A New Form of Investment that Token Real Estate (Real Estate Tech) Changes
The digital revolution is happening in real estate investment. Even if you have enough experience as an investor in crypto assets, you may often not know this information. Now, blockchains have jumped over the financial sector, and finally they have attracted attention in the field of real estate.
That is the tokenization of securities (STO). A variety of real estate investment information is stored in a blockchain, and investors receive tokens according to the amount of money invested. If you have the token, it is spreading around the United States, a system that allows you to receive rent income by itself.
This time, let’s explore in detail the features of STO, the characteristics of token real estate, and the future.
In a world where real estate investment is possible with tokens (digital rights certificates)
Real estate investment using blockchains has attracted a lot of attention, especially in the United States. In condominiums in New York and Manhattan (apartment in Japan), the use of tokens (a denomination of cryptographic asset type) to raise funds is active.
Tokens are also called digital rights certificates, and investors receive this token instead of investing the developer’s construction costs in cash. The person who holds the token has the right to obtain rent income etc. from real estate, and it is also possible to sell the token through the exchange company.
The condominiums mentioned above have raised funds from investors for as much as $ 30 million (approximately ¥ 3.3 billion). In addition, the state-of-the-art Colorado resort hotel The St. Regis Aspen Resort has issued $ 18 million (about 2 billion yen) tokens in the same fashion.
In conventional real estate investment, securitization was generally used in which rights such as rent income rising from properties were reduced, but it is possible that future securities may replace tokens. This mechanism is called STO (Security Token Offering) after ICO (Initial Coin Offering).
One of the features of tokens is that blockchain systems are highly involved. In other words, all documents such as property documents, contract information, expenses, dividends, rental income, etc. are stored on the non-tamperable blockchain. Participants in real estate networks, such as investors and developers, can always access information on the blockchain, making it possible to invest in real estate with simpler procedures.
STO example using cloud funding
STO, a token of token real estate, also talked about cases of using crowdfunding in the past. The St. Regis Aspen Resort, a luxury hotel in Colorado I mentioned earlier, is familiar with having done STO with the crowdfunding platform “Indiegogo”.
In the past, it was common for ICOs to participate in token sales from the official website of the financing company. However, relaying a specific service site, such as crowdfunding, adds a security check called “judgment of business”.
Among them, ICO, which has been considered to have many fraud tokens, is expected to have an environment in which investors can more safely provide funds when new sales methods such as crowdfunding become popular.
(Reference: COINPOST, 2018/10/10, the future of real estate tokenization: luxury hotels successfully raise 2 billion yen at “STO”)
Merits and demerits of token real estate (STO)
Real estate investment that combines new technologies such as block chains, so-called “real estate tech” has attracted attention. The tokenization of securities is not just a “point”, but it will be to build large “lines and planes” that involve technologies such as Fintech and AI.
STO in such real estate has some advantages and disadvantages.
[Merit of token real estate]
・ Direct contract with developer is possible without the need for an intermediary company (broker)
・ Information data can be stored and referred to in the blockchain, enabling more efficient operations and reduced fees
・ Investors will be able to invest in real estate with a simple procedure
・ Resistant to tampering and hacking by decentralized management of information
[Demerits of token real estate]
・ There is a concern that the broker’s guarantee will be lost and the transaction will become less liquid
・ There is a possibility that the project’s anonymity cannot be maintained because almost all the information is shared.
・ There is a risk of money laundering in the case of highly anonymous blockchain.
Although it is STO that attracts attention as a new real estate investment, it is natural to remember that there are both advantages and disadvantages. While information management on the blockchain has benefits such as cost reduction and security improvement, there are likely to be challenges in that anyone can view data and transaction content.
Token Real Estate = Future of Real Estate Tech
There is no doubt that STO has both strengths and weaknesses, but it is likely to increase its presence in the cryptographic asset market as a funding alternative to ICO. STO is characterized in that securities and other valuable assets are used as collateral, while ICO has no mechanism. Simply put, STO means that investors can safely deposit their funds.
In fields other than real estate, it is also known that American spins (spins / kick skaters) and overstocks (overstocks / surplus inventory sales) have made STOs and raised funds over 10 billion yen in a short time.
In this way, it is no wonder that the mechanism for tokenizing securities has been transmitted to various industries and recognized as a means of financing that will replace ICO. Even if you invest in crypto assets, you cannot miss the prospect.
Until now, the tokens issued by ICO have had the image of something like “cryptographic assets (virtual currency)” somehow. If you have a business that is sympathetic to the project’s business model and is likely to rise in price in the future, you can gain profits from the sale later by purchasing the token.
On the other hand, in STO, which can be seen in token real estate, the meaning of token = digital right certificate is strongly expressed. Even if you don’t sell the token and make it money, you can expect profits such as rent income just by holding it.
In the volatile market of price fluctuations, the value of the token also fluctuates depending on the day. It is easy to become a high risk high return investment because of that, and from now on, it may be possible to shift to STO for more stability.
Attention should be paid to future efforts regarding how STO will be used in countries other than the United States, especially in Japan.