Tokenized real estate property refers to physical, tangible assets that are converted into manageable ‘shares’ or ‘tokens’ that are representative of fractional ownership of the property. In addition to enabling fractional investing, by providing investment options for investors with lesser resources, tokenized real estate property also helps established investors by providing them with diversification options.
Investors with a minimal amount of resources can test the waters with regards to their investments by investing a smaller amount. Similarly, established investors who are looking to diversity can spread out their investments into several smaller options instead of concentrating all of their funds/investments at one point. This makes more practical sense and reduces the risk of losses. For smaller investors, it opens up investment avenues that they otherwise may not have had access to.
Tokenized real estate property is first divided into manageable ‘tokens’ which are indicative of fractional/partial ownership in the real estate property. After this division happens, the tokens are offered through something which is similar to an ICO (initial coin offering). The sale happens through STOs (security token offerings), TSOs (tokenized security offerings), and TAOs (tokenized asset offerings).
ICO's provide investors with a token, but they don’t imply ownership of the underlying asset. Whereas with STOs, TSOs, and TAO's, the token is indicative of asset ownership. People who are making the purchase are therefore making it an investment due to the value of the project, with the belief that as the platform grows, the worth of the tokens will appreciate.
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