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Tokenization of Short Rental and Multifamily Real Estate Projects

Tokenization of Short Rental and Multifamily Real Estate Projects

Thursday, June 13, 2024

The U.S. residential real estate market is estimated at US$2.53 billion in 2023 and is expected to reach US$2.80 billion in 2028, growing at a compound annual rate of 2.04% during the forecast period (2023-2028).

There is much talk nowadays about the "new business" of Short Rentals and Multifamily Projects.  At Expedit, these are some of the business models targeted by our investment thesis and therefore we will look at the characteristics of each Business Model and their potential Tokenization.

1.  Short Term Rental Business Model

It consists of acquiring or building a property (building, apartments, or houses) in a high-value area and renting it for personal use or vacation stays of less than one month, through platforms such as Airbnb.

The short rentals in the real estate market are a business model, that is gaining popularity in both the United States and Latin America. These have experienced a revolutionary change in tourism. In 2021, this market was valued at US$74.64 billion and is forecast to grow at a compound annual rate of 5.3% between 2022 and 2030. These trends apply to both the United States and Latin America.

Key characteristics of Short Annuities:

Flexibility: Travelers and business people are looking for more flexible and customized stay options. Short-term rentals offer temporary accommodations tailored to the specific needs of guests.

Higher Profitability: Owners can earn significant income by renting their properties for short periods. This is especially attractive in tourist areas or cities with high demand, which can easily double the monthly rental percentage.

Digital Platforms: Platforms such as Airbnb, Vrbo, and Booking have facilitated the management and promotion of short-term rentals.

2.  Multi Family Business Model

Multifamily projects are a business model that has been proven in the United States for several decades and is an emerging trend in Latin America. The optimal size for multifamily investments is preferably more than 100 apartments or housing units, which allows for a more efficient internal operation for tenant management, rentals, maintenance, amenities, and above all, dilution of investment risk.

The multifamily residential model in the United States is experiencing sustained growth, consolidating with an investment volume that exceeded US$120 billion in the last year.  This success is reflected in changes in residential and demographic preferences. In 2023, it recorded the highest volume of real estate investment in the United States and experienced a 22% growth in supply. Projections for 2024 indicate that this trend will continue to rise.

Advantages of the Multifamily:

Monthly Cash Flow: Multifamily provides a steady stream of monthly income from rentals, which represents a reliable source of passive income for investors.

Lower Risk: The initial investment and risks are usually lower compared to other large real estate properties.

Community and Neighborhood: Being located in residential areas, Multifamilies foster a sense of community among tenants.

Tokenization Potential as Real World Assets (RWA)

The Tokenization of real estate assets has been a growing trend for some years now. Converting property investments into Security Tokens facilitates investment, liquidity, and diversification. Both short annuities and Multifamilies can benefit from tokenization:

Enhanced Investor Access: Tokenization allows investors from all over the world to participate in real estate projects, including those interested in short rentals or Multifamily.

Property Fractionation: Security Tokens represent fractions of the investment in a property, making it easier to invest in property assets without having to purchase an entire property.

Transparency and Efficiency: Blockchain technology guarantees the transparency of investments in a property and transactions, in addition to reducing administrative costs, increasing the benefits to Investors.

The Short Rents such as the Multifamily have great potential to be tokenized as real-world assets - RWA, through Expedit's Tokenization Platform, which is an excellent tool to develop and manage these projects efficiently and securely, complying with all KYC, AML, and Legal Standards for issuing Security Tokens.

What is the process to tokenize a real estate property?

Real estate asset tokenization is an innovative process that uses blockchain technology to convert Investment rights over a property, into Security Tokens.  Here are the key steps to understand how it works:

Asset identification: A suitable real estate property is selected for tokenization.

Creation of Security Tokens: Security Tokens are issued through a Security Token Offering - STO regulated using Blockchain, each representing a fraction of the property investment.

Trading in secondary markets: Investors through Expedit's platform can buy, sell, or exchange these Security Tokens in the Private or Secondary Marketplace.

Smart contracts: Smart contracts define the rules for the transfer of Security Tokens and guarantee the transparency and security of the process.

Expedit, as a leading platform in LatAm, has been at the forefront of innovation in real estate asset tokenization.  Here are some ways Expedit can accelerate and contribute to the tokenization of real estate projects:

Access to a Global Investor Base: The issuance of Security Tokens allows real estate developers to access a global investor base more efficiently and transparently.  Unlike real estate crowdfunding, where participation is geographically limited, tokenization allows investors from around the world to participate.

Increased Liquidity and Diversification: Tokenization facilitates the buying and selling of fractions represented in Security Tokens, which increases liquidity and allows investors to diversify their portfolios.

Efficiency and Transparency: Expedit uses blockchain technology to ensure transparency in transactions and reduce administrative costs. This benefits both developers and investors.

Focus on Long-Term Rental Projects: The issuance of Security Tokens breaks the traditional paradigm of project developers by offering the opportunity to explore long-term rental projects instead of short-term sales.

What is the process for listing a project in Expedit?

Submit your project: Complete the form with the details of your real estate project. Include the Executive Summary of your Business Plan and Financial Plan.

Team Review: Expedit's team will review your project and determine if it is feasible for tokenization. They will evaluate its feasibility and potential.

Tokenization: If your project is approved, tokenization will proceed.  Expedit will guide you through the creation, issuance, and marketing of Security Tokens.

Expedit is a trusted expert in the tokenization of real estate assets in LatAm, its technological approach and experience accelerate and optimize the tokenization process for real estate projects. If you have a project to evaluate, you can send it through this link.

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