A new company, powered by blockchain, is offering a new way to invest in real estate at a price that almost anyone can afford.
RealT is a system for tokenizing property ownership in the United States by putting each property in a unique LLC and then selling shares of the company to anyone who purchases a token. It retains all legal rights and protections provided by traditional ownership of real estate, according to their website.
“The company acts as a wrapper for a property. That’s how we turn a single deed into 1,000 digital tokens. Each token represents a share of a company and that’s how we got the price of our token down to $63.75. This way, we reduce the costs of owning property and make it accessible on the internet,” said David Hoffman, chief operating officer at RealT.
Another unique element of this investment opportunity is that token holders collect rent on a daily basis. When people buy their token, Hoffman said they receive their rent the very next day.
RealT launched in April of 2019 and initially there was some skepticism but seeing the quick return on investment has helped people gain confidence in the company.
“We would see someone come to the website and purchase one token, sit on it for a week or two and then would come back to buy more, becoming a return customer.”
All their properties are currently rental properties and according to Hoffman, being the landlord is a pretty low-maintenance gig. RealT hires property management companies that are responsible for sourcing tenants, collecting rent and managing repairs. Property management companies are paid a 5% cash fee from rent collected. “If you own a token, there are no responsibilities or requirement to maintain the property, because we do that for you,” he added.
The median home price in the U.S. is $270,000, according to the Q3 2019 U.S. Home Sales Report from ATTOM Data Solutions. At this price, only a portion of the population can own, and Hoffman said that this system eliminates that barrier.
“What RealT does is reduce the requirements of owning a property to what anyone can pay in cash. You’re not burdened by a loan, you don’t have to worry about variable interest rates, it’s just a purely cash transaction with as minimal baggage as possible.”
Since everything is done digitally, RealT is also breaking records for property transfer as well. From buying the token, to owning a fraction of a property, it could take less than three hours compared to the average 30-day exchange period, according to their website. The company still follows “know your customer” (KYC) and anti-money laundering procedures, like with any property purchase, to ensure payments are legitimate.
“It’s a combination of various technologies we’ve really been able to leverage. The paper deed and all the compliance and legal documentation exists in our lawyers’ filing cabinet, but everything else is done electronically, from the signing of the documents, customer vetting, and issuing the tokens,” said Hoffman.
There is one small catch. For right now, you must have an Ethereum wallet and a familiarity with cryptocurrency. Rent is paid using a stablecoin called Dai, which is directly tied to the U.S. dollar. Hoffman says they are working with a third-party company called Wire that can help users who aren’t savvy with cryptocurrency to manage their digital wallets.
“We will soon be able to keep track of everything and keep a running ledger of rent that’s being paid to you. Then you can view that online, the same way you do with web banking. When you are ready to collect, we take your banking information and pass that along to Wire, who can complete the transaction and deposit the rent in U.S. dollars.”
In terms of becoming mainstream, Hoffman said they still have a long way to go. “The cryptocurrency industry is being adopted in some countries faster than others, like Argentina, Hong Kong and Singapore. I believe we are going to go mainstream with some of those countries first, where they have the technological capabilities to understand this, and the wealth to be able to invest in real estate,” he added.
Finally, if you buy a token, Hoffman says, you can sell it back to the company at the click of a button. “People aren’t committed to owning a property for 10 years. In theory, they could own a piece of property for 10 minutes, or however long they want.”