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NEWS - The risks when investing in tokenized real estates & how to avoid it

The risks when investing in tokenized real estates & how to avoid it

Rủi ro đầu tư bất động sản token hóa - The risks when investing in tokenized real estates

The pandemic has affected the economies worldwide. Property protection against inflation is the main goal for both institutional and retail investors. The foolproof way to stay afloat in the present economy is to invest more in scarce assets, real estate being the most lucrative of them all. However, not all investors have abundant capital to invest in this property. Therefore, tokenized real estates are an intelligent investment for retail investors. So what are the risks when investing in tokenized real estates & how to avoid it? Let’s find out with GIG in the following article.

Read more: Top 5 Types Of Real Estate Investments

The risks when investing in tokenized real estates

Regulation

Navigating complex regional regulations around the globe is a key issue that faces the adoption of any new technology, blockchain-based platforms included.

For example, some blockchain-based real estate investment platforms do not allow investors from the United States to participate because the relevant regulations tend to be strict and cause additional administrative overhead for the sale and trade of tokens. Therefore, it is easier for these platforms to prohibit Americans from participating, even with losing a huge market of potential investors.

Moreover, not all states and countries recognize smart contracts as legally binding, which poses a huge threat to parties that may not be aware of this — especially when it comes to contracts representing sizable investments like properties and titles.

The regulatory hurdles with blockchain technology are holding many enterprises back from adoption. However, some movement is taking place in this area.

Financial theft

Cryptocurrency has high-risk exposure to a new form of financial theft by hackers. It is on record that several institutions have already fallen victim to this threat, like the hacking of the Singapore-based exchange. This is because, unlike fiat currency, Cryptos are invisible, exclusively digital forms of currency, making them vulnerable to hackers. This calls for caution when Cryptocurrency becomes more integrated into real estate transactions. This also makes it reasonable for additional measures such as the involvement of the services of insurance companies to cater to the associated risks.

Real estate prices fall

If real rental income or real estate sales fall, so will the return on investment.

Blockchain technology does not protect inventors against junk real estate

Blockchain technology makes investment transactions secure. It’s true: The blockchain, as a decentralized, digital ledger system, stores data in such a way that it cannot be tampered with. However, distributed ledger technology does not protect investors from risky bad investments. After all, tokenized real estates represent shares in real estate assets. However, this does not mean that a house or apartment is worth its money in realization possibilities. Token owners should also inform themselves precisely about the framework conditions of their investment. This also applies to diamond tokens, car tokens, or the purchase of artwork NFTs.

The quality of the investment is crucial

The technical advantages of the blockchain should not blind investors. It is true that the technical process is simplified by digitization and thus certainly optimized in terms of costs; standardized forms help protect investors. But that does not affect the actual project. Therefore, private investors should always take a very close look at a task.

What steps do token owners need to take to make tokenized real estates projects viable?

Even though tokenization has lots of potential for improving real estate investments, it is a complex structure that comes with a lot of practical and legal issues that need to be tackled. If any of those is ignored, the whole thing can fall apart. The first thing that is obvious for any project in this direction is compliance.

Some startups are already developing automated compliance solutions for KYC and AML, which are essential for these projects. All token issuers must comply with Know Your Customer (KYC) and Anti Money Laundering regulations and laws, no matter where their tokens are offered.

The general need is for governments to get involved and work with private companies to establish better infrastructural solutions that will improve payment capabilities, reduce settlement risks, and improve operational efficiency.

What should investors do to minimize risks in tokenized real estates investments?

The risks when investing in tokenized real estates

Research

Reading its whitepaper is of utmost importance before going ahead with any tokenized real estate investment. It gives you a fair idea about the company’s plans and if they align with yours. Remember, other’s research is not your research. Dedicate time reading and understanding a digital currency before giving in to the temptation of investing in it. Laziness can cost you your money, don’t let it settle.

Capital

If you happen to be a beginner, make sure you use only the buffer money, for many have committed the mistake of investing their hard-earned money, thinking they would turn into profits soon. So, invest only if you have enough capital and if the money you plan to invest is not required elsewhere in the immediate future. Don’t even think about taking a loan and investing in digital assets like tokenized real estates.

Keep a keen watch

First, the digital asset exchanges aren’t completely secure. There are no clear-cut rules or regulations, and, therefore, once you lose your money, there’s no way you are getting it back. Therefore, every step has to be taken with extreme caution. Read the circumstances under which others were scammed so that you don’t fall for them.

Keep evaluating the market

Tokenized real estates investment is not a sure-shot method to make money. Besides the risk of online scams, there are genuine possibilities of losing money or sustaining heavy losses. Hence, it’s important to be on your toes all the time and understand the direction in which the market is going. Depending solely on the unit price of a token will only lead to disappointment for you. With time, you should be able to predict the market’s mood. That’s when you start making money.

Choose carefully as you review the various types of real estate investments. Remember, you aren’t locked into one investment type only; you should invest in many types of real estate investments strategies to diversify your assets and passive income sources.

GIG is positioned to become a global platform connecting users and suppliers. Soon, investors will readily invest in Real Estate, Enterprise Shares, Service Vouchers, Immigration Investment, Study Abroad, Labor Export, etc. with GIG Dollar. Whether users are in Vietnam or Thailand, our supplier is in Europe, and our partner remains the same. Subscribe to GIG Dollar to stay updated with the latest news on blockchain, cryptocurrency, digital asset investment, etc.

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