What is tokenization and what is a token ?
A token is a digitalized representation of a (property) value including the rights and obligations contained in this value and its transferability made possible by this.
The digital representation is usually implemented on the blockchain from which tokens are issued. Each of these tokens represents a certain proportion of the asset’s value
A contract is usually set up to define the rights and obligations resulting from a token. The tokens can be transferred completely digitally to another party. This also transfers all rights and obligations from the contract. Tokenization can therefore make an asset completely digitally transferable.
Tokenization of real estate
Real estate can be tokenized via a so-called SPV (Special-Purpose-Vehicle). For this purpose, a company is set up whose purpose is to hold the real estate. The shares of this company are tokenized, making shares in the property transferable.
How does it work?
In tokenization, an asset is legally linked to a digital representation (token) on the blockchain. With our infrastructure, no special blockchain know-how is required. You can use Starton solution to tokenize assets on your own branded platform.
Investing in Real Estate without tokenisation
Investor make a down-payment of a penthouse for 200K$ before project's construction start, with the goal to sell it a higher price when the building ends construction.
Investor is targeting an eventual sale price of $1M, which would result in proceeds of $400,000 (the $1M less the remaining $600,000 owed on the property) thereby doubling their original cash outlay.
Investing in Real Estate with Tokenisation
Investor make a purchase of 40 tokens of 5k$ rather than 200k$ down payment for a single unit. Net proceeds from the investment increase due to lower transaction fees. Obligation to fund 600k$ is eliminated.
Achievement risk decrease with the progression of the construction and token price increases.
No debt with covenant and staged released of capital limiting flexibility.
Investor can sell the tokens via a secondary exchange or exchange a certain number of ownership in the building.