Everything is being tokenized these days from paintings to even real estate, even as controversy continues to surround the housing market. A new firm, RealT is aiming to simplify global access to U.S. real estate investment, starting with investment opportunities in Detroit, MI due to the city’s urban renewal plans and promising prospect for ROI. Powered by the Ethereum blockchain, RealT enables investors around the world to buy into ownership of U.S. properties and enjoy passive rental income. Ownership of each property is tokenized to unique ERC20 tokens and based on token share, owners then collect rent revenue.
BlockchainReporter spoke with Rémy Jacobson, the Founder and CEO of RealT.
What inspired your decision to start operations in Detroit MI?
Detroit is an optimal place for RealT to get started. The city of Detroit has seen huge growth in recent years and we’re not the only company that recognizes its great potential. As major automotive and media companies begin investing heavily in the Detroit metropolitan area, the local economy and, by default, the real estate market is sure to thrive. Properties in Detroit are already in high demand due to their low price tags and high rental rates. By tokenizing property ownership in Detroit, you can now invest in real estate from as little as $63.75. RealToken owners are given indirect individual ownership and certain governing rights in a property and they can generate passive rental income. Having low-cost properties with high rental rates is a great way to provide value for our early adopters.
What made you choose the Ethereum blockchain for this endeavor compared to others available?
Ethereum was the obvious choice for RealT, as its strength as a tokenized asset platform has been proven. RealTokens, we believe, as real-world asset/security tokens, will become an important building block in the greater Ethereum ecosystem. The theme of 2018 was the discovery that Ethereum could enable and facilitate a world of decentralized finance, where assets and smart-contracts exist in the same design space. It is crucially important, we believe, for driving future demand for RealTokens, that these tokens are able to fit into Ethereum based products generated by other teams. It’s part of RealT’s mission to see RealTokens inside of MakerDAO, Dharma, Set Protocol, or other decentralized, Ethereum based finance infrastructures. Platforms like EOS or Tezos do not have these same or similar products within their blockchain ecosystems.
How does this system work, exactly?
RealT’s platform operates by utilizing a Delaware series limited liability structure where each series is treated as if it were a separate legal entity. Ownership interests in each series is represented by RealTokens, which are ERC20 tokens modified to meet transfer restriction requirements under applicable U.S. securities laws, and the series acts as a bridge between a token-owning individual and a piece of real estate property. Ownership of any or all RealTokens of a particular series gives an individual actual ownership and a number of governing rights over that series and, therefore, over the specific property owned by the series. Investors decide how many RealTokens to purchase and, based on token share, receive rental revenue from the property.
Someone interested in purchasing a RealToken can create an account on the RealT website and assess which property they’d like to invest in as well as how many tokens they’d like to purchase. Once they have gone through a KYC/AML process, which takes just a few minutes, they can purchase RealTokens from any of the available properties on the website. After signing the subscription agreement that is sent to them, the RealTokens are dispensed to their Ethereum wallet address that they have provided. Then, the next day, they will begin to see rental income distributions in the form of Dai stablecoins deposited to their Ethereum wallets that hold their RealTokens. Any purchaser can transfer a RealToken from their Ethereum wallet to another Ethereum wallet that has passed the AML/KYC process on RealT, so long as the applicable US securities laws are complied with., Purchasing direct from the RealT website will not be the exclusive way to acquire RealTokens – listing RealTokens on a regulated exchange or an ATS such as OpenFinance, where accounts that have cleared internal AML/KYC reviews will be able to buy or sell RealTokens, is a priority for RealT.
With many young people unable to access home ownership due to rising living costs, do you feel that a service like yours will appeal to younger people majorly or are you targeting people of all ages?
While our platform is not exclusive to any age range in particular, we certainly feel that the comprehensive, fully-compliant and efficient nature of the RealT platform as well as its low access cost will appeal to younger generations and hopefully inject a sense of optimism into the idea of property ownership and investment. Additionally, we are committed to removing the traditional barriers and opening up the US property market to foreign investors. There are so few passive income opportunities available to retail or low-capitalized investors, and we are proud that we are able to offer a product to help serve this need.
What role do you see Blockchain playing in the property market over the next decade?
Real estate is notoriously illiquid, documentation heavy, and valuable. Three characteristics that make real estate an industry ripe for blockchain integration. Because a blockchain is an open ledger, much of the documentation requirements for the exchange of real estate or management of rent, is executed automatically, where the blockchain itself represents the required documentation for compliant exchange. Because real estate is so inherently valuable, the incentive to adoption a blockchain based platform with blockchain based tokens is very strong.
Blockchain-based real estate will be a powerful globalization force, as real estate properties can be sold to almost anyone from around the world. The future of the blockchain world is creating one single platform for all financial activity. In a world where real estate represents up to 40% of total global value, a single global real estate platform that everyone can access can turn the real estate industry on its head.
How much of your clientele consists of US residents versus foreigners who wish to get in on the US property market?
Currently, our service is primarily aimed at investors living outside the US but who wish to access the US property market, which has traditionally been overly restrictive to non-US residents. In the future, we expect to open the RealT platform to US based investors as well. Overall, we believe that blockchain will revolutionize the property industry and indeed, we’re starting to see this come about now. Property investment and purchasing has typically been a laborious process involving several third parties and a great deal of bureaucracy. Blockchain and the increase in “PropTech” initiatives will make the global property market more efficient and accessible on a global scale.
How many people, on average, can buy into a single piece of property by RealT?
The number of tokens varies between each property. Typically, the property will be divided into 1000 or so RealTokens and, therefore, give access to a greater number of people at a lower price. In this way, RealT hopes to democratize the world of property investment.
Now that you are launched, what is next?
As RealT grows, we will continue to add to our platform new property types across various cities in the US, such as Cleveland and Malibu. RealT has plans to tokenize properties in all major U.S. cities, and we look forward to seeing the varying demand across different locations. Additionally, as RealT’s offerings expand, we are looking to create baskets of tokens based on cities, or property type, or other categories. Set Protocol enables multiple RealTokens to be collected inside a single token set which is beneficial for purchasers that don’t feel strongly about one property in particular, but want exposure to a region or property category. We expect this type of instrument to be a driving force of demand for a large number of RealTokens, while simplifying the experience for our users.