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How Does RealT Make Money?

RealT is one of the first companies to offer tokenized real estate on the blockchain. Although the concept has been around for some time, RealT has streamlined the tokenization of real assets. But is RealT actually legit? I’ll share my research plus my personal experience as an investor.

RealT is a legitimate company that offers investors a legally compliant way to invest in tokenized real estate. The company was founded in 2018 and is headquartered in Boca Raton, Florida. The team is comprised of – mostly French – investment and finance executives.

In this post, I’ll share my own investing experience with RealT and will also give an objective overview of how RealT operates. We’ll look at how RealT works, and how much you can expect to earn and settle once and for all if RealT is a scam.

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How does RealT work?

RealT offers investors a convenient way to access fractional real estate ownership. Real properties are split up into dozens or hundreds of digital tokens, each representing a fractional share of the asset. As an owner of these token, the investor is entitled to receive distributions from rental income.

Let’s look at this step by step:

  1. Acquisition of Property: The first step of the process is the acquisition of the property. This is conducted entirely by RealT without any investor involvement. RealT currently acquires mainly single-family homes in the mid-west area.
  2. Legally Compliant Tokenization: Once these homes are under contract they will be split up into several tokens. Tokens are created in such a way that each individual one is worth about $50. So, the number of tokens per asset varies and depends on the asset’s total value. This tokenization is legally compliant with current security laws.
  3. Sale on Marketplace: Once tokenization is complete the property will be listed on the marketplace and investors can buy one or more fractional shares of the asset. The token will be transfered to your Ethereum wallet as an NFT.
  4. Payments on Ethereum: Holding the RealT token in your wallet is proof of ownership and entitled the wallet owner to receive daily(!) rent distributions. These distributions are currently sent out on xDai due to the high gas costs on Ethereum.

While the above description is still a slight simplification of the entire process it may give you a general idea about how RealT operates. For a more detailed description check out my RealT Review.

Before we move on let’s look at how much RealT actually pays out per token and how much you could earn monthly from your investment.

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How much does RealT pay?

The exact payment amount you will receive per token is determined by the ROI of the property and current market conditions. Generally, RealT aims to pay out more than 10% annually based on the invested capital.

Here you’ll see an overview of their most recent deals and their associated income:

You’ll notice that the expected income is typically higher than 10% per annum. In addition to the rental income, investors will also receive a return on capital once the property is sold or refinanced.

The return on capital is indicated just below the rental income and varies between 10-15% for the past year. Note that these gains will only be paid out once they are realized in the disposition of the property.

Let’s look at an example investment! Say you invested $10,000 across multiple properties with RealT and as a result hold several dozen tokens in your wallet. Then, your rental income is expected to be $1,000 per year (10%).

Yearly income: 10,000 * 0.1 = $1,000

Daily income: 1,000 / 365 = $2.74

In addition to the rental income, you’d receive a return on capital of around 12.5% which would come out to be $1,250 in this example. So the total earnings per year could be:

1,000 + 1,250 = $2,250

Just keep in mind that the capital appreciation associated with the property will not be paid out daily or monthly but will only be realized when the asset is sold.

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Is RealT a scam?

While nay-sayers and blockchain skeptics may keep calling RealT a scam, the truth of the matter is that RealT has done everything to become a fully legitimate and legally compliant RealT estate syndicator.

Are there risks involved with investing in RealT? Sure! But these risks are generally not greater than investing with any other real estate syndication. The only difference here is that RealT utilizes the power of blockchain technology to secure digital ownership of assets.

New tech always has to gain our trust first, and rightfully so. But do your own research, see if you can understand how RealT operates, and experiment with the Ethereum blockchain. Only then can you form your own opinion before investing.

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Conclusion

RealT is a legit company that offers legally compliant tokenized real estate on the blockchain. After acquiring a property it will be listed on their marketplace and investors may buy individual tokens of that asset. Each token represents a share of ownership and entitles the owner to collect rental income. Additionally, income from capital appreciation will be disbursed to all token holders at the time of sale.


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