Passive income on the blockchain

  • Higher returns and lower transaction costs: typical yearly returns for residential real estate range from 7–20%, depending on the amount of liquidity, the risk incurred by investors and type of property purchased. By tokenizing real estate securities, issuers incur much lower transaction costs, which can be appealing to investors seeking to get a higher percentage of the cash-flow. We explore this in more detail in our Real Estate Digital Securities Cost-Benefit Analysis (research.atlasone.ca/reports). In the report we examine how digital securities can save issuers 30–50% in transaction costs.
  • Security and Transparency: blockchain technology allows issuers to track their cap-table in real time, without the need to constantly update it manually (whitelisted tokenholders are registered and visible on the token contract’s page). It also provides investors with transparency around dividends and ownership structure. In the case where the security is issued on a public blockchain, the distribution of ownership is visible to anyone on the internet. This can be an appealing feature to investors, as their ownership is securely stored.
  • Lower single-asset risk: by only purchasing fractions of properties or oftentimes smaller stakes in real estate funds, investors further diversify their portfolios across regions and types of properties. They can build their own real estate portfolios without relying on middlemen entities and fund managers. Their overall risk profile can be diminished if they choose to allocate capital more sparsely.
  • Transferability and liquidity: secondary venues for digital securities are emerging worldwide, from tZERO’s ATS where assets such as Aspencoin trade to decentralized exchanges such as Uniswap where investors can sell RealT’s property tokens. Tokenization has allowed exchanges to create infrastructure whereby only whitelisted wallets can trade with each other, thus still operating within the frameworks imposed by regulatory bodies. This allows investors to liquidate their holdings without paying hefty premiums, and they can also acquire real estate securities even after the offerings have been sold out.

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