Real estate tokenization is revolutionizing the industry by introducing new ways to invest and manage properties. The two primary methods in this space are synthetic and fractional tokens. Each method has its own set of characteristics, benefits, and risks.

Fractional Tokens: Bridging Real Estate and Securities

Fractional tokens represent equity in entities or funds that hold real estate assets. By tokenizing their equity, these entities enable investors to purchase fractional ownership of properties. The tokens issued represent equity in these entities, akin to traditional securities.

The demand for properties in tokenized neighborhoods or cities can influence housing prices. This demand is usually driven by individuals and institutional investors, pushing prices higher and potentially pushing residents out of their own neighborhoods.

Additionally, investing in fractional tokens comes with significant risks. If a property is damaged or suffers a significant event, investors face direct losses. Poor performance by property managers can negatively impact returns, and failure to cover debt obligations can lead to foreclosure, affecting the value of the tokens.

Finally, fractional tokens are generally only accesible to accredited or high-net worth investors, which means the full promise of democratization is not realized in many circumstances.  Regulatory limitations on securities apply to most fractional tokens, limiting the beneficial impact to a subset of would-be investors.

Synthetic Tokens: A Futuristic Approach to Real Estate Investment

Synthetic tokens offer a different investment model, focusing on the broader real estate market without direct asset ownership. These tokens are often structured similarly to perpetual futures, linked to the future performance of a specific neighborhood or city. This structure eliminates the need for direct ownership or management of real estate assets.

Since synthetic tokens do not involve the purchase of physical assets, they do not directly affect housing prices. Instead, they offer a way to speculate on, or hedge against, the real estate market without the complexities of property ownership. While synthetic tokens eliminate asset-level risks, they still carry market risk, as their value is tied to the overall performance of a neighborhood or city. Investors must be aware of broader economic factors that could influence real estate market trends.

A further advantage of not depending on physical assets is that tokenized synthetics could be considered a futures contract rather than a security. Consequently, they are not subject to the same accredited investor restrictions.

What We Do At Shareland

At Shareland, we revolutionize real estate investment through synthetic tokenization. Our platform uses synthetic tokens, functioning similarly to futures contracts, to allow investors to speculate on the performance of real estate markets without owning physical properties. Our advanced price oracle system calculates the average price per square foot of homes in various neighborhoods using real estate transaction data, providing accurate and up-to-date valuations. This method ensures a democratized and accessible investment opportunity, allowing a broader range of investors to participate in the real estate market without the complexities and risks associated with direct property ownership. By leveraging technology and data, Shareland aims to create a more inclusive and efficient real estate investment environment.

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