Becoming a real estate investor is not easy. To buy a property you need a lot of money. However, these sectors are always active looking for new ways to invest and have found in the blockchain an ally that fits perfectly. This is what Reental proposes, a Spanish startup that allows invest in flats through tokens, with shares ranging from 100 euros.
With a couple of clicks, any interested party can become an investor with an initial amount much lower than usual. Reental has 36 tokenized properties, for a total value of about 7.8 million euros.
We have spoken with Carla Castelló, Reental’s director of operations (COO), to explain how this new real estate investment method works, what differences are there and what associated risks may exist.
democratizing investments
The first clarification that they make from Reental is that it is not about tokenized floors. The user is not acquiring a proportional part of the apartment, but of the investment that is made on that floor. A very relevant nuance to understand how what the company proposes works.
“We always say that more than tokenizing the property, what we are tokenizing are the returns that the properties generate for you,” explains Castelló. A business plan is drawn up for each floor and what is expected to be achieved is calculated based on rental income and surplus value income. Once the calculations are done, the participating loan is tokenized.
If, for example, a property is valued at 50,000 euros, 500 tokens will be issued (each of 100 euros). If the floor is 120,000 euros, then 1,200 tokens. “A participatory loan is issued that is tokenized and then what investors have are the economic rights generated by the properties.”
Most of the properties are in Spain, although they have two in Mexico and another in Miami, United States, where they have recently focused on expanding their business. To date, the largest operation was a building in Valencia that was tokenized for 3.2 million euros, with an average ticket of 30 tokens per investor.
That floor has already returned the capital, plus interest and the surplus value. In how much time? That case took “about 10 months or so after receiving the financing. But because it was in a very booming area. The rest of the properties are usually between 2 and 6 years old, the average we have being 4 years.”
As the company explains, Reental offers returns of approximately 11%. Month after month a dividend is received and when the property is sold, a capital gain. Of these amounts, Reental applies a commission. 10% in the launch, 2% in the rent and 40% with the capital gain from the sale. Although they point out that “in reality we are not applying that 2% of the rent in most cases.” Conditions that once signed, Reental cannot change.
The startup is the one who decides when to sell the apartment and at what price. Castelló points out that “there is an idea of giving power to investors, but it is true that Today those real estate decisions are made by us“, to which he states that “it has not yet been the case that it is below the price we had estimated.” In case of reaching that doubt about whether to sell for less money or continue placing the apartment for rent, it would be consulted investors, they explain.
One of the points that generates the most doubts among Reental users is precisely everything related to tokens: “there are many people who still hold back on that,” says Castelló. He explains to us that for the investment it is possible to pay with a virtual wallet or by transfer. Although they accept several cryptocurrencies, the investment is made in USDT, a stablecoin linked to dollar.
As the investment is divided into tokens, it is also easier to get rid of the investment if you want to. The tokens are sold (all or a few) and that’s it.
One of the main doubts is how these tokens work when making the income statement. “What you have from dividend yields (rent) they compute you as if they were stock returns. In fact, if you don’t claim them, because you leave them on the platform and reinvest them, it works like an investment fund. You can apply that compound interest. Until you make a claim, we do not apply the withholding, because we apply the withholding (19%) directly,” explains Castelló.
Another matter is at the time of the sale of the property. “The surplus value of sale is declared as capital gainbut it goes another way (that of movable capital)”.
A more traditional financial product than it seems
Unlike other crypto companies, Reental at all times makes it clear that what they offer are financial products. Reental informs that it is offering an STO (Security Token Offering), meets the requirements of the CNMV and is governed by article 35.2 of the Securities Market Law.
For this reason, Castelló explains that they are not directly affected by the new European MiCA regulation. Although, they are in a waiting process to see how the new ‘DLT Pilot Regime’ regulation affects them, which regulates financial assets and defines this sector in Europe for the coming years.
“Until now we made a ‘white paper’ and we presented it to an ESI validated by the CNMV. Now what happens is that they have since the ESI (Investment Services Companies) are no longer sufficient and an Agency is needed above. What happens is that as of today there is no Agency prepared. It is something very new, which has been going on for less than two months,” says Castelló.
Regarding the United States, Castelló explains that there the tokens are shares of an SL. Each property has an associated company. “Here it could be done and it would generate additional protection, but in the United States creating a company is literally 10 minutes.”
To what extent is the investment guaranteed? This is where you have to differentiate two points. What is not guaranteed is the promise of performance. Although, the property is linked to the debt. “That is why it is an anticipatory loan. Investors have the property itself that has been tokenized as collateral,” they explain from Reental. “The property is owned by Reental and is purchased before a notary.”
This is where the potential point of greatest risk is. Liquidity is provided by Reental itself. What we do is buy a stake from them. That is, in the event of the bankruptcy of the company, there would be problems with those tokens. It is true that Reental must put the properties up for sale (guarantee of the tokens) but nothing ensures that the real estate market will not drop suddenly.
His relationship with the regulatory body is cordial. “The only thing that worries them is that users are well informed. In other words, what they want is, hey, for the user, the consumer, to have information, to know who is buying, to know what the risks of the investment are and so on,” explains Castelló.
In order to access this investment, you must register in advance and validate your identity. It is for a matter of KYC (‘Know Your Customer’), a common process in the banking field. Unlike other crypto companies, Reental does not seek at any time the anonymity of its users. “We try to do this validation process in 24 hours.”
The tokenization of real estate investments is the latest trend in the sector, but Reental is not the only company. Yes, it is the largest in Europe and Latin America, but the benchmark, as Castelló explains, is RealT, American pioneers of this mechanism.
“We see a lot of potential in these investments. And also in real estate beyond apartments, for example hotels,” Castelló anticipates. Reental’s goal is to reach 400 tokenized properties by 2025.
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