Real Estate Tokenization
Curious to see the audiences thoughts on the whole concept of real estate tokenization. There’s companies out there that specialize in this such as RedSwan or Blocksquare,etc and although they’re still in the startup phase they seem to be gaining interest from retail and institutional investors.
Do you think that this is something that will gain mainstream access?
Are you for or against tokenization?
I didn't know what this meant so I looked up RE tokenization. Forgive my ignorance but isn't this just a discussion about whether or not you're bullish on blockchain/crypto technology in general? The concept of "common shares of real estate ownership" already exists in the form of REIT's.
From my understanding, the way that tokenization differentiates from a REIT is the concept that you are able to individually pick and choose your property rather than a REIT being a group of assets pooled together under the discretion of that company. But yeah the other hand is the concept of blockchain technology
The other problem is, who manages it? REITs are great because you are picking a manager, not necessarily just the assets.
Also, we had this system too. What is being discussed here is basically a Tenancy in Common. Single assets that are owned by lots of small investors.
As always, anything crypto/blockchain related has no real use case except defrauding other people, or from boosters looking to make a quick buck off someone else by promoting a "new idea" that will change how the business works and raise a ton of money... but I repeat myself.
A single-asset REIT could already exist, the reason that there isn’t liquidity in tiny stakes of individual buildings is that there isn’t demand for that. The required spread would have to be huge for me to want to buy a minority stake some tokenized private asset that can’t get capital any other way.
Yes, I would like to follow the tickers and financials of 10,000 individual single family homes in Kansas City and then also have an immutable record of all transactions so if someone misclicks my stake can just go poof.
What if it’s an Institutional quality asset say 1mm sf office tower in midtown Manhattan
What would blockchain add to this over a single-asset REIT? Would opening it to the blockchain investor pool result in a materially higher valuation? Or would traditional reit investors be scared off by this weird new thing?
I genuinely think the only use for tokens, crypto, and blockchain are to defraud other people or to conduct illegal transactions. There simply isn't a real use case for this technology beyond some extremely tiny corners and truly meaningless applications.
I used to intern for a startup in the real estate tokenization space. Of course, this was four years ago when cryptocurrencies/blockchain/NFTs were extremely popular. The startup was actually able to raise hundreds of thousands of dollars by selling “reservation spots” but the entire project never ended up taking off. I personally wouldn’t invest in this space.
In a hypothetical where every commercial real estate asset is tokenized, you could place bids on any property and put out an ask for a minority stake in your asset, but buyers already have a way to bid on any properties by just sending a letter to the owner’s address or have a broker chase down the owner. Same thing for selling the asset, except a token is going to be listed on an exchange with no trading volume because who is going to make a market in trading token-shares of 123 main street? The result is going to be owners placing the ask on their tokens super high as a “make me move” price, and a bunch of low bids on assets, and only the largest, most well known assets will have anything resembling a liquid market. Furthermore, reporting is going to be a pain if every owner of a tokenized single family home has to submit regular financials that will tell you what exactly?
Additionally, with the current title system, if the chain of title says I own something, the sheriff will enforce my property rights. Who is going to enforce my property rights with a blockchain token? “Code is Law” has to be the worst way to present a contract, no I will not put my trust in the unauditable code of some smart contract when I can instead use a contract that has established case law and a real enforcement mechanism in the relevant jurisdiction.
Honestly thought this was going to be race related.
The fact that it is blockchain related is even more of a disappointment
I took a look at a real estate tokenization project back in 2021. Reading through the white paper, they had hidden fees here.
If I remember correctly, they wanted a 12% transaction fee to buy and a 12% transaction fee on top of a management fee.
Yeah the guys were fucking morons. I went into their discord and told them who the fuck would buy this shit if there are REITs. Got banned.
They're not morons, they're clever criminals. Basically every crypto/tokenization "scheme" is just that - an attempt to defraud small retail investors. Who deserve to lose their money, of course, but lets not pretend like "hidden fees" aren't the point of these projects and not some sort of bug.
I take back what I said, RafikiToken only charges a 10% management fee and a 10% acquisition fee. Real estate tokens are the future!
The real "value" in tokenization is that it would increase velocity of liquidity and cut out the need for brokers. With that said. I don't think the value of either of these things is really all that large. Given that the only way for new systems to be adopted is for new value to be unlocked I do not see this as a very compelling "solution".
We already don't need brokers, bro. Institutional inertia is the only thing keeping brokers around.
I'm new to the industry, so this thread has been informational. Maybe blockchain takes off here, maybe not. For now, I'm trying to understand who the end-user investor would be. Would sophisticated shops be interested in smaller 5% stakes in random buildings, or would they rather own/operate the whole thing? Would less sophisticated retail investors be the target here?
Say we find ourselves in a similar high interest rate market in the future, an owner with a 10% stake needs to liquidate, and sells their stake at a loss. Maybe that triggers a couple of other owners to sell. Hypothetically, could blockchain devalue properties more quickly?
Ignoring the crypto/blockchain portion of this and focusing on the idea of offering fractional shares in individual properties to retail investors - this has been explored and is in practice in some countries where it's legally permitted.
In my view allowing this raises a lot of concerns with unsophisticated investors who have no idea what they're getting themselves into. It needs to be highly regulated to prevent inexperienced sponsors from using it as a means of raising capital for deals they have no idea how to execute and are going to lose uneducated folks' money. Also presumably you'd need to add restrictions to fees/promote the sponsors can charge since retail investors would have no clue what market is.
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