What benefits does real estate tokenization have as opposed to real estate crowdfunding projects or traditional REITs?

Even with the explosion of investment opportunities around us, investing in real estate remains to be a safe harbor against fluctuation in comparison to investing in volatile stock markets or risky private ventures also it is an attractive asset to posses and store ones wealth into, yet access to this type of investment was not open to all people until recently.

Real Estate Investment Trusts (REIT) and Real Estate Crowdfunding Platforms are two ways for low key investors to get into real estate investment, a traditional investment space which have been limited historically to rich investors only. Thanks to Blockchain technology, “Tokenizing” of real estate have brought us the best of what these two can offer adding to them all the advantages of a token (cryptocurrency) such ability for global transition, lower intermediary costs and accessibility to much larger pool of people.

REIT is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and timberlands. REITs were first introduced to the American real estate investment market in 1960 through “The REIT Title Act”, signed by President Dwight Eisenhower aiming to give the average investor access to income producing real estate. REITs can be publicly traded on major exchanges, public but non-listed, or private.

Real Estate crowdfunding projects will be raising finance for a particular real estate project or a specific portfolio of projects. This type of investment might or might not be in cash generating assets. In most cases it offers investors the chance to craft their own specialized real estate investment portfolios.

The key limitations to REITs and Crowdfunding are mainly around liquidity, accessibility and costs. Anytime an investor wants to exit or move shares to others, there will be substantial regulatory requirements and several middle layers of handling parties which will add much time to the transaction incurring much more costs. The introduction of tokens as a form of cryptocurrency by Blockchain Technology has enabled us to add a layer of trust through decentralizing the verification process thus taking out the need for middle layers and thus reducing time and costs.

Moreover, these tokens themselves now represent a value of the real assets they represent, thus they can be used as a financial medium to store value and to purchase other goods.

Therefore, tokenization technology will take real estate investment one step beyond REITs and Crowdfunding platforms introducing tokens which can be exchangeable, traceable, economic and secure.

One interesting project around this concept is QuantmRE.  QuantmRE is presenting a business model allowing real estate fractional ownership through creating a marketplace for fractional interests and at the same time a cryptocurrency backed up by real estate assets through creating EQRE a security token that belong to the “stablecoin” breed of cryptocurrencies. Moreover, for the first time, homeowners will be able to extract value out of the equity they have built in their single family homes without adding more debt or have to pay for rent.