🏡 Comprehensive Analysis of RealT: A Leading Real Estate Tokenization Provider

14 min readJun 16, 2022

The small, lesser known city in the midwest known as Detroit, Michigan was once renowned internationally as the “Motor City”. However, some would argue the “Motor City” lost its motor when the automotive companies took work overseas. Being from a town just outside of Detroit, I was fortunate enough to call Detroit my home and I am here to tell you that it’s poised for another meteoric rise to international recognition.

It’s true this city has gone through more turmoil than most, including losing hard-working Detroiters’ jobs causing many to flee, further exacerbated by controversial situations such as mayors being jailed, and having to file for bankruptcy.

Yet still, the city has shown time and time again that perseverance is the most palpable attribute of its people. This uncanny perseverance can be attributed to the grit, innovation, and determination that Detroiters seek to see their city thrive.

I am writing today to share with you one of the most innovative projects in the blockchain space that not only pioneered real estate tokenization, but has tremendously helped Detroit as well.

This company is RealT and they’re helping to get the “Motor City’s” engine humming.

So, let’s dive in on what RealT is all about:

RealT is a residential real estate tokenization platform that aims to democratize access to real estate through unleashing the power of blockchain. They have hundreds of properties throughout the US that are held by thousands of unique landlords around the globe totaling tens of millions in assets

Their team of experienced real estate investors are carefully curating investment opportunities to then securitize, fractionalize, and digitalize.

By utilizing RealT’s platform, real estate investors are offered a plethora of investment opportunities into their 132 properties tokenized on the Ethereum blockchain and 190 on a layer two called Gnosis chain a.k.a xDai Chain (per Dune). These properties are held by 8,700 unique landlords and totals $50,000,000+ in assets, all data in this report is as of May 5th, 2022.

To learn more about how RealT utilizes the Gnosis chain layer 2 Ethereum solution to lower transaction time and costs click here.

Not only are investors offered a diverse selection of properties from all over the country, they are now able to invest into a singular property in any allocation they desire starting at ~$50 per token.

Investors on RealT, however, are currently restricted to a maximum of 10% of a property’s shares listed during presale with the option to scoop up some additional shares in the sale 12 hours later (per their FAQ.) Of the properties being tracked by Security Token Market, RealT tokens have been sold for as much as ~$220 (16200 Fullerton Ave).

With the S&P 500 down 10.35% (Google Finance) and the entire cryptocurrency market capitalization down almost 25% (CoinMarketCap) since January 1, 2022, one would be pleasantly surprised to find 95 RealT properties in the green so far this year per stm.co! It is also impressive that in times of economic uncertainty and distress all RealT properties being tracked on secondary markets have appreciated an average of 5% since the beginning of 2022. Which is even higher than the appreciation seen in 2021 pictured below:

This shows yet again the quality of investment opportunities RealT provides. Real estate currently makes up 89% of all security token offerings and with 2022 poised to be the year of the security token, these tokens are sure to see some serious action.

RealT itself accounts for a hefty majority of these offerings with their 177 properties accounting for 99% of the total 180 real estate security token offerings trading on secondary markets that are being tracked by stm.co.

Looking more closely at the opportunities presented by RealT investment properties, one could see why they have been so resilient despite the public’s financial troubles that have come with COVID-19 and now some of the worst inflation globally we have ever seen. One report distributed by RealT themselves in the midst of the pandemic showed that if you owned one token in each property (a grand total of $1,048.17), you would have earned 11.36% over a time period where many people were scrapping for cash. RealT was able to maintain cash flow in their properties despite people everywhere missing rental payments.

Results if you had held one of each RealT property listed from July 14th, 2019 — July 14th, 2020

The following quote from a June 2020 CNBC article shows just how bad our rental industry had gotten specifically in the US:

As the economic fallout from the coronavirus pandemic continues, almost one-third of U.S. households, 32%, have not made their full housing payments for July yet, according to a survey by Apartment List, an online rental platform. About 19% of Americans made no housing payment at all during the first week of the month, and 13% paid only a portion of their rent or mortgage.

RealT operates within a particular niche section of the residential real estate industry that helped them avoid missing rental payments from tenants. They work with Section-8 and affordable housing projects. This means that the government, in one form or another, is helping subsidize the rent for the tenants which, from the investor’s perspective, means rental income becomes more or less guaranteed. Additionally, families sometimes wait years before getting a Section 8 voucher which makes these properties very rare and ultimately leads to little vacancy, if any, once acquired by private landlords.

How Does RealT Work?

RealT facilitates the ownership of these properties via the Ethereum or Gnosis blockchains through a process known as securitization.

First, RealT acquires a property. They then create an LLC (Limited Liability Company) in Delaware for the sole purpose of holding this singular property. The relatively lenient legal structure in Delaware, the low-costs associated with creating an LLC there, and the lax reporting requirements make this state among the most attractive.

After creating the LLC, they fractionalize and digitize the LLC, thus creating security tokens.

Some RealT properties are divided into as few as 750 security tokens, some as many as 19,000. The beauty of blockchain is that they could decide to not fractionalize the shares at all or fractionalize into 1,000,000,000 security tokens, it is fully at their discretion.

Once smart contracts have been written, immutably storing ownership of the LLC on the Ethereum or Gnosis blockchains, RealT holds the primary issuance of the token on their marketplace. Here investors can purchase shares of properties throughout the United States.

The price per token depends on the supply and the valuation of the property, so you can see how the issuer of the token can choose to expand his investor pool by offering a higher supply of tokens, thus lowering the cost per token.

Over a 12-hour period, all of the tokens are typically sold, the buyers sign a purchase agreement via email and an electronic signature, and then bang!

Tokens are distributed to designated Ethereum or Gnosis Safe addresses and the tokens start yielding weekly rental income via payments in USDC. Despite most renters still paying on a monthly payment schedule, through the efficiencies of blockchain coupled with weekly Section 8 payments, RealT has made weekly rental installments a reality for the real estate investor. Providing distributions on a weekly if not daily basis helps stabilize secondary market prices as trading tokens are subject to less volatility around payment time and, as they lay out in the linked Twitter thread, faster rental distributions are cooler.

You may be asking now, who manages these properties? RealT on the backend has a rolodex of property management companies that handle the rental payments from tenants as well as maintain and repair the properties. One might have been skeptical about this out-sourcing method in RealT’s early days, but now with hundreds of properties throughout the country, they have an established network of trusted property management companies at their disposal.

When the holder decides they need liquidity, they can list their RealT tokens on a DEX (Decentralized Exchange). Levinswap, an automated market maker DEX built on the Gnosis Chain, can be utilized by sellers to receive market value for their shares at any time. This differs from a DEX such as Swapcat or AirSwap where sellers can create limit orders that need a buyer to fulfill them. It is not as easy to buy tokens via a DEX as it is to sell them. This is because users will have to be whitelisted for the tokens before executing transactions thus ensuring that investors meet the investing prerequisites. More about buying and selling RealT tokens on DEX’s can be found here.

Who Can Participate?

RealT currently offers investment opportunities for US Accredited or International Non-Accredited investors (for a full list of their investor capabilities click here).

Investors then browse their primary marketplace before ultimately paying with credit cards or ETH, BTC, LTC, DOGE, BCH, DAI, or USDC.

Who Doesn’t Like More Yield?

To further maximize investor yield, RealT holds their reserve funds, maintenance funds, and rental payments waiting to be distributed in Compound to earn an additional yield before it is distributed to investors.

All the rental income one is yielding can also then be automatically reinvested on their platform to help accumulate more shares. In my opinion, the most exciting part has just been unveiled. RealT has just released a product that is a monumental stride forward for both their business and the security token industry at large. They have announced the creation and launch of their DeFi platform: the RMM.

The RMM beta was launched 4/14 at 3PM EST and RealT token holders can officially participate! The RMM will serve two main functions while acting as a liquidity provider to RealT holders without them having to ever sell their RealT tokens. The two functions can be simply explained as follows:

Providing liquidity to RealT holders without having to sell their equity.
Allowing RealT holders to be able to take out loans collateralized with their RealT tokens.

By allowing holders to take out loans on RealToken or xDai, it provides an avenue for holders to deal with unexpected needs for liquidity i.e. medical emergencies or financial emergencies and opportunities.

RealToken holders will be able to take out loans collateralized by their RealTokens in the ArmmToken which is explained in depth here. Users will connect their ETH wallet and be able to set their loan-to-value ratio and get loans in their ArmmToken which they can track the value of and calculate repayments until the loan is paid off.

Through their innovative technology, it will be possible for borrowers to have the loan paid off directly from the rental distributions their tokens are receiving and stored value while they are collateralized.

The RMM Beta appears to be having a successful launch as within two weeks of its launch, the RMM has garnered over $4M in deposits.

With the community recognizing the opportunities presented by the RMM, RealT has continued to add properties to the platform and has been keeping the public informed of this via its Twitter. Since its inception, they have added 12 properties to the platform. Token holders of these 12 properties are able to participate in providing liquidity or taking out collateralized loans today.

I have been a true admirer of RealT for over a year now. With this, I have been continually more and more impressed with them, their innovative ideas, and their ability to execute the more I learn about them and the more they continue to scale and grow.

To learn more about the RMM, RealT has been providing users with answers to their questions on YouTube via community calls.

Join our crowdfund that is going live on July 6th here!

Why Detroit?

I’m from West Bloomfield, Michigan and have been calling Detroit my city since birth. I was absolutely exhilarated when finding out RealT had begun their tokenization of residential properties in Detroit. Having been involved with the Detroit real estate in the past I knew that by utilizing the right strategies, there is stable, consistent returns to be made in the Detroit real estate market.

In recent years, people are all too familiar with the depiction of Detroit as a place of despair, with abandoned, boarded-up buildings and broken-down cars lying about like in the movie 8 Mile. Having lived on “15 Mile” my entire life, I know this just isn’t the case. 8 Mile was at that time seen as a border separating the White suburbs from the predominantly African-American city of Detroit. Having driven up and down the 20 miles that 8 Mile stretches for as long as I can remember, I know this is no longer the case.

Detroit has always been a city of grit, with the determination to persevere and innovate through its hard times. People like to say the city is “back,” but for those that have been there, we know the city never left.

“Why Detroit?” answered straight from RealT’s website — “Why Detroit?” answered right on RealT’s website

The hundreds of years of culture and industry are abundant and thriving as you walk the city streets. You are surrounded by boutique and flagship stores, great smelling local food, exquisite restaurants, a bustling nightlife scene, museums and exhibitions, sports, and my favorite, the old French architecture found throughout the city. RealT has acknowledged Detroit’s growth and resurgence as they choose Detroit as their first city to tokenize properties. As stated by RealT CEO Rémy Jacobson in 2019,

“The recent influx of investment into Detroit, most notably a $4.5 billion USD injection by Fiat Chrysler that will preserve and add up to 5,000 jobs in the city, is emblematic of a period of renewed growth. RealT is proud to be among those contributing to the continued redevelopment of the city by offering a means of foreign investment into the Detroit housing market which will help to further develop the economy and drive urban renewal efforts. We’re delighted to launch our platform in the Renaissance City and contribute to its ongoing revitalization. We’re also planning on expanding to additional U.S. cities later this year and are passionately committed to making U.S. property investment a more realistic prospect for individuals around the world.” (Bitcoinist Press Release)

This renewal effort has never wavered and only strengthened as more efforts and resources have poured into the city. It is my personal opinion that blockchain technology and tokenization will provide funding avenues for outside capital into Detroit which will be extremely beneficial to the city and citizens.

Detroit has a very strong renters’ market due to the constant demand for home rentals and a steadily increasing population of Millenials moving into the city. We have also seen an increasing trend within Millennials that have a preference to rent instead of buy at a higher rate than previous generations. Below is a map of the affordable housing in Detroit.

With all these properties, it is not surprising to see why RealT chose Detroit as its starting point. Historically, Detroit has had inexpensive home prices and with the vacating of the city in the early 2000’s, this was exacerbated. However, in recent years, Detroit home prices have shot up. According to FRED, since Q1 of 2017 Detroit home prices are up an astonishing 69%. This rapid rise in home prices coupled with an abundance of affordable housing made Detroit the best candidate to pursue RealT’s investment strategy.

I worked at a real estate company out of a suburb of Detroit that had an investment strategy surrounding HUD properties in the Detroit area. Through this experience and now having tracked and studied RealT for almost a year, I too see real opportunities within the Detroit affordable housing market, just like RealT has all along.

https://detroitmi.gov/webapp/affordable-housing-map

Not only is it extremely safe as an investor, but their strategy is providing housing to those who can benefit the most from renting it at prices best for them and the community. They are now taking on housing projects in several areas around Chicago, Cleveland, New York and Florida. RealT has even begun to move into multi-family and other commercial buildings as well.

Concluding Statement:

From our mutual admiration of Detroit and its potential to our joint goal of tokenizing real estate, I knew this was what I wanted to write my debut article about. The innovations presented by companies like RealT, at the intersection of blockchain and real estate, provide opportunities for communities to flourish internationally like never before seen.

I think RealT is moving in the right direction with their expansion into multi-family and commercial real estate and furthermore with the development of their RMM. I personally have seen tokenization as a better use case for multi-family/commercial real estate as opposed to single-family residential. However, with RealT’s Section 8 strategy, I am more at ease about the risks of having a single family residential security token.

I also am very happy they’re moving into commercial real estate as well as expanding liquidity and yield options with the build out of their RMM.

Through their innovative solutions, they will continue to make real estate investing more democratized, accessible, and liquid. Capital of all kinds has never been this liquid. Let’s keep getting it to the places where we can play positive sum games like RealT has done in Detroit.

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LinkedIn: https://www.linkedin.com/in/jacksonblau3901/

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Email: jackson@stomarket.com

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Special Thank You:

I wanted to give a much obliged “Thank you” to Kyle Sonlin, , Peter Gaffney, Jonah Schulman, and Aneesh Shinkre. Without conversations with them over the past year and information from their Real Estate Intelligence Report, this article would not have been possible. The report was done in conjunction with CoinTelegraph and featured their two expert analyses for a thorough deep dive of the entire tokenized real estate industry and can be found HERE. I also want to thank the rest of Security Token Market team for their help and roles in publishing this; I really appreciate all you have done for me to help publish this!

Disclosures

Neither Security Token Market nor the individual Authors of the report pursue their own financial interests with the reports. This report is not a recommendation to purchase or trade any mentioned securities. Everything in this report is for entertainment purposes only. Nothing written should be considered financial nor legal advice and any investment decisions should be consulted with financial advisors and/or legal experts.

No money or other consideration is being solicited, and if sent in response, will not be accepted;
No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and A person’s indication of interest includes no obligation or commitment of any kind.