Throughout the past couple of years, I’ve always been interested in long-term investments in fundamentally strong but undervalued companies, projects, cryptocurrencies, etc.
My ultimate goal has always been to build multiple (passive) revenue streams, to snowball wealth as efficient as possible, in a risk-diverted way. This of course includes real estate. During my classes in San Francisco, I learned a lot about real estate development, even though my interests mainly lay with BRR (Buy, rehab, rent).
The entry barriers have always been too high to invest in real estate assets. This was until I first discovered REITs, followed by RealT (fractional real estate investing in U.S. properties through LLCs). as well as I recently discovered LabsGroup.
When wanting to invest in real estate, I experienced the following barriers:
- High entry costs & exit costs: with markets booming, houses are currently valued very high. This results into high entry costs (especially in Europe), as well as high exit costs due to the need of middlemen such as agencies, listing agents, notaries, etc.
- Time & effort versus return: considering I’m interested in rehabbing properties and then renting them out, this takes a lot of time and effort. As well as money, since I’m not the most handy person. A big issue with renting out properties are maintaining relationships with tenants and dealing with the issues they provide (this is simply going to happen at some point).
- REITs are interesting, however not perfect. It’s not possible to cherry-pick properties, as you get access to a full portfolio. This portfolio is often localised, meaning it’s difficult to get access to a portfolio containing properties around the world.
To still be able to invest in real estate, I discovered two options: RealT & LabsGroup.
I’ve been using RealT for about half a year now, whereas I’ve had it on my radar for over two years. RealT is located in Boca Raton, Florida, and offers fractional investments into the US real estate market through fully-compliant, fractional, tokenized ownership. Powered by blockchain technology.
- Each property gets its own security token. Whitelisted users can purchase these tokens directly from RealT upon launch, or later on on its secondary marketplace. Currently RealT offers to purchase tokens back directly, until this peer2peer marketplace is launched.
- Because it’s fully compliant, users need to be whitelisted in order to be able to purchase or transact RealT security tokens (properties). This is done through identity confirmation, better known as KYC.
- Real Estate can’t be directly tokenized, so the security tokens offer direct ownership in legal entities. These legal entities are LLCs (limited liability companies) registered in the US.
- Properties are managed by RealT, on behalf of the token owners. They take care of pretty much anything you can think of and the fees are communicated up-front in a transparent way on the property listing page (typically 7% + 2% platform fees).
- RealT enables you to collect rent every day, sent to you in xDAI or claimable in ETH. Fully visible and manageable within their platform.
I also recently discovered LabsGroup, who just successfully completed their LABS token sale on Poolz, Mantra DAO and Zendit. It’s clear this team knows how to market their platform, it’s yet to be found out what reality is going to be like once it launches and enables users to invest in fractional tokenized real estate.
As explained tokenizing real estate assets on the blockchain offers for more liquidity, 24/7 property ‘trading’ and cross-border ownership. This significantly reduces entry barriers and costs to begin investing into real estate. It also reduces the barrier of having to invest a large amount of money into a single property, enabling users to spread their risks among different properties.
LABS also combines real estate with DeFi. To further ‘reduce’ the entry barrier and to further enable users to enjoy leverage, LABS offers peer2peer transactions, but also collateralised loans with LABS. Meaning loans can be taken by providing collateral, this means more liquidity available for more properties.
Do note: loans typically come with risks of being liquidated upon a decrease of the collateral value below the required threshold.
What’s interesting is that LabsGroup is ultimately building on the RioChain, a Polkadot’s Substrate. Built for cross-chain transfers and DeFi, to still support e.g. the ERC-20 Network (and taken advantage of the benefits of multiple chains, such as lower fees and faster transactions).
LabsGroup is building the LABS Securities Exchange, to be fully licensed, enabling investors to cherry-pick their properties incl. residential, industrial, commercial real estate, or a hybrid version of it.
Where RealT only offers properties in the US, LabsGroup goes beyond that and aims to offer global real estate, with various projects confirmed in the pipeline. This is incredibly interesting and I’m eager to find out which kind of properties we'll see listed on their exchange.
Because of this license, LabsGroup is able to offer projects that meet the criteria to raise funds directly through Security Token Exchange Offerings (STEOs).
Similar to RealT, LabsGroup aims to distribue dividend or rental payouts on a daily basis. This makes it extremely easy to re-invest earnings into new properties, to snowball asset growth.
Real Estate Swap Marketplace
The Real Estate Swap marketplace is something that stood out to me. LABS aims to launch this marketplace in Q4, 2021, enabling investors to further diversify their portfolio by offering peer2peer swaps of pre approved KYC assets. Effectively making them the owner of assets that are being swapped.
LabsGroup will also offer to facilitate OTC deals instead, for those who do not want this to be publicly seen.
As mentioned, LabsGroup recently successfully completed the LABS token sale. They sold out rapidly and are now trading on the open market at more than 10x its token sale price.
LABS is a utility token, that can be used for various features:
- Governance: token holders are able to help decide the future of the platform.
- LABS token holders are prioritized and are the first to hear about and get access to new real estate deals.
- LABS token holders will receive inventives, such as discount on assets or by participating in staking token holders can join a rewards pool that shares 80% of the net profits through buy backs -> distributed directly into stakers their wallets. The distribution factors amount of time staked and number of tokens staked by the holders.
Revenue is generated through multiple streams, incl. management fee, advisory, fundraising, legal services, transaction fees on the LABS platform, listing fee of properties, and more.
- Used as collateral to mint USDL (pegged 1:1 with USD) to invest in real estate assets.
On top of that there will be security tokens / NFTs that represent the ownership of unique properties.
What is the difference between tokenized real estate & REITs?
RealT & LabsGroup differ from REITs in four significant ways, according to the LabsGroup white paper.
- Real Estate Investment Trusts are listed on the stock exchange, meaning it’s limited to a business hours trading window.
- REITs are designed around single investment types (e.g. no hybrid options, rather either redential OR commercial, etc.)
- REITs typically pass more expenses to individual investors, partially due to the need of more middlemen
- REITs have higher entry barriers due to limitations and restrictions
Differences between LabsGroup and RealT are / will be:
- LABS offers governance, whereas RealT doesn’t
- LABS combines DeFi with real estate investing, enabling staking for profit - whereas RealT doesn’t
- LABS has their own token, enabling investors to get various incentives including discounts on investments or collateralised loans.
- RealT already enables investors to invest in real estate, whereas the LabsGroup platform isn’t live just yet. Security token exchange planned to launch Q1 still. Marketplace to launch Q4.
- LABS is going to offer global investments, RealT limits itself to the US market. Both options offer various benefits, e.g. RealT are experts in the US market.
I’m a big fan of tokenized real estate, as it enables the masses to start investing into it. Although, do understand this comes with multiple risks and I’d recommend you to:
- Do due diligence to the platform you’re interested in using
- Check if this is allowed by your local authorities (you’ll want to be compliant)
- Do due diligence on each single property you’re interested in investing in
- Do consider this as mid/long-term investments rather than flips.
For me, real estate is a perfect way to further diversify my portfolio outside of cryptocurrencies. I sold my stocks about two months ago as I’m anticipating the downside risk is higher than the potential rewards. As well as I’ve been investing into peer2peer lending for about five years now.
I’ll likely continue to purchase properties through RealT for now, but am very interested in LabsGroup and purchased a decent number of LABS in anticipation of the platform launch.
Based on their launch and the properties they offer, I'll decide if the LABS token is meant as short-term trade or rather a long-term HODL opportunity to invest into real estate properties while enjoying various benefits.
It’s certainly a unique project and in my opinion offers significant upside potential, as this opens up a complete new investment opportunity for cryptocurrency enthusiasts (and other type of investors that currently find the real estate investment entry barriers to be too high).
If you’re considering to use RealT, then feel free to contact me if you have any questions (either comment or send a private message on Telegram @TMod_Marco). I’d be happy to help you.
Interested in learning more about cryptocurrencies, blockchain technology & other related projects? Be sure to join us on Telegram at YourCryptoLibrary and QuoraInnerCircle. You’re welcome to join for free, we’ll be sharing fundamental research reports such as this one, as well as technical analysis.
I am not affiliated with the RealT OR LabsGroup team. I am simply an enthusiast and contribute where possible to provide community members and my followers information that’s easy to understand. I do hold LABS and properties on RealT, I am not intending to change my position over the course of the next 24-hours.