Real estate tokenization is the process of converting property rights into digital tokens, with each token representing a fraction of the underlying asset, along with its associated rights and obligations. Importantly, it’s not the property itself that is directly tokenized, but rather the LLC that owns the property.

Instead of receiving a traditional paper certificate to indicate membership interest in the LLC holding the property title, investors receive property tokens representing the same ownership interest. These tokens are securely stored on a blockchain, allowing them to be easily bought or sold.

The entire process is managed through smart contracts, which automate and enforce contractual terms. For example, a smart contract can automatically handle ownership transfers or distribute rental income proportionally to each investor’s share in a property. This ensures transparency, security, and efficiency in property investment.