Since going online more than a decade ago, the blockchain has been one of the most transformative and disruptive innovations. For once, we have access to a decentralized form of record keeping that is for the most part protected against unauthorized modifications and fraudulent transactions. However, most blockchain-based platforms revolve around cryptocurrencies. RealT, though, is one of a growing number of companies utilizing the technology for democratization of investments. Below is my RealT review.
As the name suggests phonetically, RealT is involved in the real estate industry; specifically, real estate tokenization. Before we get into the details of this RealT review, it’s important to have a basic framework of the blockchain. As mentioned above, a blockchain is a decentralized, distributed public ledger, typically to record transactions of financial value. From the public’s perspective, this translates to cryptocurrencies like bitcoin or ethereum.
However, blockchains can also store immutable records of digital tokens, which represent ownership toward a real asset; in this case, real estate. Therefore, you can think of tokenization as the digitalization of deeds, contracts and certificates (say for equity ownership). By this logic, real estate tokenization is a relevant alternative to paper deeds to property.
Now let’s dive into some of the core details of this RealT review.
One Theme Underlines This RealT Review: Democratization
Structurally, what’s compelling about this real estate tokenization platform is that RealT is based off the Ethereum blockchain. As you may know, Ethereum was founded on the principle of smart contracts – essentially, eliminating human middlemen with a perfect, immutable ledger of records.
With the replacement of “paper” representations of asset ownership to blockchain-based tokens, the idea of smart contracts is shifting from conceptualization to actualization. Over time, this innovation can not only transform private investing, it could shake up transactions involving expensive middlemen, such as attorneys and brokers.
You may not care too much about the underlying technology. However, everyone wants to save money; hence, the likely interest in this RealT review.
More importantly, real estate tokenization promotes democratization. Investing in real estate is often prohibitively expensive, which immediately presents obstacles to underprivileged communities. Of course, this is a huge dilemma because lack of practical access to capital growth can create generational poverty and dependence.
This isn’t just an ultra-liberal protest of our current financial architecture, it’s reality. According to an alarming article by the New York Post, corporations are buying up homes – and have done so in the aftermath of the Great Recession. Such actions will likely end up creating fiefdoms of multi-generational dependency, or more bluntly, modern day slavery.
However, RealT and the broader concept of real estate tokenization flips the bird against these high-level shenanigans. Through tokenization, RealT can provide fractional ownership of property. From there, investors receive their portion of rental income.
Obviously, this platform is compelling for two reasons. First, it offers much greater potential for accruing passive income than through traditional means like dividends. Second, real estate is arguably a superior investment than stocks; after all, no one is making any more land.
Risks to Consider for Real Estate Tokenization
Although groundbreaking on multiple levels, I’d be remiss in my RealT review if I didn’t include risk factors. As with any investment – and particularly with private investing – you can lose your entire principle.
This is especially valid considering the times we are living in. Yes, real estate prices have unexpectedly soared during this pandemic, in part due to families seeking to move toward the suburbs or rural areas. With the advent of work-from-home initiatives, employees no longer need to be tethered to the big cities. Finally, pent-up demand, along with corporate purchases of homes, contributed to the price spike.
But this bullishness may not last if wide-scale economic pain continues to proliferate. According to many experts, our nation could risk a “homeless pandemic.” If so, that does not augur well for real estate prices.
Further, RealT contradicts its democratization ethos if you happen to live in the U.S. While citizens of other nations can enjoy fractional ownership of real estate, for U.S. investors, you must be accredited. Unfortunately, that leaves out most of the people that would be interested in fractional investing.
To be fair, RealT’s management is actively working to remove this roadblock so that all American investors can benefit from the platform. But until then, a significant market is off the table.
If or when that hurdle is eliminated, RealT’s platform opens the door to endless possibilities. For example, investing app Robinhood has taken off this year due to both the pandemic and its ease of use. Now imagine people investing in real estate through their phones, while simultaneously accruing rental income.
Once U.S. investors have full access, RealT can power a radical paradigm shift. To learn more about the platform and opportunity, visit its website here.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he is long the cryptocurrencies mentioned on this article.