Real estate tokens are based on blockchain technology and represent digital shares in specific properties or a pool of assets. They can be sold or transferred like regular tokens, often through smart contracts.
REITs (Real Estate Investment Trusts) are traditional investment funds that own and manage real estate and distribute income to investors in the form of dividends.
Let’s perform an investment comparison based on several key parameters:
Investment Accessibility
Real estate tokens allow investing even with small amounts (e.g., starting from $100 or less), making them especially attractive to beginner investors.
REITs, particularly private or institutional ones, often have a higher entry threshold (starting from $1,000 or more).
Liquidity
Public REITs traded on exchanges offer good liquidity. In contrast, private REITs may require capital to be locked up for several years.
Real estate tokens can also be quite liquid if they are available on secondary markets. However, liquidity may vary depending on the platform.
Regulation and Reliability
REITs are strictly regulated by the government, especially in the U.S., and are governed by clear laws, making them a reliable asset.
Real estate tokens are still in a legal gray zone in many jurisdictions, and the level of investor protection depends on the platform and legal framework in place.
Returns and Dividends
REITs are required to distribute at least 90% of their profits as dividends, ensuring a stable cash flow.
Tokens may also generate income (e.g., rental income), but payouts depend on the project and platform. Automation mechanisms are not always fully developed.
Technological Advantages
Real estate tokens are ideal for instant transactions with digital assets. Added benefits include blockchain transparency and, in some projects, the ability to participate in governance through voting. Investors worldwide can participate without borders.
REITs are more conservative, and all processes — from purchasing to reporting — follow standard corporate procedures.
Risks
REITs:
- Lower risks
- High legal protection
- Established, time-tested structures
Tokens:
- Potentially higher dividend yield
- Higher technological and legal risks
- Dependence on platforms and liquidity
Which is Better?
If your goal is stable passive income with minimized risk, REITs are the more reliable option. They are ideal for conservative investors and long-term retirement strategies.
For those looking for innovative opportunities, want to invest smaller amounts, and be more involved, real estate tokens are more suitable. They offer flexibility, potentially higher returns, and early-stage project access.
Real estate investment trusts are gaining popularity for their promising returns.
The optimal strategy is investment portfolio diversification — combining REITs and real estate tokenization to spread risk and increase potential returns.