- RealT seeks to offer a solution to the barriers above through permissionless, fractional, tokenized ownership of U.S real estate assets from anywhere in the world.
- The company uses smart contracts to disperse rent on a daily basis.
- An option that can be leveraged is the ability to secure a loan via these fractional investments.
Online Real estate Platform RealT offers individuals the opportunity to partake in one of the oldest commodities in existence, Real Estate. Through fractional tokenized ownership, people from around the world can buy into the U.S real estate market, powered by Blockchain technologies.
The demand is simple: people need shelter. Whether it be for business, personal, or recreational use & with the rise of tech companies such as AirBNB, there are more ways than ever for real estate owners to better leverage the value of their property.
Real Estate Barriers to Entry
Real estate is not without its hurdles. High prices, high fees, illiquidity, minimum investment & Geography are all issues that can affect middle & low-income buyers.
Housing, while maintaining an intrinsic value versus a commodity such as Gold with a perceived value, is tough to liquidate quickly without devaluing the asset. The average house price in the U.S is $226,800. Transactional costs between brokers can run upwards of 6%, and many properties require a minimum $5-$10k down payment.
What does RealT Offer?
RealT seeks to offer a solution to the barriers above through permissionless, Fractional, tokenized ownership of U.S real estate assets from anywhere in the world.
How Does it Work?
Typically ownership of property is obtained through a paper deed. RealT offers an Ethereum based Token called a Realtoken; these tokens symbolize ownership similar to a deed in a digital format.
RealT purchases the deeds to discrete assets and grants ownership of the deed to a series. Membership interests in each Series split into equal digital token units or RealTokens. The sole purpose of a Series is to own one single property; ownership of all of the RealTokens issued by a Series is effectively ownership of the property held by that Series.
A Series acquires the deed for the real property asset, that is, the legal document showing who owns the entire property, lists the Series as the recorded owner of the real property.
By offering individualized tokens, the barriers of real estate are combatted immensely. Purchasers can lower minimum down payments to as low as $50-$150USD. The low and middle-income buyer now has much more purchasing power as well as Liquidity of the asset.
If the token exhibits sound legal representation of ownership, its exchange of ownership becomes significantly more simplified. Previously, real estate buyers & sellers required many document signatures, notarization, submission, and approval. A blockchain-based structure can eliminate this process. Public Key Cryptography can be used to verify signatures.
Property ownership comes with real-life maintenance. One cannot expect buyers from around the world to take turns mowing the lawn, so to speak. RealT requires the hiring of a property management company. This company would be responsible for collecting rent, general upkeep of the property, and distributing rent.
Owners will pay the property management service provider a cash fee equal to 5% of rents collected on the real property asset held by a Series and a cash fee equal to 1.5% of the costs of all repairs to a real property while the Series owns the asset.
Smart contracts disperse rent daily. The net of operating costs is exchanged for the stable coin DAI, then distributed to the RealToken rent contract associated with the property. The DAI is then dispersed to Ethereum wallets, which can be exchanged for most Major currencies allowing them to be traded to Fiat-backed stable coins to enable the conversion to U.S Dollars.
The Future of Asset Ownership
What RealT is offering confronts many of the challenges to the casual buyer when purchasing an asset. Real estate is not the only market being affected by tokenization. Platforms such as Paxos & Circle have presented similar fractionalized ownership of assets such as Gold and even USD, respectively.
Besides illiquidity and high prices being the significant barriers, Various problems with property geography can be addressed. People can purchase from anywhere with WIFI, and transaction time is much quicker than a traditional property purchase.
Hypothetically Collateralized Loans
An option that can be leveraged is the ability to secure a loan via these fractional investments.
Homeowners might want to leverage the capital locked up in their houses without seceding ownership of the properties to anyone else. A second mortgage is possible but not without high fees or interest.
A RealToken owner could, using a decentralized finance platform such as Dharma or MakerDAO, leverage some or all of the RealTokens to secure a collateralized loan anywhere from 0.5%-3.5%. Assuming one of these platforms would accept Realtokens as collateral.
The relationship between real-world assets and Crypto Loans is still a short distance away, but companies such as RealT are bridging the gap. You can find the whitepaper here.