Real Estate Tokenization Guide: From Property to Token

The core benefits are liquidity, accessibility, and operational efficiency. Tokenization lets you sell fractional shares of a property to a global pool of investors, making a $5M asset accessible to someone with $500. It creates a secondary market where owners can trade shares 24/7. For the creator or sponsor, it automates distributions (like rent) via smart contracts and creates a new, ongoing revenue stream from secondary trading fees (e.g., the 0.30% creator fee on Spawned).

Distribution is managed through smart contracts and the project's legal/admin entity. Typically, rent is collected by a property manager into the project's entity bank account. On a scheduled basis (e.g., monthly or quarterly), funds are converted to stablecoins and sent to a smart contract. The contract then distributes the funds pro-rata to all token holders based on their share of the total supply. Some platforms automate this, while others require manual initiation by the admin.

It is complex and often not advised. The mortgage lender (the lien holder) has a primary claim on the property. Tokenizing ownership would involve sharing that ownership with potentially hundreds of token holders, which most lenders' agreements prohibit. Typically, the property must be owned outright or the tokenization must be structured in a way that satisfies the lender, which is rare. Most successful tokenization projects start with unencumbered (mortgage-free) assets.

Solana's Token-2022 program is an upgrade to the basic token standard. For real estate tokens, its most important feature is the ability to impose a **permanent transfer fee**. After a Spawned-launched token graduates, it can activate a 1% fee on every token transfer. This fee goes directly to the project's treasury in perpetuity, funding essential ongoing costs like property management, maintenance, taxes, and insurance without needing to dip into rental income or issue new tokens.

It's a unique feature on Spawned that rewards holders for providing liquidity and holding the token. On every single trade (buy or sell), 0.30% of the trade value is taken as a fee. This fee is then distributed proportionally to all wallets holding the token at that moment. This creates a continuous yield for long-term holders, directly incentivizing them to hold their fractional property shares rather than trade frequently, which promotes price stability.

This is defined in the legal offering documents (the operating agreement for the SPV/REIT). Typically, a majority vote of token holders would be required to approve a sale of the underlying asset. Upon sale, the net proceeds (after paying off any expenses) would be distributed to all token holders proportionally, likely through a smart contract. The tokens would then be burned or become worthless, as they no longer represent an underlying asset. The process must be transparent and follow the pre-defined rules.