I am interested how the whole REAL > RPP > Property investement would work.
Let's say I have invested 100ETH at ICO and got 28K REALs.
Who decides what the REAL to RPP exchange rate is?
Or now they bought 10 flats and let's imagine they paid 100K USD for each, then how many RRP is one flat?
From my understanding, they will give to a property a value in RPP (let's say a property is worth 1000 and then it will be worth 1000 RPP) but I don't know how they will price RPP against REAL, I know that if a property value goes up, RPP value go up as well
REAL to RPP exchange is different to everyone, as we paid different amount for the tokens as REAL price is floating against free market. RPP price is defined by the value of the property, its fixed to the pricetag, when bought or when sold.
All this concept is described (better then i could here) in the whitepaper.
What is REAL?(1)
The Real Estate Asset Ledger (REAL) team aims to disrupt the world of real estate by applying blockchain technology to an industry that is historically inefficient and illiquid. REAL uses Ethereum smart-contract governance to provide the best ecosystem for real estate investment. They aim to eliminate intermediaries, improve transparency and liquidity, lower barriers to entry, and alleviate tax issues associated with cross-border transactions. REAL aims to generate rental income and value appreciation through worldwide real estate investment. By bringing together property owners and potential investors, the REAL platform will reduce friction in the real estate investment process.
Any amount of money can be contributed towards a real estate property. Anyone can exchange REAL tokens for economic rights to some piece of property (these economic rights are referred to as REAL Property Participation — RPP). Profits are paid back in Ether, and users can even trade/sell rights to those investments (RPPs) on the platform. Both a website and mobile application will be the home to view and invest in any property made available by the REAL team.
It is important to note that the REAL platform will take a 10% fee of all profits. If a property earns 1,000 Ether in rental income, the REAL platform will take 10% as commission for finding and hosting the property on their website.
How does it make money?(1)
Through the REAL platform, both investors and property owners will be brought together in one “marketplace” of sorts. Property owners are able to “tokenize” their real estate holdings, thus making them more liquid, and users are able to use REAL tokens to gain real ownership over the property. The REAL team will also be selecting, acquiring and managing a variety of real estate properties all over the world. The team aims to employ three value-investment philosophies to their acquisition strategy:
“Buy-to-lease” commercial properties: These are commercial properties that the REAL team will purchase and lease out. The goal is to recoup your original investment through leasing, while the asset appreciates in value over time.
“Buy-to-sell” flip properties: These are commercial or residential properties that, for one reason or another, are being sold at a discount. Generally, the purchase of the property will require some sort of further investment to flip the property, but this is not always the case. Buying low and selling high (and quickly) is the goal when using this strategy.
“Loan-note” investments: These investments are “paper” investments, meaning, the REAL team would be buying the loan on some property with the goal of renegotiating the terms of the loan. Often the previous owner has failed to make payments, or is in foreclosure, so the lessor will accept less than the original loan to ensure newly negotiated payments are made on time and in full.
The team will look to acquire high-quality properties in desirable locations with steady, long-term cash flows. The team states that they have already identified the Spanish market as one with room for considerable growth, and will analyze the North American, Latin American and Asian markets next. Spain, the Caribbean and United States are of particular interest to the team. Some other important details include:
— The team is aiming for 12–20% annual returns depending on the type of asset and market risk. While these returns may be smaller than some of the reported returns through cryptocurrency investment, it’s important to note that these retrurns are generally valuable in the real estate industry. REAL is essentially providing a safe haven from volatility that is more typical of cryptocurrency investment.
— REAL is aiming for a 50% loan-to-value ratio (re: putting up 50% of the total property value in a loan). They also plan to allow for 20% headroom in the ability to service the debt, which will allow for some cushion in case of unforeseen circumstances with each property.
— The team aims to build a partnership with Portblue hotels, a hotel operator that is managed by one of their advisors. This will be the first major partnership for the REAL team.
— The team aims to have a desktop, mobile and lite client of the REAL platform in order to make the use of the platform available to as many people as possible. For further details on smart contract or desktop/mobile specifications, please consult the REAL whitepaper.
Technological Specifications(1)
The REAL token is the primary driver of the REAL platform. As an ERC-20 token, it has full smart contract functionality. In this case, the smart contract will complete the property acquisition for users. Users can exchange their REAL tokens for RPP (REAL Property Participation), which entitles them to a proportional amount of profits from that property. As the property earns rental income or when the property is sold, Ether will be automatically deposited into the RPP holder’s wallet. Further, once the property is no longer owned by the REAL team, the REAL tokens that the user exchanged for RPP for participation in that property will be returned to them.
Evaluating new property
The REAL team will ensure that the process of finding new property is intensive and results in a positive outcome for REAL token holders. Their 11 step checklist found in their whitepaper involves identifying a location and property, renovating and furnishing it post-purchase, and ensuring profitability through low vacancy rates and available maintenance processes when necessary.
Once a property has been purchased, a smart contract executes the following steps in order to list the property on the REAL platform:
A property register ID, acquisition documentation hash (using IPFS), custody information (using IPFS), total amount of participants, and value in REAL from each participant are all included.
The smart contract will mint the necessary RPP for each property, allowing users to exchange REAL tokens for property participation/ownership. The smart contract associated with each property will hold the REAL contributed for each user and return the REAL tokens when the property has been sold.
Process Flow of the platform
The REAL team lists a helpful 12-step process flow in their whitepaper for ease of understanding:
1. The REAL Platform invests in the acquisition of a property and offers participation(s) to platform users. For that, we will create a REAL Property Contract (RPC), a smart contract of physical property.
2. The REAL Platform creates participations that are offered to the users through REAL Property Participations (RPP). These are internal tokens that describe the participation details for each property with their different valuations and participation percentages.
3. Users will get REAL Tokens in the Token sale, or at exchanges. We will facilitate on our site the exchanges link where users can buy REAL Tokens.
4. Once the users have REAL, they will be able to acquire RPP (Real Property Participation(s)) by exchanging REAL Tokens.
5. Property participation(s) of each property generates profits through rentals.
6. These profits will be split according to the participation percentage of each user in that property. (This will be detailed in the RPPs).
7. Rental profits will be paid monthly among the RPP owners in Ether.
8. The REAL Platform sells the property.
9. Profits from the sale of the property are obtained.
10. The profits are split proportionally among users as detailed by the RPPs.
11. Each user’s profits are paid in Ether.
12. Each user gets their REAL Tokens back when the sale transaction is finished.
Finally, it is important to note that the REAL team has spent time analyzing the future price of the REAL token and potential profit or loss. They also include information on what they believe will be a token price “floor effect” (re: token cannot go lower than “x” price) and have analyzed the level of growth of the project. All of these equations created by REAL can be found towards the end of their whitepaper. (1)
