The Brazilian real estate sector is going through a moment with many challenges in the search for solutions that bring the liquidity and profitability necessary for the attractiveness and sustainability of investments in the market. Real estate tokenization is undoubtedly one of the ways.
Despite being a new investment alternative, tokenizing real estate is already attracting the attention of important real estate players and especially a portion of the public that is far from real estate as a generator of capital: small investors .
It is a fact that real estate cryptography will be an essential driver for the resumption of growth in this market. However, it is natural that it still raises doubts, especially when compared to real estate funds .
Are they the same products?
What are the differences between real estate tokenization and real estate fund ?
And what are the advantages of each model of investment in real estate ?
BLOCKBR prepared this article to talk about each one and open an important reflection on their potential in the Brazilian economy and in the investment capacity of the real estate sector and the budget of Brazilians!
WHAT ARE REAL ESTATE FUNDS?
Real estate funds are groups legally constituted and formed by people and companies with the purpose of investing in the real estate market . To do this, each participant buys shares of profit sharing and the fund’s capital is placed in an investment account .
CHARACTERISTICS OF REAL ESTATE FUNDS
- A real estate investment fund can be created to buy and sell real estate, buy to rent and invest in real estate projects;
- Each real estate investment fund can define a specific asset profile – for example, investing in luxury real estate or taking advantage of the growth of logistics condominiums ;
- The fund’s shareholders receive the income earned in proportion to their holdings in the fund, in addition to the benefit of the property’s appreciation while it is in the fund’s portfolio ;
- The management of the real estate fund – prospecting opportunities, responding to legal and commercial obligations and managing the costs inherent to the operations carried out – is carried out by a specialized financial institution.
Real estate funds are a great option for those who want to live off rental income or profits from real estate negotiations and do not have enough capital or prefer their risk – and profits – to be lower, limited to quotas but with lower risk of losses.
However, they have other characteristics that meet the needs that investors currently have and prevent the product from reaching more people.
ATTENTION POINTS OF REAL ESTATE FUNDS
- Frustration of expectations: changes in investment strategy are common and often necessary to optimize or preserve gains, but they can conflict with the profile of investors – bold or conservative;
- Audience limitation : the funds impose restrictions on small and medium investors, as they are aimed at qualified investors;
- Centralization : there is a total dependence on the fund manager , as he will prospect for opportunities, investment choices, negotiations and the shareholders do not interfere. The results are a direct consequence of this management;
- Lack of transparency : this is a consequence of the centralization of fund management, as there is no discussion of decisions and, sometimes, management information is not clear enough;
- Security : there is no guarantee that the manager’s system is completely secure and does not suffer from virtual attacks that could divert investment balances.
A point of special attention are the costs of a real estate fund and are various fees: administration, custody, performance, emoluments and brokerage.
WHAT IS REAL ESTATE TOKENIZATION?
Real estate tokenization consists of generating an encrypted digital record – the token – of a physical real estate asset to be offered, directly by the token issuer (owner of the asset) on a blockchain .
- land;
- Ready-to-go or on-plan properties;
- Common spaces of condominium for rent;
- Commercial areas in condominiums for rent;
- Housing projects.
As we can see, the first and big difference between tokenization and real estate fund is the fact that a developer, construction company and even individuals can tokenize the assets and trade them.
HOW DOES PROPERTY TOKENIZATION WORK?
In general terms – you can see more details in our article How to create a token for your company – creating and offering real estate tokens is quite simple.
- A company specializing in asset tokenization ; analyzes the feasibility, authenticity and legality of the property;
- Once the conditions are approved, the asset is tokenized – represented by a number of tokens – and offered on the blockchain, supported by a digital smart contract with all the conditions provided for the negotiations;
- Investors access the blockchain and make their purchases of tokens and, at the end of the offer period, the network sends the capital calculated and the tokens to each investor to the asset owner;
- All steps are electronically managed by the blockchain with the smart contract , without human interference, including the calculation of earnings (profits, rents and others) for delivery to investors.
Want to tokenize your real estate portfolio and increase your profits?
HOW DOES TOKENIZATION FAVOR THE FURNITURE MARKET?
As we can already see, tokenization has a number of differences in relation to the real estate fund and in the most important aspects for decision making for the best model.
- Security : Blockchain is an encrypted technology with a high level of security, whose validation engineering of each operation prevents attacks and data theft or fraud. It is the environment used for years to create and move cryptocurrencies;
- Transparency : all operations are individually recorded with a unique key in an encrypted ledger;
- Decentralization : there is no external company involved in the management and negotiations, which are made directly between the owner’s digital wallet and the buyers’ digital wallets ;
- Authority : the asset holder himself contracts the tokenization, without the intermediation of management companies and brokers;
- Democracy : asset fractionation allows more people to invest with small amounts, which increases the success rate of the offer, liquidity and speed of the process;
- Agility : Blockchain works 24/7. Just access the network, carry out the operations and the confirmation is immediate;
- Costs : There are no intermediaries and the costs related to them.
- Universality : people from all over the world can access the blockchain , buy property tokens and receive their monthly income. While you sleep, land tokens are being acquired!
As we can see, the real estate fund and real estate tokenization are two great options for earning income from real estate without buying it.
On the other hand, tokenizing real estate brings several advantages to a sector where the speed to do business, security, availability and low cost are essential to increase profits and win more and more digitized customers!
BLOCKBR Digital Assets is a fintech that combines technological innovation and digital knowledge to transform physical assets into digital ones, in the asset tokenization process.
The offer of tokenized physical and financial assets, both current and new, is democratic and decentralized, which makes investing safer, simpler and more efficient.
We enable, structure, issue and offer tokens on our platform and beyond. Be aware that tokens depend on feasibility and regulatory factors.
Do you want to tokenize your business or part of it? Do you have a business solution and does it make sense to issue your own token ?
Fill out our form and we will contact you.
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