Reasons Why Millennials are Investing in Fractional Property OwnershipPublished by
Traditionally illiquid, costly, and slow-moving physical assets such as real estate are now readily available to millennials because of the revolutionary merging of blockchain technology with real world assets. Most individuals only bought residential properties once or twice in their lifetimes until it was made accessible to the general public as a potential investment option with the advent of fractional property ownership via real estate tokenization.
This is critical, since many millennials and members of Generation Z are unable to purchase a home because of this due to multiple reasons, ranging from slow growth of wages, ever-increasing inflation as well as tighter lending criteria being imposed by financial institutions. Blockchain technology is already changing the real estate sector via real estate tokenization, offering new creative options for the smaller and retail real estate investors in easing the process of owning properties.
As opposed to building up a hefty down payment and then securing an expensive housing loan, millennials may now purchase digital tokens that represent small fractions of a property, allowing them to gradually increase their investment as the value of the property increases in value over time.
Sounds tempting, isn’t it? To assist you further in understanding this topic and enabling you to get most out of it, we will discuss about the reasons why millennials are and should start investing in fractional property ownership.
What is Fractional Property ownership?
Fractional property ownership is made possible by tokenization. Tokenization is the process through which real estate assets are divided up into a number of separate digital tokens for use in various applications. Fractionalized property platforms may be used to further sell and buy these digital tokens. When you buy a specific token, you become the owner of a share of the asset.
Direct ownership of an item is a key component in real estate tokenization. Real estate investment funds, individual pieces of real estate, stock in real estate-owning companies, and many other types of assets might be included in this category. As a result, property buyers may conduct transactions digitally using tokens instead of the conventional method of paper documents, thanks to tokenization.
Tokenization, also known as security tokens, has the goal of protecting actual assets. Tokenization is similar to securitization in that it divides an asset into tokens, each of which represents a specific portion of the underlying asset.
Hence, it is worth mentioning that identifying a reliable fractionalized property platform is imperative to ensure you are being well informed of the types of tokenized real estate you’re investing in, their associate risks and possible returns in order to meet your investment objectives.
Reasons why Millennials are Considering Fractional Property Ownership
Accessible Investment Medium
Millennials are saddled with student loan debt which takes them decades to clear it, not to mention other financial commitments. As such, this made them even tougher to accumulate the down payment sum for purchasing a property. There are a number of ways they may invest in real estate, but fractional property ownership via real estate tokenization enables them to do so. Because of this, they might benefit from the continuous rental income or price increase of a property as a result of real estate investments. Real estate investments may be expensive and difficult to get into, but real estate tokenization makes them more accessible.
Millennials have also shied away from real estate investing due to a scarcity of available funds. This is evident from the fact that financial institutions are increasing their lending criteria where millennials find it hard to fulfill by which their credit rating may not be strong enough due to their lesser records of payment history.
Furthermore, the money is locked in a brick-and-mortar building until we can find a buyer who is willing to pay what we want. It is especially true since it requires a lot of time to find some parties on the other end of transaction meeting eye to eye.
However, leveraging fractionalized property platform for real estate tokenization and subsequently to be listed on regulated exchange ease the process of disposing of properties. With this, purchasing and selling of digital tokens allows for the immediate release of liquidity from an otherwise illiquid asset.
Easy to Diversify Your Investment Portfolio
Investing in real estate has long been seen as a privilege reserved for the well-heeled. As such, smaller and retail investors only have the alternative options such as stocks on public market or even cryptocurrencies which are popular among millennials. An optimal investment portfolio is of course to have a diversified portfolio which encompasses a wide range of asset classes to hedge against market downturn.
When you get to invest in properties fractionally, you may get access to assets that you would otherwise be unable to obtain. Aside from stocks or cryptocurrencies, you may easily and affordably diversify your investment portfolio in taking a stake in properties via purchasing digital tokens being backed by real estates according to your affordability.
Millennials are eager to invest in real estates if given an option rather than just solely investing in intangible ones like stocks, cryptocurrencies or any other asset classes because of the various investment options available in the market.
With fractional property ownership, it can be seen that millennials are no longer a bystander but also get to be participants in this ever-growing real estate sector.