Becoming Landlord has Never Been This Easy via Real Estate TokenizationPublished by
Needless to say, high dividend yield property has always been the darling among real estate investors in Malaysia. Being a landlord and being rewarded with monthly cash flow which would be contributed to your monthly property instalment doesn’t sound bad at all.
The caveat is: Investing in real estate is difficult since it requires a huge sum of money and the ability to keep it locked up for an extended length of time. This has undoubtedly discouraged many investors with smaller capital unable to participate in this market or even only confined to a few investment properties due to insufficient capital.
In tackling these pain points, real estate tokenization promises to be the solution. With the emergence of real estate tokenization, one’s dream of becoming a landlord no longer remains a dream but reality.
What is Tokenization?
Tokenization, as the term implies, is the use of digital tokens to represent ownership of a certain asset. These tokens are also being referred to as security token. By using blockchain technology, an asset's ownership may be subdivided fractionally. In practice, these security tokens may be exchanged on a secondary market once they are sold.
Security tokens and cryptocurrencies differ primarily in that they are tokenized assets. This implies that, rather than being a speculative investment like cryptocurrencies, these tokens are linked to actual assets such as real estate. While cryptocurrency investors are often looking for a quick gain in cryptocurrency, security tokens give a unique combination of advantages: the security of real estate and the rental return that property investments bring by being a landlord.
Real Estate Tokenization offer a much-needed link between real-world assets and blockchain. Real estate tokenization platforms enable asset owners to tokenize their properties and to be listed on an exchange to potential investors to purchase.
On the other end, investors who bought the security tokens would assume the position of owner and start being a landlord if subsequently decided to have the targeted real estate to be rented out to its target tenants.
Factors of Real Estate Tokenization that Helps you to Become Landlord
Lowering the Barrier of Entry in Owning a Property
With the strong divisibility of tokens, even small stakes in underlying assets may be purchased. Fractional offers of multi-million dollar homes may be presented to a broader audience, allowing for a greater number of prospective buyers. The reduction in the amount of money required to invest will be welcomed by many aspiring investors, in particular the ones with lesser capital.
As a result of a lower barrier of entry, potential investors could now participate in real estate sector and becoming a landlord, without the need to purchase an entire property at the outset as the conventional method.
Mitigated Risk as a Property Owner
Those who acquire tokens get the advantages of real estate investment without having to get subjected to a housing loan with normal real estate transactions. This is mainly attributed to the cost of owning a fraction of property is not high to begin with, hence there is no need of housing loan at all.
Shared ownership also reduces the risk of investing in a property as well as the administrative load of administering it. Rather than lying solely on the shoulders of a single owner, the risk is shared by many, and a small investor may enjoy the financial rewards of being a landlord without having to worry about issues like property maintenance or rent collecting.
One of the most significant disadvantages of real estate investing is the inability to easily sell the investment at a later date. It may take a long time to find a buyer for a real estate with higher price since there is a restricted pool of investors who can afford it.
Real estate tokenization, which divides ownership into smaller, more manageable pieces, claims to be the answer to these problems. Tokens may even be sold by property owners in order to raise funds and then repurchased at a later date when cash is no longer required. The advocates of tokenization say that tokenization might potentially capture extra value lost owing to the bad impression that real estate is illiquid.
As such, property owners have the freedom to pick what they want to tokenize, allowing for a wide range of options for buyers.
Real estate tokenization has great growth potential. As we can see, the benefits vary from dividing the property into its components to ensuring liquidity and widening the pool of investors.
Despite that being said, many real estate investors yet to recognise the extraordinary potential of real estate tokenization for addressing current market difficulties. On the other hand, those who are quick to learn about this will put them on a new road, allowing them to realize their long-awaited dreams, reaping the benefit as a landlord.