How to use collateralized loans to maximize your investment in Reental

Are you looking for ways to maximize the return on your capital in the investment world?

At Reental, we have an innovative solution for you: tokenized investment in real estate projects. Not only does this approach make it easier to invest in properties, but it also allows you to take advantage of advanced strategies.

Imagine increasing your profitability even more without having to sell your assets. With collateralized loans, you can make it possible.

In this article, you'll discover how these loans work, how they can be used on our platform and the benefits you can get by implementing them. Keep reading and optimize your investment strategy with Reental!

How collateralized loans are integrated with Blockchain technology

As we saw in the previous article”What are collateralized loans and how do they work?“In short, collateralized loans are those in which the borrower uses an asset from his portfolio as collateral to secure the loan. In the case of Reental, these assets can be your real estate tokens. By collateralizing your tokens, you can get a loan without having to sell your investment, allowing you to keep the property and associated benefits.

But why is this product so important?

1. Quick access to funds: Collateralized loans can be processed more quickly than traditional loans, giving you immediate access to funds when you need them.
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2. Potential to increase profitability: By using the loan to reinvest in more tokens, you can significantly increase your profits.
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3. Compound growth potential: By reinvesting the funds obtained from the loan into more tokens, you can benefit from compound growth, increasing your returns exponentially over time.

This product is in high demand, thanks to the adaptation of the revolutionary Blockchain technology, decentralizing finance, optimizing loan costs and processes, and offering exceptional flexibility for its different actors.

The role of DeFi (Decentralized Finance) is essential to understand these new concepts even more, since it allowed us to broaden the landscape and open up the range even more to new entrants, actors that perhaps before, for various reasons, they could not access. DeFi refers to an ecosystem of financial applications built on blockchain technology that operate without traditional intermediaries, such as banks. Through DeFi platforms, you can manage your assets and apply for loans and collateral efficiently, with total transparency and without the risk of manipulation.

Blockchain technology is changing the financial sector, and collateralized lending is one of these changes. At Reental, we use Smart Contracts to ensure that all transactions are transparent and automatic. Smart contracts are contracts that are computerized to execute automatically on the blockchain, complying with the terms and conditions established in the contract. This ensures that the loan conditions are met unambiguously, without the need for intermediaries.

Examples of using Collateralized Loans

Let's imagine a practical scenario in which an investor wants to maximize their returns using collateralized loans. This investor holds real estate tokens and is looking for a way to access additional funds without having to sell their assets. Below is a detailed example of how this process can work and the benefits that can be obtained.

• Initial Value of Tokens: Let's say you have real estate tokens worth 100,000 USDT.
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• Obtaining the Loan: Through collateralization, you could get a loan of up to 80,000 USDT.
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• Reinvestment and Profitability: If you reinvest this loan in new real estate tokens, and these generate an average return of 10% per year, you would earn an additional profit of 8,000 USDT per year.
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• Cost of the Loan: By subtracting the average cost of financing (assuming 5% interest), which would be 4,000 USDT, the additional net return would be 4,000 USDT.

To continue with the proposed scenario and make an accurate comparison with the profitability obtained in this operation, it will be necessary to first consider the original profitability without using collateralization vs. profitability with collateralization. Real estate tokens with a value of 100,000 USDT and an average return of 10% per year would generate an annual return of 10,000 USDT.

Profitability of Collateralization

• Initial value of tokens: 100,000 USDT.
• Loan obtained: 80,000 USDT.
• Loan reinvestment: 80,000 USDT * 10% = 8,000 USDT.
• Loan cost (5% of 80,000 USDT): 4,000 USDT.
• Additional net return: 8,000 USDT - 4,000 USDT = 4,000 USDT.

Total Profitability with Collateralization

• Original return: 10,000 USDT.
• Additional net return on collateralization: 4,000 USDT.
• Total annual return = 10,000 USDT + 4,000 USDT = 14,000 USDT.
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This means a return of 10% to 14% per year with the same capital.

Considerations and Risks

While collateralized loans offer numerous benefits, it's also important to consider the risks.

What if I can't repay my loan?

The main concern is the possibility of a drop in the value of the tokens used as collateral, which could trigger a margin call and require the sale of assets to cover the loan.

If I ask for a loan, what interest rate will I pay?

The interest rate paid on a loan depends on how “saturated” the loan application service is with the total available liquidity: the more liquidity willing to be lent, the cheaper the loan will be. The lower the liquidity (that is, if a lot of people borrow) the more expensive the loan will be.

How is interest calculated?

The interest will always be in a range of lows and highs, depending on the available liquidity. There is no fixed formula, as it depends on the liquidity available at any given time. Also knowing that any user can provide liquidity (lender), the calculation is carried out on each block of the blockchain.

Conclusion

Collateralized loans represent a powerful tool for maximizing your investment in Reental. By using your real estate tokens as collateral, you can access liquidity without selling your assets, increase your profitability and diversify your investments. Take this opportunity to optimize your investment strategies and obtain greater benefits in the exciting world of tokenized investment in real estate projects.