Real estate investment guru Grant Cardone has given a tentative nod to the hot new trend of tokenized real estate — but he has his reservations.
You could be the landlord of Walmart, Whole Foods and CVS (and collect fat grocery store-anchored income on a quarterly basis)
UBS says 61% of millionaire collectors allocate up to 30% of their overall portfolio to this exclusive asset class
Owning real estate for passive income is one of the biggest myths in investing — but here is 1 simple way to really make it work
Cardone, who goes by the nickname Uncle G, recognizes how tokenized real estate could expand the market for everyday investors — something he has long fought for after starting his real estate empire from nothing and feeling like “the little guy.”
But like many of us, Uncle G isn’t well-versed in the realm of tokenized real estate, nor is he familiar with navigating the complex world of digital assets and the blockchain.
“I wish somebody could show me how to put my properties on the blockchain. If they could, I would,” he said in a Twitter Spaces discussion led by social media marketing firm, Wolf Financial.
What is tokenized real estate?
Real estate tokenization converts the value of real estate into digital tokens stored on a blockchain.
Each token can represent ownership of all or part of a real property, plus a right to a share of the profits and losses generated by that real property, among other things.
This method enables fractional real estate ownership, which allows a broader group of investors to invest directly in real estate of all kinds, including commercial, residential or trophy. It’s similar to the crowdfunding process championed by Cardone, which allows everyday investors to pool their money to purchase property (or a share of property) as a group.
“People don’t want to own a home anymore,” said Cardone, who argued that baby boomers would rather retire and go on vacation, while younger generations “don’t want the obligation of ownership, even if they could.”
It’s not that easy though
Tokenized real estate has a few key benefits, Cardone wrote in a blog post last year: Blockchain technology enables “lightning-speed transactions at a lower cost,” the investments have a higher liquidity than brick-and-mortar real estate and the process is very secure.
But Uncle G has one big reservation about trading real estate as a digital asset — “everybody … forgets one little group called the SEC.”
Generally, the SEC considers real estate tokens as “securities,” meaning they’re subject to disclosure and registration requirements, unlike pure brick-and-mortar real estate investments.
Cardone, who is known for his 10x (go big or go home) philosophy, expressed concerns about whether the current regulatory structures would allow him to “do giant deals” on the blockchain.
“Show me how to get a $100-million deal on the blockchain,” he said. “I'll buy the deal, throw it on the blockchain, and then get me an approval from the SEC so I don't go to prison.”
Those regulatory structures do exist, according to John Belitsky, co-founder of Balcony DAO, a Web3 Investment bank that provides crypto financing solutions for real world assets, including real estate.
Tokenized real estate is “what every private equity firm in the world is eyeing as the future of the real estate industry,” Belitsky argued on Wolf Financial’s Twitter Spaces.
If you’re not yet ready to take on digital assets, here are two other ways you can build your real estate portfolio.
Read more: Hold onto your money': Jeff Bezos issued a financial warning, says you might want to rethink buying a 'new automobile, refrigerator, or whatever' — here are 3 better recession-proof buys
Invest in REITs
Investing in a real estate investment trust (REIT) is a way to profit from the real estate market — without having to buy a house or worry about screening tenants, fixing damages or chasing down late payments.
REITs are publicly traded companies that own income-producing real estate like apartment buildings, shopping centers and office towers. They collect rent from tenants and pass that rent to shareholders in the form of regular dividend payments.
To qualify as a REIT, a company must pay out at least 90% of its taxable income to shareholders as dividends each year, in addition to other requirements. In exchange, they pay little to no income tax at the corporate level.
Essentially, REITs are giant landlords. Some have seriously blue chip tenants, including the U.S. government, while others house e-commerce giants like Amazon and Walmart.
Of course, not all REITs are made equal. Many took hits during the pandemic, but generally, they’re described as total return investments that provide high dividends and the potential for moderate, long-term capital appreciation.
As REITs are publicly traded, you can buy or sell shares anytime and your investment can be as little or as large as you want — unlike buying a house, which usually requires a hefty down payment and then comes with a mortgage.
Use online investment platforms
Building a brick-and-mortar real estate portfolio requires serious cash, time and sweat equity, but it is possible to grow your portfolio without all the red tape.
With the help of new online platforms, you can gain access to institutional-quality commercial real estate investments without the leg work of finding deals yourself.
You can browse curated deals or join funds invested in diversified real estate portfolios that will maximize your returns while keeping your fees low.
Most platforms are supported by a team of experts who can help you build a portfolio that best fits your needs.
What to read next
Americans are paying nearly 40% more on home insurance compared to 12 years ago — here's how to spend less on peace of mind
Here's how much money the average middle-class American household makes — how do you stack up?
The US dollar has lost 98% of its purchasing power since 1971 — invest in this stable asset before you lose your retirement fund
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.