What is tokenizing an asset and how to tokenize a property

If you are interested in learning more about the world of tokenization and real estate and how it can benefit you as an investor, keep reading this article. We'll provide you with an overview of the tokenization process and explain the benefits and recommendations for investing in real estate through tokenization.

What is tokenizing an asset?

La Tokenization has the potential to transform the market by opening up investments to a wider global set of investors and facilitating the innovation of new product offerings. Precisely because of their digital nature, the Security Tokens They are what fits best. It's a financial instrument that represents an ownership interest in an asset, only one that has been digitally created, or tokenized, to unlock the power of the blockchain. In a nutshell: security tokens are digital representations of values in the blockchain

With tokenization, many of the traditionally laborious and manual processes involved in introducing securities into public and private markets can be transferred to the blockchain and automated. This benefits issuers and investors in a wide variety of ways, from increasing efficiency to reducing the margin of error, ultimately leading to significant cost reductions.

Are you interested in invest in real estate in a more accessible and cost-effective way?

La Real estate tokenization is an innovative process that can change the way we invest in property. In the tokenization process of Reental, the economic rights derived from the exploitation of the property are represented in the form of a digital token registered on a blockchain. What does this mean for investors? Greater accessibility, liquidity and profitability.

What is a tokenized property?

To facilitate understanding, we will say that a tokenized property is a property that has been converted into a series of digital tokens that can be bought and sold on a blockchain-based tokenization platform. Each token represents a fraction of the ownership of the property. Tokenization allows investors to buy and sell property tokens instead of buying the entire physical property. Real estate tokenization also allows for the division of property into multiple owners, making investment easier and reducing the cost of entry.

But what is a Token?

A token is a digital object that represents a security or an asset and is recorded on a blockchain. Tokens are used in a variety of applications, from cryptocurrencies to the tokenization of physical assets, such as real estate, works of art, and other financial assets. In simple terms, a token is a unit of value that exists only in a digital environment and is designed to be exchanged or used as a means of payment on a specific platform

What Advantages Does Property Tokenization Bring Us?

Property tokenization has several advantages and benefits, which we detail below

• Greater accessibility for investors: By tokenizing a property, investors can purchase a part of it through an online platform, reducing minimum investment requirements and making investment more accessible to a wider range of people. At Reental we allow this investment starting at 100€
• Increased liquidity: Tokenization allows investors to trade tokens in a secondary market, increasing asset liquidity and allowing investors to make a profit more quickly and easily than with traditional real estate. Although this secondary market must occur within registered members of the Reental platform, work is being done at European level on the regulation of secondary markets for security tokens, so it is expected that in the coming months we will see an important evolution in this regard.
• Reduced transaction costs: Tokenization eliminates the need for intermediaries and reduces transaction costs associated with investing in real estate.
• Flexibility in financial structuring: Tokenization allows greater flexibility in financial structuring, which means that investors can choose the type of token and the terms of the smart contract that best suit their needs and objectives. Such as immediate liquidity in projects, receiving income when selling the property, or receiving the operation monthly.
• Investment transparency: Tokenization provides a transparent and verifiable record of ownership, increasing investor confidence.
• Property fragmentation: Tokenization allows real estate to be divided into smaller parts, reducing the entry barrier for investors and increasing portfolio diversification.
• Elimination of middlemen: Tokenization eliminates the need for middlemen such as real estate agents and brokers, reducing costs and increasing efficiency.
• Investment diversification: Tokenization allows investors to diversify their investment portfolio and reduce risk by investing in several tokenized properties instead of a single property.
• Internationalization of investment: Tokenization allows investors to buy real estate anywhere in the world, increasing investment opportunities and reducing dependence on local markets.
• Increased security and confidentiality: Tokenization uses blockchain technology to ensure the security and confidentiality of investor and transaction data, reducing the risk of fraud and improving security.

How to tokenize a property

Tokenizing a property may seem like a complicated process, but it's actually quite simple if you follow the right steps. Below are the steps necessary to tokenize a property:

1. Evaluate the value of the property
   Before starting with the tokenization of a property, it is important to evaluate its current value and income potential. This involves carrying out research on the real estate market and the property itself.
   One way to evaluate the income potential of a property is to analyze the rental market in the area where the property is located. You can search for similar properties in the same location and compare rental prices to get an idea of how much you can expect to earn in rental income. In addition, it is important to consider factors such as the expected occupancy rate, the potential for revaluation of the property, the cost of maintenance and any other expense related to the property. For example, if the property is in an area with high tourist traffic, the occupancy rate can be expected to be high during the high season, which would increase rental income.
   It's also important to consider the expenses associated with the property, such as taxes, insurance, and maintenance costs. For example, if the property needs major repairs or renovations, the cost of these improvements and the impact they will have on rental income must be considered.
   Once the value and income potential of the building have been evaluated, it can be decided what percentage of the building should be tokenized to offer to investors. Once the percentage has been drawn up, you can proceed to the next step.
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2. Structuring the token
   At this point, the blockchain platform for the issuance of the token must be chosen. There are several options available in the market, each with different features and costs. It is important to choose the right structure that meets the specific requirements of the project. In the case of Reental, the blockchain used is the BSC (Binance Smart Chain)
   
   The issuance of Reental tokens is part of Security tokens, since it is a regulated financial product.
   
   The terms of the smart contract that governs the token must also be established, including the rights and obligations of investors, the deadlines and conditions for the payment of dividends and the sale process.
3. Validation of the whitepaper
   Each property has its own business or operating model, which must be reflected in a whitepaper, which must be validated by an ESI (Investment Services Company) under the regulations of the CNMV (National Securities Market Commission)
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4. Issuance of the token
   Once the token has been structured, it can be issued. The token must be created and issued on the selected blockchain platform. This process involves creating the smart contract, assigning the token, and verifying and confirming the issuance of the token.
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5. Managing the token
   Finally, it's important to establish a process for managing the token and providing regular updates to investors. This includes keeping an up-to-date record of token holders, managing dividends, and providing regular financial reports. It is also important to comply with corresponding legal and regulatory obligations, such as issuing annual reports and complying with KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements.

In short, real estate tokenization is a process that involves converting a property into digital tokens that can be bought, sold and traded on a blockchain platform.
This process offers several benefits, such as increased liquidity, transparency, and accessibility for investors.

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Welcome to the new way of doing finance, welcome to Reental.