An important part of the world's wealth is concentrated in real estate. This is the reason why the biggest wealth managers own many real estate properties. However, buying is not easy, it requires a lot of capital, time and expertise.
The first real-estate funds appeared in 1970 with the aim of giving easier access to real estate. They were very successful, especially with bank savers. For more than 40 years, there was practically no innovation in this market. Today, tokenized real estate competes with its predecessor the real-estate fund.
In this article Real-estate funds vs Tokenized Real-estate, we will see the similarities and differences between these two types of investments:
The main similarity is the value proposition: Provide simplified access to real estate. Both can offer an investment that can be resold on secondary markets. The token can also be resold on other marketplaces, as it exists on a public blockchain. It will therefore generally be more liquid.
For tokenized real-estate, there is a platform fee of between 5% and 10% of the acquisition price and a real-estate management fee of about 10% of the rents. The real-estate funds charge a subscription fee of 5% to 12% and a management fee of 10% of the rental income.
Investment in tokenized real estate is done online. It is usually necessary to create a profile on the platform, take a picture of an identity document, sign the online investment contract and pay. This can take between 2 and 5 minutes.
For real-estate funds, the process is generally longer. You have to send the supporting documents by email, print the documents to sign them and send them back. Some real-estate funds are starting to digitize the subscription process.
For tokenized real estate, you choose the property in which you invest. For real-estate funds, you invest in a pool of properties.
You can borrow from the bank to invest in real-estate funds. For real estate tokens, it is the issuer of the tokens who is able to make a loan so that investors can benefit from the leverage effect. In the future it will be possible to collateralize your real estate tokens to borrow money.
In this article Rea-Estate funds vs Tokenized Real-Estate, we have seen the differences and similarities between these two types of investments.
Tokenized real-estate wants to position itself as an innovator in the real estate investment space. It is likely that many real-estate funds will tokenize part of their assets in the coming years.