Picture this: you own a small office building in the heart of downtown. You want to build up some cash reserves, so you’d like to open up the property to investors but you’re struggling to find anyone with the capital available, or a reliable property manager. What about tokenization? While previously inconceivable, splitting your property up into fragments and allowing them to be purchased and traded without high transaction costs is now a viable option available for property owners and comes with a wealth of benefits for asset owners and investors alike.
Here’s how it works: tokenization, as it pertains to commercial real estate, breaks up the value of an asset into smaller chunks. Each fraction of a real estate asset is then converted into a token and encrypted with all the details that grant ownership.
“Tokenization unlocks the liquidity of an asset, streamlines and automates the administration of managing the asset, and is a tool to raise capital,” says Yael Tamar, CEO and Co-Founder solidblock.
Tokenization allows property owners to find a wider pool of potential investors and also lets more people tap into the asset class of commercial real estate (CRE). It promotes inclusion, narrowing the gap between small investors and UHNW or institutional ones, leveling the playing field. For instance, traditionally, a retail investor who wanted to invest in CRE would need a minimum of at least $250,000 to start out. With current CRE tokenization platforms such as AKRU, you can invest in CRE for as little as $1,000.
While the benefits of tokenized CRE are plentiful, some of the top, according to Andy Kolodgie, real estate expert and owner of Sell My House Fast, include:
While it is possible to tokenize commercial real estate assets directly, it would require assessment and auditing by a bank, accountant, or law firm, as well as a number of other hoops to jump through.
Meanwhile, there is no shortage of platforms a homeowner can use to tokenize an asset, but it's important to remember that not all are trustworthy, says Ben Wagner, Real Estate Investor & House Flipper at Leave The Key.
Mike McClungs, home construction expert, real estate agent and CEO of Integrity Cash Home Buyer’s advice for the tokenization of commercial real estate is to commit to doing a fair amount of research before making a decision.
“It's not an old concept, so you may have to learn a couple of things before finalizing,” he says. “You may need to learn more about existing blockchain and security measures.”
Enter, AKRU.
With a process that emphasizes security and privacy through blockchain technology, an immutable ledger of transactions and ownership records.
Through the platform, security tokens, and multi-signature wallets work together to complete the unchangeable record of ownership recorded on the blockchain and mitigate the risk of fraud.
As mentioned, AKRU’s minimum investment threshold is much lower than traditional barriers at $1,000 USD. Using security tokens allows for increased liquidity opportunities in a previously illiquid investment class, by streamlining communications, negotiations, and processing of transactions, AKRU’s accredited investors won’t experience extended lock up periods and can benefit from single direct ownership in a diverse portfolio of assets.
For increased ease for asset owners, all assets placed with AKRU will be managed professionally by providers verified and acceptable to the company.
As the owner of a commercial real estate property — you are no longer bound by the ties of traditional investors. There are a number of benefits to tokenization, even beyond those listed above, and giving smaller investors the ability to gain entry to CRE thanks to tokenization could be a game changer for the returns on your investment.
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