Do you want to invest in real estate using the blockchain? There are specialized platforms that have significant advantages over traditional solutions. Here’s how to buy “paper real estate” and collect rent, thanks to tokenization.
The blockchain makes real estate investment accessible
The means of investing “in stone” are varied. This can also be done through the direct acquisition of physical goods, but also through “paper real estate” such as Stock Exchange Traded Funds (ETF) or Société Civile de Placement Immobilier (SCPI) shares.
Each method has its own advantages and disadvantages, which will satisfy different investor profiles. However, a new way to gain exposure to this asset class is beginning to emerge through blockchain: real estate tokenization.
This process generally consists of digitizing the shares of real estate, or rather of the companies that own them, on a blockchain. This happens in particular through security tokens or non-fungible tokens (NFT). These then entitle you to the benefits associated with them, such as the share of rents generated by this property.
The main advantage of this method is that it becomes possible for everyone to invest in real estate, whereas it is an extremely expensive investment via traditional methods.
The different ways to invest in real estate with the blockchain
To date, the main real estate tokenization platform, which is also the one we recommend, is RealT. However, it’s not the only solution when it comes to investing in tokenized real estate on the blockchain.
For example, where RealT is developing a down-to-earth approach through security tokens, the French Wincity platform instead includes a gamified dimension, through NFTs that can be used in a play-to-earn game.
At the same time, solutions like Vave directly allow investors to tokenize their property themselves, to raise funds that will allow investors to share the income from said property. HoneyBricks’ solution tends to focus more on commercial real estate.
Here is an overview of these actors, through a non-exhaustive table :
Platform
Kind
RealT Immobilier locatif fees Blockchain fees + 3% when reselling on the Wincity Immobilier locatif platform + NFT and metaverse Blockchain fees + 1% of the sale price, for the buyer or seller at the initiative of the transaction Vave Crowdfunding Unspecified HoneyBricks Commercial real estate Blockchain fees
Invest in tokenized real estate on the blockchain thanks to RealT
Founded in 2019 by the brothers Rémy and Jean-Marc Jacobson, the RealT platform offers to invest in real estate shares from $50.
Specifically, the buyer invests in the limited liability company (LCC) that owns the property, which then transfers the rental yields deducted from the charges, depending on the number of shares the buyer holds. Thus, yields vary within a range of between 9 and 11% per year approximately depending on the property.
This rental income is paid out weekly, depending on the method selected by the investor: either in stablecoin or compounded into a reinvestment property which will in turn generate income.
Investing in real estate with the blockchain
? From just $50
Buy a fraction of tokenized real estate on the blockchain thanks to RealT
To get started with the RealT platform, you can find our dedicated guide:
👉 How to create an account on RealT and use the platform?
Let’s see anyway how to buy a fraction of tokenized real estate on the blockchain with RealT.
On the screenshot below, we see for example a property for sale in Detroit, for an entry ticket of 50.94 dollars and expected returns of 9.76% per year.
For this property, the date on which rental income will begin to be paid is announced as August 1, 2023.
Figure 1 — RealT marketplace homepage
When you add the desired quantity of tokens to the basket, you have several options for payment.
Indeed, we can see below that it is possible to settle the purchase in USDC or xDAI from the Gnosis Chain, with 6 other cryptocurrencies, including BTC and ETH thanks to Coinbase Commerce, or by credit card :
Figure 2 — Making a payment on RealT
Once payment is made, you will receive contractual documents to sign on your mailbox to complete the transaction.
On the other hand, RealT operates both on the Ethereum blockchain, but also on the Gnosis Chain. Thus, it is possible to choose where to receive your fractions of tokenized real estate, and how your rental income will be received:
Figure 3 — Choice of network for payment of rental income on RealT
Additionally, RealT is also designed in a way that makes it easy for people unfamiliar with the cryptocurrency ecosystem to get on board.
And for good reason, the “Walletless” feature allows you, as its name suggests, to use the functions of RealT without a wallet until you feel ready to fully utilize the capabilities of the blockchain.
For the most advanced users, the RMM platform will even allow you to deposit your tokenized real estate as collateral in order to borrow cash. The concept also uses the technology of the Aave protocol to work:
Figure 4 — RealT RMM platform overview
Investing in real estate with the blockchain
? From just $50
FAQ — Frequently asked questions about RealT
What happens if RealT goes bankrupt?
For each property, RealT creates a company independent of the others on the model one property = one company. This protects investors, whose share of capital in each company is symbolized by the tokens in their possession.
In the event of the bankruptcy of the parent company, investors would therefore not lose their fractions of tokenized real estate. Note, however, that this operation is specific to RealT, and that it is not necessarily the same model for other projects combining real estate and blockchain.
Can I sell my RealT tokens?
If it is much easier to sell real estate shares in the form of RealT tokens than a physical good, it’s also not as liquid as the rest of the cryptocurrency market.
For investors who wish to part with their fraction of tokenized real estate on the blockchain, RealT can redeem your tokens up to $2,000 per week, for a total of 3% fee. The platform also sets up a marketplace system between users, which limits costs, but keep in mind that the process can be long before finding a buyer.
Are the advertised returns guaranteed?
RealT has the advantage of detail all the charges that apply to a given property on its description sheet, which avoids unpleasant surprises and hidden costs.
However, it is also necessary to keep in mind the possibility of rental vacancies, or periods of renovations preventing the generation of income. These factors can then reduce your annual performance.
This risk can be mitigated by diversifying the properties you invest in.
Where can I track my RealT assets and the payment of my rental income?
Every week, RealT sends a report by email, indicating to investors the income received with the different properties.
In addition, it is possible to have a visual of your tokenized real estate fractions directly from your RealT accountand track your wallet address on Etherscan and Blockscout blockchain explorers, depending on the network you operate on.
How do I secure my RealT tokens?
Besides Walletless functionality, RealT runs on Ethereum and the Gnosis Chain, which means tokens and rental income can be stored on any wallet compatible with the Ethereum Virtual Machine (EVM) like MetaMask, Frame or Rabby Wallet.
Nevertheless, it is wise to pair these wallets with a hardware wallet like those of the Ledger brandin order to ensure optimum security for your investments.
👉 Learn how to set up a Ledger Nano S Plus
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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