Fractional Investment: How Does RealT Democratize Real Estate?

Real estate investment attracts many savers. However, financial and administrative barriers make access difficult. Buying a property requires significant capital, rigorous management, and market knowledge. Fractional investment offers an alternative and allows acquiring shares of a property with reduced capital. It is a model that simplifies management and offers greater accessibility. RealT stands out in this field. This platform uses blockchain to make real estate investment more transparent and flexible. Its model allows purchasing fractions of properties starting from just a few tens of dollars, while generating regular rental income. Let’s review this form of investment through this article.

Understanding fractional investment and fractional ownership

Traditional real estate investment requires significant capital, and this constraint prevents many savers from accessing it. Fractional investment offers a more accessible solution by allowing acquisition of a share of a property at a lower cost.

What is fractional investment?

Fractional investment is based on a simple principle: several investors jointly purchase a property by dividing its total cost into shares. Each participant becomes the owner of a fraction of the property according to their initial investment. This model democratizes access to real estate by eliminating the need for a substantial down payment.

How fractional ownership works

Each investor holds a specific share of the property. They receive rental income proportional to this share. For example, an investor who owns 10% of a property receives 10% of the rents. Property management is handled by professionals. They take care of maintenance, rent collection, and administrative formalities.

This approach simplifies real estate investment. The investor does not handle rental management or legal constraints. They benefit from the profits without facing the drawbacks of a traditional owner.

Advantages of fractional ownership

Fractional ownership allows diversification of one’s real estate portfolio. The investor can buy shares in multiple properties and spread the risks. This diversification reduces the impact of a value drop in a single property.

This model also improves accessibility. With just a few hundred euros, it becomes possible to invest in real estate without bank loans. Finally, management delegated to experts ensures optimized returns and peace of mind for investors.

The RealT model: making real estate accessible to all

Real estate investment remains difficult to access for many savers. It requires significant capital, administrative procedures, and rigorous management. RealT offers an innovative alternative by combining fractional real estate and blockchain.

Presentation of RealT and its mission

RealT is a real estate investment platform founded in 2019. Its goal is to democratize access to ownership through tokenization of real estate assets. This model allows purchasing fractions of properties in the form of tokens, making investment accessible to a larger audience.

RealT’s objective is to simplify real estate investment. The platform lowers financial and administrative barriers. It offers investors a turnkey solution to receive passive rental income.

How does RealT work?

RealT acquires properties and divides them into digital shares called RealTokens. Each RealToken represents a fraction of the ownership and entitles the holder to a share of rental income.

Investors purchase these RealTokens through the RealT platform. They then receive rents proportional to their investment. All transactions are recorded on the blockchain, guaranteeing total transparency.

Property management is handled by specialized companies. They take care of maintenance, rental, and legal formalities. The investor thus receives rental income without any management constraints.

Specific advantages of the RealT model

The RealT model offers many notable advantages:

Financial accessibility

RealT allows investing in real estate from 50 dollars. This model eliminates the need for a large down payment and bank credit. It opens real estate investment to a variety of profiles, including those with small capital.

Unlike traditional real estate investment, which requires purchasing an entire property, RealT allows acquiring fractions of real properties. The investor directly owns a share of the property, granting rights over rental income and asset appreciation without management burdens.

Transparency and security thanks to blockchain

Blockchain ensures complete traceability of transactions. Each transaction is recorded immutably, reducing fraud risks. RealT uses smart contracts to automate management of property rights and payments. The investor does not need an intermediary to receive rents. They can consult the transaction and payment history anytime.

Using blockchain also reduces management costs. Processes are automated, lowering fees associated with traditional intermediaries.

Regular distribution of rental income

RealT pays rents weekly to investors. This model ensures a stable and predictable income stream. The investor can reinvest these earnings to buy more RealTokens and progressively grow their real estate portfolio.

Payments are made in stablecoins to guarantee a fixed income value. This approach avoids volatility common to classic cryptocurrencies. The investor can then convert their stablecoins into fiat currency or reinvest them in other properties.

By combining accessibility, transparency, and regular income distribution, RealT thus revolutionizes fractional real estate investment. This model enables everyone to invest in real estate without administrative constraints or rental management.

Comparison between fractional investment and traditional real estate investment

Real estate attracts many investors seeking stability and attractive returns. Two solutions allow access with different approaches: traditional real estate investment and fractional investment. Each of these models has its own characteristics, with advantages and limitations.

Traditional real estate investment: a proven but restrictive model

Traditional real estate investment consists of buying a property entirely to rent it out or resell it at a profit. This model requires significant capital, complex administrative procedures, and active property management. The investor must handle acquisition, maintenance, finding tenants, and rent management.

One of the main assets of classic real estate investment is full ownership of the properties. The investor has total control over their asset and can decide on its management (rental, renovation, resale). However, this autonomy also entails responsibilities and additional costs, especially related to taxes, condominium fees, and maintenance work.

The main differences between fractional investment and traditional real estate

Classic real estate investment requires a considerable financial commitment, while fractional investment, such as that offered by RealT, allows purchasing shares of a property in the form of tokens. This approach democratizes access to real estate by lowering the financial entry barrier.

Furthermore, traditional investment requires rigorous monitoring and direct management of properties. With fractional investment, rental management is automated and outsourced, which spares the investor from administrative and operational constraints.

Liquidity

One of the main drawbacks of traditional real estate investment is its lack of liquidity. Selling a property can take several months or even years, depending on the market. Moreover, transaction costs (notary fees, agency fees, taxes) are high.

Conversely, fractional investment facilitates liquidity through secondary markets on the blockchain. Although these platforms do not guarantee immediate sale, they offer a more flexible alternative to reselling property shares without the delays and costs of the traditional real estate market.

Control and transparency

In traditional real estate, the investor has total control over their properties, but they also must manage risks and portfolio profitability themselves. They depend on the rental market and their ability to select the right assets.

Fractional investment offers increased transparency thanks to blockchain. The investor knows exactly which properties they own, follows their investments’ profitability in real-time, and benefits from simplified management. All transactions are immutably recorded, ensuring traceability and security.

What are the respective advantages and disadvantages of the two models

Classic real estate allows total control over assets and the adoption of various strategies (furnished rental, unfurnished, co-rental, renovation). It also offers leverage through mortgage loans, enabling property acquisition with a reduced down payment.

This model also allows for long-term appreciation, as the real estate market has historically tended upwards. Finally, profitability can be optimized through tax mechanisms such as property deficit or tax exemption laws (Pinel, LMNP).

The drawbacks of traditional real estate investment

However, this type of investment requires a high initial capital and long, complex procedures. Rental management can become time-consuming, with risks of unpaid rents, vacancies, and property damage.

Moreover, market illiquidity limits investor flexibility who wish to resell quickly. Acquisition and holding costs can also weigh on final profitability.

The advantages of fractional investment

Fractional investment offers several advantages that distinguish it from traditional real estate. The first major asset is financial accessibility: it is possible to invest with a few tens or hundreds of euros, without having to mobilize hundreds of thousands of euros as for buying an entire property.

Transparency and automation of management constitute another key advantage. Investors can follow their rental income in real-time, without worrying about administrative procedures or finding tenants. Payments are automated via blockchain, ensuring a smooth and secure process.

Finally, fractional investment allows access to regular rental income without exposure to stock market volatility. Unlike financial assets, rents remain stable and predictable, offering a source of long-term passive income.

The disadvantages of fractional investment

Like traditional real estate, fractional investment also presents some challenges. Liquidity, although better than in physical real estate, remains lower than that of financial markets. Reselling shares depends on demand in the secondary market, which can sometimes cause delays.

Another disadvantage lies in the need to actively diversify investments. Unlike a diversified real estate portfolio, a fractional real estate investor must buy several tokens of distinct properties to reduce risks linked to a single asset.

Finally, blockchain-related fees (gas fees, transaction fees) represent an additional cost to consider. However, these fees tend to decrease with the evolution of technologies and optimizations of blockchain infrastructures.

How to start with a small capital on RealT?

Investing on RealT does not require a large capital. The platform allows purchasing fractions of real estate from 50 dollars. This model facilitates access to real estate investment for those with limited budgets. Before buying tokens, several essential steps must be followed.

The registration process on the RealT platform

Registration on RealT is simple and quick. You need to create an account by providing an email address and a password. Once the account is activated, the platform requests an identity verification (KYC). 

This step is mandatory to comply with current regulations. The investor must provide a valid identity document and proof of address. After validation, access to the RealT marketplace becomes available.

Selection of available properties

RealT offers a varied selection of properties, mainly located in the United States. Each property has a detailed sheet with information on its location, rental yield, and appreciation potential. 

It is important to evaluate several criteria before investing. Location influences rental demand and price trends. Rental yield indicates the profitability of the property relative to the investment amount. Finally, appreciation potential allows anticipating the future value increase of the asset.

The process of buying real estate tokens

Once the property is selected, the investor can purchase tokens representing a fraction of the property. Payment is made in cryptocurrencies such as USDC or ETH. RealT also accepts some traditional payment methods via stablecoins. 

The minimum investment amount depends on the token price but remains accessible. After purchase, the investor receives their tokens in their crypto wallet compatible with RealT.

Management and monitoring of the investment

After acquiring the tokens, the investor begins to receive rental income. These incomes are distributed weekly in the form of stablecoins and paid directly to the investor’s crypto wallet. RealT provides a dashboard that allows real-time tracking of generated returns.

If the investor wishes to resell their tokens, several options are available. They can sell them on RealT’s secondary market, sell to other investors via YAM, or use decentralized platforms like Uniswap. This process enables recovering capital without waiting for the sale of the underlying property.

Challenges and prospects of fractional investment with RealT

Fractional investment with RealT offers advantages, but it also poses certain challenges. The platform operates in a changing environment, especially in regulatory and technological terms.

What are the potential challenges?

Legal regulation remains a major issue for RealT. Authorities closely monitor financial innovations related to blockchain and security tokens. The rules vary by country, which can complicate the expansion of the platform.

Crypto volatility represents another challenge. RealT uses stablecoins to limit fluctuations, but price changes can impact investor profitability. The use of digital assets also involves risks related to wallet security and cyberattacks.

Finally, token liquidity can be an issue. Unlike reselling a traditional real estate property, which can take several months due to administrative procedures and negotiations, reselling RealTokens depends on the secondary market. The absence of buyers can extend the exit time for an investment, although some platforms facilitate these transactions.

What are the prospects for development?

RealT aims to expand its model to new markets. Adding properties located in Europe or Asia could strengthen the platform’s appeal.

Diversifying the types of properties offered is also a development focus. RealT could include assets such as offices, shops, or tourist residences.

Integrating new technologies would improve the user experience. Automating rental payments and optimizing the secondary market with smart contracts could streamline exchanges and attract more investors. Fractional investment allows access to the real estate market with a reduced capital. This model offers an alternative to traditional methods by guaranteeing direct ownership and greater transparency. The RealT platform uses blockchain to make real estate more accessible. The platform simplifies purchasing fractional properties, distributes regular rental income, and secures transactions.

The rise of RealT thus demonstrates that real estate investment can open up to a wider audience. Investors looking to diversify their portfolio can explore this innovative opportunity and benefit from the advantages of tokenizing real estate assets.

La Rédaction C.

The Cointribune editorial team unites its voices to address topics related to cryptocurrencies, investment, the metaverse, and NFTs, while striving to answer your questions as best as possible.