The first thought here is, “Sure! If I had the capital to invest in a home other than my own.” which up to this point has been the very high bar to entry to get into the real estate market. This bar has kept many from enjoying the benefits of passive income via a real estate investment until now. In comes cryptocurrency and the seemingly endless innovations its having in multiple markets.
“Is it possible for people who is starting out with LITTLE capital to ACTUALLY OWN the real estate they are investing in while being able to enjoy the steady passive income stream without troubling themselves with immense paperwork and proper management of asset?”
– Medium.com’s “First Look Into RealT”
Well, the short answer is yes. RealT and companies like them are recreating a real estate investment market that doesn’t tailor only to the wealthy. Instead it makes real estate a fractional investment. Learn more below from the cited article above:
How it works
The properties in various cities across the United States listed on the marketplace are handpicked by the real estate team after their evaluation.
To still be able to keep the legal rights and protections that are granted by property ownership after tokenization, RealToken LLC was established. It is a series LLC where it is divided into independent series which is treated as a separate entity. Each series of the RealToken LLC are used to purchase and own a single property asset. The ownership is then tokenized into unique ERC20 tokens on the Ethereum blockchain, RealTokens and split equally. Owning a RealToken equates to owning a share of the property owned by a particular series. This translates into effective ownership of the property held by the series for individuals holding RealTokens.
For homeowners who are interested in tokenizing their property and making a sale through the platform, they will have to submit a form which covers their property details and will be contacted by a sales representative. If chosen after a fair assessment, their property will be tokenized and listed on the marketplace to be made available for purchase.
The process of owning and managing property has never been made easier! Know Your Customer (KYC) procedures are in place for identify verification and ensure payments does not come from illegal sources. Simply browse through the marketplace and if any of the listed properties catch your eye, purchase your desired amount of RealTokens available. Once the payment is successful and the required documents are electronically signed, the tokens will be sent to the buyer’s Ethereum wallet. Congrats, you are now an owner of the property!
For management wise, the idea is to have little to no engagement from the token holders — just sit back and enjoy the rental income paid out daily. The maintenance will be outsourced to a property management company where they will manage all landlord responsibilities.
Based on the illustration of the process above, the rent will be collected by the management in USD and exchanged for DAI, a decentralized stablecoin pegged to the US dollar. The DAI will be sent to the RealToken smart contract associated with the property. From there, the rent contract will automatically distribute the DAI to the Ethereum wallets of token holders based on their share of the property on a daily basis.
Shaking up the real estate market
- Real estate investments or owning a property are no longer exclusive to the rich as RealT introduces fractional ownership of its listed properties which greatly reduces the price entry barrier for each individual, expanding the pool of potential buyers and adding onto liquidity
- The high transaction costs and slow settlement process can be revamped with blockchain technology — this process can take place on-chain within a few seconds just by transferring of tokens and the only fees incurred would be the price of gas used in the transaction
- Illiquidity of real estate market stems from being restricted to a small pool of buyers locally as there are many regulatory hurdles in purchasing properties abroad. With RealT, market outreach for the US real estate market is maximized as international investors can easily own US property by purchasing through the platform that is compliant with the US legal system.
For crypto investors that are looking to diversify into real estate for their portfolio, this is your go-to place. An opportunity like this arises because assets can be tokenized on the blockchain. Blockchain has continued to prove to be an important tool in enabling financial products to the masses due to its properties (no pun intended) and there are many innovative financial products created to be the solution for their target market. RealT is making use of blockchain technology to better serve real estate investors while solving the issues plaguing the real estate industry. I am excited to see how RealT evolves into a worldwide marketplace for real estate investments.