Thread by @shivsakhuja

Here's a 🧵 about why real estate will eventually get tokenized and what that model could look like 👇

A thought experiment..

2/

First, let's address what I mean by tokenized -- tokens will be created to represent ownership of real estate.

Since every piece of real estate is unique, NFTs would be a great way to represent them.

These can also be fractionalized to allow for multiple owners.

3/

If you have a token that represents a property, you have digital proof of ownership in your wallet.

That can be plugged into other smart contracts. What can you do with that?

4/

Mortgage / Refinance:

• It can take months to secure a typical mortgage.
• It requires all kinds of documentation.
• It requires a good credit score. Credit scores are an incredibly biased and unfair system.

5/

In #DeFi, you can get a loan in seconds, as long as you have collateral to back it.

When you get a mortgage, your house is the collateral.

So if you have a token representing a property, you should be able to use that as collateral to get a loan in seconds in #DeFi.

6/

Okay so you'll be able to get a mortgage / refinance in seconds, not months.

What else can we do with tokenized real estate? 👇

7/

2. Real Estate Investments

In #TradFi, you have 2 options:

• Buy a property: Requires lots of capital required, physical access, management, offers no diversification.

• Real Estate Investment Trusts or REITs: limited options, requires trust in managers, no granularity.

8/

With tokenized real estate in #DeFi, you'd be able to:

• Invest from anywhere in the world
• Invest with a small amount of capital
• Invest in a specific property, or
• (potentially) Invest in index tokens that represent a neighborhood, city, state, or country.
+++

9/

Here's an example: You have a $1M property, but you need $100k ASAP.

With #DeFi, you could do one of the following things: 👇

10/

1. Get a $100k line of credit against your property tokens in seconds.

2. Sell $100k worth of your property tokens. Liquidity will come from an open market with individuals, institutional investors, endowment funds, index token funds, etc

11/

So if there are 1000 owners of a given property, who owns and lives in the house?

Here's one idea I have to solve this:

12/

Property token could be split into 2 tokens: one representing ownership, and one representing occupancy rights.

• Owners get the benefits of cash flow from rent, and price appreciation.

• Occupancy token holder lives in the property and pays rent to a smart contract.

13/

• If the Occupancy token holder defaults, the Occupancy token is seized, and the occupant can be evicted via court order.

• Taxes and maintenance are paid by owners (expenses can be automatically deducted from the Ownership token value)

14/

This is just a thought experiment - I strongly believe that real world assets will be tokenized through models like this.

There is so much more I could muse about with this kind of model.

If anyone is working on this, I'd love to hear about it.

Only a matter of time imo.

15/

Here's a post I wrote about why #DeFi is so powerful, and why everything will eventually be tokenized.

https://twitter.com/shivsakhuja/status/1471819070458658816?s=20

16/

Give this post a like / RT if you agree.

If you're working on this, please slide into my DMs.

I'd love to learn more.