale price. The potential earnings from real estate tokenization, however, can differ significantly and depend on a variety of variables, including:
Rental income
Your real estate tokenization income will be based on rental income. Depending on the tokenization platform, the terms outlined in the investment contract for the distribution of rental income and property expenses differ. Token holders receive distributions of rental income in proportion to their ownership stakes after deducting property expenses.
Capital gains
Your return on investment from real estate tokenization will vary depending on the jurisdiction and the capital gain tax deduction.
Dividend payments
The profit-sharing payment schedule between the company and its investors is another consideration. The board of directors of the real estate company sets the price per share, which varies from company to company.
Platform fees
The real estate tokenization platform's trading or processing fees have an impact on your return on investment. For instance, RealT only keeps 2% of gross rental income; the remaining 98% is distributed to RealToken holders in USDC.
Financing costs
If the property is financed with a mortgage, the interest rates and terms of the loan can affect the net income earned from the investment.
Note: A property's location, market conditions, and type (for example, residential, commercial, or industrial) are all significant determinants of its marketability and potential rental income.
Possible risks of real estate tokenization and how to avoid them
Risks associated with real estate tokenization could include those related to security, regulatory and legal risks, market fluctuations, and a lack of liquidity. Hence, for an investor to avoid real estate tokenization risks, they should do the following:
Before investing, investors should perform thorough due diligence and evaluate their risk appetite for real estate tokenization.
Before investing, familiarize yourself with the real estate tokenization rules that apply in your jurisdiction. You can consult a qualified attorney before using blockchain in real estate transactions.
Discover the typical issues and fixes for using blockchain technology in real estate transactions. Before using blockchain in real estate transactions, ensure the data is accurate and from the right source.
Even though blockchain technology improves security, think about introducing more safeguards. To secure the network and data, employ encryption and authentication techniques.
Pros and cons of investing in tokenized real estate
Real estate tokenization comes with many advantages and disadvantages. Below are the pros and cons of real estate tokenization.
👍 Pros
• Real estate tokenization ensures more accurate and authentic data is available to valuers, auditors, and brokers.
• A Blockchain's encryption system prevents unauthorized parties from accessing private data.
• Real estate tokenization automation reduces manual error and automates repetitive tasks, freeing up time and financial resources to concentrate on deal structuring for tokenized real estate assets that add value.
• Investors who could not previously afford the high upfront costs of real estate investment now have the opportunity to own a portion of it, even though it is a small portion.
• Real estate tokenization makes it easier for investors to create customized portfolio rebalancing strategies because they can flexibly manage a wider variety of assets in their portfolios and change their exposure to specific assets by selling or buying tokens.
• Real estate tokenization lowers investment entry barriers and enables nearly instantaneous settlement of transactions for tokenized goods.
• The blockchain allows for the tracking and public display of transaction information, and cryptographic hashes maintain the data anonymity of blockchain transactions.
👎 Cons
• The costs of tokenizing real estate and the costs incurred by real estate tokenization platforms may impact an investor's ROI.
• While a regulatory framework governs tokens, the absence of a centralized reporting system makes it difficult for some jurisdictions to monitor and enforce compliance.
• Token security can be an issue, just like with any other kind of digital asset, especially if they are kept on a platform or exchange that is susceptible to hacking.
FAQs
What is real estate tokenization?
Real estate tokenization, which has to do with blockchain, is the process of turning physical assets into digital tokens. Following conversion, these tokens are saved on a blockchain, enabling the transfer of fractional shares and digital ownership.
Is tokenization legal in real estate?
Yes. Real estate tokenization is legal, and many regulated platforms offer this service in various jurisdictions in compliance with regulations approved by the financial bodies.
What is an example of tokenization in real estate?
Consider owning a $24 million luxury beachfront resort in a sought-after neighborhood. An inn, a restaurant, a spa, and private villas are all on the property. To draw in more investors, the owner decides to tokenize this asset. The property was fragmented into 2,40,000 tokens, each of which represented a $100 ownership interest in the resort.
What platform is used to Tokenize real estate?
Republic, Harbor, Arrived, Roofstock, and RealT are among the platforms used to tokenize real estate.
Team that worked on the article
Peter Emmanuel Chijioke is a professional personal finance, Forex, crypto, blockchain, NFT, and Web3 writer and a contributor to the Traders Union website. As a computer science graduate with a robust background in programming, machine learning, and blockchain technology, he possesses a comprehensive understanding of software, technologies, cryptocurrency, and Forex trading.
Having skills in blockchain technology and over 7 years of experience in crafting technical articles on trading, software, and personal finance, he brings a unique blend of theoretical knowledge and practical expertise to the table. His skill set encompasses a diverse range of personal finance technologies and industries, making him a valuable asset to any team or project focused on innovative solutions, personal finance, and investing technologies.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).