Generation Z wants to own part of your house
You can already buy fractional shares of stocks, cryptocurrency tokens, even high-dollar baseball cards. Now, one Utah-based company wants to bring fractional ownership to the real estate scene.
Realium, which describes itself on its website as “a stock market for residential housing,” is currently in testing mode, hoping to make high-end property ownership more realistic for the average person. The company’s website shows a list of expensive properties, from Los Angeles to Hilton Head, South Carolina. The properties aren’t actually for sale now, but soon, they will be.
Co-founder Demitri Haddad says that when Realium eventually comes to fruition, each property will be tokenized, with a ledger on a blockchain. “What we’re doing is we’re representing real estate, which is a real fixed asset, as a security. In order to do that we need to securitize it or to tokenize it… and we can’t tokenize exactly like a physical asset as is, but what we can do is tokenize a legal entity or an LLC,” Haddad says.
“So the business structure serves as a master LLC, and we have a series LLC for each property, and the series is then tokenized. The property is quick-deeded over to a series LLC, that LLC is then tokenized, and then it’s issued basically a number of tokens. And those tokens represent ownership in the LLC or ownership of equity in this LLC, and therefore represent ownership in this property.”
Some people may not understand blockchains, tokenization, or cryptocurrency, but Haddad says Realium won’t be too complicated. The project will run on the Avalanche blockchain and the average user won’t even see most of the blockchain aspects of the site. “Our application is designed to look like Zillow and function like Robinhood, and it has the blockchain behind the scenes. The only blockchain aspects you’ll see on our website are the wallet associated with it, which is just you adding funds into the platform,” he says.
“The second thing is: each property has a chain history. That’s just a ledger of all the transactions that have happened. We are not promoting or trying to make things more complicated than necessary in the blockchain world. And that’s one of the biggest hurdles of these blockchain applications. We don’t go into investment pitches saying: ‘we’re this big, revolutionary, super complicated Avalanche project.’ We go in targeting and marketing ourselves toward the retail investor.”
With Realium, fractional owners wouldn’t have the rights to live on a property. It’s not like a timeshare where each owner has any right to the property, either. Instead, Haddad says a management company will be in charge of the behind-the-scenes work to rent out the house—though he also envisions people being able to sell part of the equity in their own home.
This wouldn’t be a substitute for the standard home-buying and selling process that we’re accustomed to. “I think this isn’t a solution for like, ‘I’m trying to get out of my house tomorrow and move across the country,’” Haddad says. “This is like, ‘I’m in my house, I want to access part of my equity… to do something else that I want to invest my money in.”
Investors would be entitled to income like dividends when renters pay their monthly rent, along with any increases in value to their property. Like dividends on stocks or mutual funds or staking on cryptocurrency, Realium hopes to bring passive income from real estate to more people, not just people who can afford to buy entire properties.
“The market capitalization of the equities market is about $50 trillion. And the real estate market capitalization in the United States is similar to that with a combination of residential and commercial,” Haddad says. “The difference here is that the trading volume of equities is about $.7 trillion on a daily basis. In real estate, the trading volume on daily real estate is super low. So the opportunity that we’re trying to capture is the trading volume of equities—considering that their market caps are very similar.”
Haddad expects that the earliest iteration of his platform will launch in Q2 of 2022—but the company still has a lot to work out to do on the regulatory side of things with the US Securities and Exchanges Commission. The group is targeting a $1 million raise and a $6 million post-money valuation. Haddad says he’s seen a lot of interest in the idea thus far.
“I think the younger generation is starting to reach this big barrier with investing in real estate, where we don’t have the capital, are crippled by debt and student loans, while Gen X was able to get into real estate at a reasonable price point,” Haddad says. “Now I think people my age (and a little older and younger) see the ability to benefit from real estate.”