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Does RealT Work?

Does RealT Work?

At first glance, RealT might seem like a run-of-the-mill scam. Tokenizing real assets on the blockchain, what does that even mean? But after doing my due diligence and investing personally with RealT I’ll share with you whether RealT actually works.

RealT works just like a traditional real estate syndicator except that the fractional real estate assets are sold as tokens instead of shares. The tokens serve as proof of ownership and rents are paid out daily do token holders.

In this post, I’ll not only go over how RealT works in detail but we’ll also discuss why RealT is not a scam and how to place your first investment with RealT.

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How does RealT work?

To begin with, RealT acquires the properties with their own capital. Currently, these are mostly single-family homes in Detroit and surrounding cities. Once all legal requirements have been satisfied and the sale has gone through, the property is fractionalized into tokens.

Exactly how many tokens are created per property depends on the price paid for each asset since RealT aims to keep the price per token around $50. This ensures that all listed properties remain accessible to the common investor.

Once purchase a property token you are legally becoming a part-owner of that property. This is put into writing in the Private Placement Memorandum (PPM) which you will receive at the time of purchase and which regulates your legal relationship with RealT and the asset.

When buying the token you will need to provide an Ethereum wallet address to be able to receive the digital ownership token. Once the token gets transferred to your wallet you are entitled to receive rental payments on a daily basis! Read my comprehensive RealT Review for more details.

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How do RealT tokens work?

As mentioned before, RealT tokens are proof of fractional ownership of a real-world asset. However, since these tokens are live on the blockchain they can be used for so much more! Besides receiving rental payments, here’s how you can make the most use of your RealT tokens:

  • Collateralization: One of the major benefits of representing ownership as an NFT is that it can be used as collateral in decentralized protocols. The Realtoken protocol allows you to lock in your RealT tokens to receive interest or to borrow USDC against that token.
  • Decentralized Finance (DeFi): Besides using the Realtoken protocol, these asset tokens can also be traded and utilized in the wider world of DeFi. Many decentralized and centralized exchanges – including 1Inch – allow you to buy, sell, trade, and collateralize your RealT tokens.
  • Selling Tokens: Selling your share of ownership in a property is now as simple as sending a request to RealT. Tokens are being bought back and resold on a regular basis. Additionally, you can sell your tokens easily on the open market.

The kind of liquidity that the tokenization of real estate provides is unprecedented! Real estate – one of the most inflexible assets to own – is fast becoming a liquid trading ground for enterprising investors.

I’ve included a screenshot above of the RealToken Protocol which gives you an overview of the current APYs for depositing and borrowing RealT tokens.

Now, before concluding this article I wanted to go over in more detail how you actually receive your investment returns from purchasing RealT tokens!

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How to receive RealT investment returns

Essentially, there are two major ways to profit from your RealT investment: one is the payment of rental income on a daily basis, and the other, is the capital appreciation which only comes due when the property is sold or refinanced.

  • Rental Income: Rents that are collected by RealT through property ownership are distributed to investors (token holders) on a daily basis. Once you hold the asset token in your wallet you will notice smaller USDC deposits arrive every day. This is your rental income which is paid out on the xDai chain due to high gas prices.
  • Capital Appreciation: Besides the rental income you are also entitled to receive your  fractional profit from the sale of the property. As the real estate market booms, assets are being evaluated at higher price points and can be sold at a profit or refinanced. These profits are also distributed to token holders.

Thus, digital ownership entitles you to actively participate in the investment operations of each property. And with token prices as low as $50 it becomes more feasibly to participate and diversify across multiple properties. Win-win!

FYI: Another great way to get exposure to the real estate sector is by investing in real estate debt. Groundfloor offers fantastic short-term, high-yield bonds that can add diversification to your portfolio!

Conclusion

RealT works. As one of the first companies to tokenize real assets in a legally compliant manner RealT has paved the way for future real estate tokenization. You can invest in properties through their marketplace, receive rental payments on a daily basis in your Ethereum wallet, and even use your tokens as collateral in DeFi.


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