Daily Rent Payments

With the advent of smart-contracts, there is no reason to retain the archaic system of payment every 30 days. Instead of one lump sum paid out every month, a RealToken Rent Contract will manage the dispersal of funds to RealToken owners, so that they are able to collect rent on a daily basis.

But, how can RealToken Holders be Landlords?

It is unrealistic to expect numerous individuals from across the world will be able to coordinate property management decisions. Instead, a property management company is required in order to upkeep the property and manage all landlord responsibilities. Property management companies are paid by the rent collected from the tenant and are responsible for paying converting fiat to DAI (USD Stablecoin) to send to RealToken holders. Using a property management company allows for minimum necessary involvement on behalf of the RealToken owners. In the most ideal scenario, nothing of significance will ever be asked of RealToken owners, and ownership of the property is as simple as owning a RealToken.

The property management service provider will be paid a cash fee equal to 5% of rents collected on the real property asset held by a Series and a cash fee equal to 1.5% of the cost of all repairs to a RealT property while the asset is owned by the Series.

Stablecoin of Choice: DAI

RealT is being designed to be aligned with the values and goals of Ethereum and cryptocurrency at large. We have selected DAI to be the stablecoin used in the RealT system. to distribute rental income streams to the RealToken holders. DAI represents a jurisdiction-agnostic stablecoin on the Ethereum blockchain, and it is also the only decentralized stablecoin. By choosing the only stablecoin without a “Burn and Reissue” function, the selection of DAI removes a potential attack vector from the RealT system. Upon receiving DAI in their Ethereum wallets, RealToken owners are able to exchange DAI for any other currency, including a fiat-backed stablecoin that enables them to receive US Dollars to their bank account.

Ideation Surrounding Potential Utilities

The tokenization of real estate enables new utility functions for how ownership of a real estate property is managed. We discuss different ways which the tokenization of real estate invents new mechanisms for property ownership and investment strategies.

Rent-to-Own

If a tenant finds themselves renting a RealT property, they have the option of purchasing the RealTokens for the property. While purchasing all RealTokens might be outside of the means of the tenant, the fractionalization of the property enables them to purchase a more reasonable number. Upon purchasing the RealTokens, the tenant is effectively paying rent to themselves. If they are only able to afford ⅓ of a house, they can purchase the rights to ⅓ of the rent they are paying. Through the purchasing of ⅓ RealTokens, they are effectively reducing their rent by ⅓. The reduction in their cost-of-living can help enable the purchasing of future RealTokens, and can help snowball a tenant into owning the home outright.

Accessing Capital

A homeowner may want to leverage the capital locked up on their house, but without seceding ownership of the property to anyone else. A second mortgage, reverse mortgage, or a collateralized loan are all options available from a bank, but the bank charges high fees or interest. A homeowner could tokenize their house on the RealT platform, and using decentralized finance platforms like Dharma or MakerDAO, can leverage some or all of the RealTokens to secure a collateralized loan. This service requires MakerDAO governance to accept RealTokens as collateral and is purely hypothetical.

Set Protocol

Once RealT has more properties available on its website, we will add RealT “Set” tokens, where we can create a basket of similar RealTokens. For example, a RealT Set could be “Detroit, Single Family”, and have 1 token from each property inside the basket. The Set token would accrue all rent from all RealTokens, and Set token owners would be able to un-basket the RealTokens and DAI.

Digital Identities for Real Estate Properties via IPFS

IPFS provides a mechanism for giving access to documents to anyone that is able to connect to Ethereum. DigixDAO is a leading example of leveraging the decentralization and immutability of IPFS to prove the solvency of their gold vaults in Singapore.

RealT intends to use the same IPFS mechanisms to provide all RealToken owners with access to their relevant documents. In the future, the phases of the RealT project, the Certificate of Formation, deed, affidavit, and operating agreement will all be made available by ownership of the relevant RealToken, via IPFS. Additional property information such as a home inspection report, title insurance, history of maintenance, and logs of all repair or renovations are also documents that are of interest to property owners, and future development of RealT will enable the appending of documents to the associated properties. This will allow for each property on the RealT system to have a provable and immutable history grow, providing clarity and security for potential real estate purchasers. As RealTokens diffuse throughout the Ethereum ecosystem, the perpetually available documents on Ethereum’s IPFS will always be present and accessible to the RealToken holders.