Invest in real estate from 50 euros and collect rent every week. This is the promise of RealT, a real estate tokenization platform that offers up to 11% return per year. But this investment is not without risk.
RealT has been around since 2019. And in the space of three short years, the American company has convinced 10000 investorsfrom 135 different countries, to invest more than 46million dollars in 200 tokeniss properties.
But what exactly are we talking about? Token real estate consists of split a property and transform it into tokens, i.e. digital tokens that change on a blockchain.
In concrete terms, on RealT you are not buying real estate. But rather a token. On our platform, tokens correspond to company sharesexplains Jean-Marc Jacobson, co-founder of RealT.
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The principle is as follows: each time RealT acquires a property, the company creates a limited liability company (LLC), i.e. the equivalent of a SARL in France. Then this LLC becomes the owner of the property.
We then divide the LLC into shares, then we transform these shares into digital tokens, which investors can buy to become shareholders of the LCC and, by extension, obtain a right of ownership over the real estate it owns, explains the manager. .
The method is perfectly legal. In 2018, an American judge recognized that a token could serve as title deed to represent a part of LLC, specifies Jean-Marc Jacobson.
From a financial point of view, the tokenization of real estate has several advantages. Starting with a bar the entrance almost non-existent. You can invest in real estate with your credit card from 50 euros. And then you get every week a rent whose amount is proportional to the number of tokens you hold, continues Jean-Marc Jacobson.
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9 11% announced returns
The yields announced by the platform oscillate between 9 and 11%. Small subtlety: the payments arrive on your digital wallet in USDC, a stablecoin backed by the dollar. You are free to convert your USDC into euros afterwards if you wish.
But that’s not all. The fact that the investment is backed by the blockchain also brings greater liquidity, continues Jean-Marc Jacobson. Investors can resell their tokens whenever they want. It’s much faster than for a traditional real estate investment.
In detail, investors have two exit doors. A primary market, organized by RealT, in which case it is the issuer (the LLC) that redeems the token. But this is not the most interesting option. It takes up to 10 days and we apply 3% administrative costs, warns Jean-Marc Jacobson.
For him, it is better to go through the secondary marketon which your tokens can resell from gr to gr in a few minutes and free of charge. Provided, however, that there is sufficient demand.
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The big plus of real estate tokenis is that it runs on the blockchain. However, decentralized finance (DeFi) and web 3 open up many possibilities for valuing your investment, says Jean-Marc Jacobson.
RealT, for example, has developed its own lending platform. If you need money but don’t want to sell your tokens, you can mortgage one or more tokensexplains the leader.
The advantage is that you can release funds in a few clicks, without having to fill out a file. And you continue to receive your rents during this time. On the other hand, if you are unable to repay the interest, your token will be seized.
Conversely, if you do not need short-term cash, you can become a lender on this platform and receive additional compensation of 4 8%emphasizes Jean-Marc Jacobson.
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However, real estate tokenis are not safe. To start, tokenization does not protect against the risks inherent in real estate investment, admits the leader. In other words, if the tenant decides not to pay his rent, you will not have any money coming in.
Similarly, if the price of a good depreciates, your tokens may lose value. RealT revalues the properties held once a year, and we adjust the token value accordingly. And precisely: the majority of RealT’s real estate is located in Detroit, a grim city whose population has been declining for several years. Real estate is cheap there and the founders of RealT are betting on the fact that Detroit will regain its attractiveness.
But in reality, there is no guarantee that this will be the case. If you decide to invest on the platform, therefore be sure diversify geographical areas in which you buy your tokens. RealT also plans to export its model to Europe by the end of the year.
Furthermore, the blockchain is a recent technology, and the next regulatory developments could have an impact on RealT’s business (and by extension, on your investment). For all these reasons and many more, caution is still in order when considering this type of investment.
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A rental investment from 50 euros and a return of 11%, what is RealT’s promise worth?
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