“Invest in real estate with contributions from 100 euros”. “Immediate liquidity, with a single click”. With messages like these, and the offer of great returns, in some cases guaranteed, tokens have become the fashionable real estate investment. Eric Sánchez, CEO and co-founder of Reental, the largest company in the sector in Spain, explained this week at Sima, the real estate fair in Madrid, that "in five years everything will be tokenized." The firm, founded last year, has already raised 5 million euros from 5,500 investors, in 25 operations -in one of which it sold an apartment in Seville for 69,000 euros in 4 minutes- and plans to reach 1,000 in 2025.
Tokenizing a property means fragmenting its value into small amounts and registering contacts with Blockchain technology, which, according to its promoters, provides greater traceability, facilitates transmission and eliminates intermediaries. Some only allow contributions in cryptocurrencies, such as bitcoin, ethereum or USDT, which they also use to reward investors.
However, the legislation -in Spain and in most countries- obliges to go to the notary and register all transactions in the Property Registry, so the tokens are not linked to the property, but are a loan contract , that the investor makes to the platform, to buy the property. Sánchez points out that the Reental tokens are participating credit contracts given to the company Reental Token, SL, “and now we are introducing participation accounts”. The former have an expiration date, while in participatory accounts the company that receives the funds has no obligation to return them. “The tokens are linked to each property, which is purchased with that loan. That is your guarantee and the money is returned when you sell the property,” says Sánchez.
Another of the leading platforms in the sector, HauxT, has some token issues in which the investor signs a fixed-rate loan with the company HC Proptech Spain, SL that guarantees interest, explains its CEO and co-founder, Raul Alarcón. The firm is also studying issuing tokens that are shares in a company: create a firm for each operation and that it be the latter who buys the property. "In this way, the investor would be the indirect owner of the property and the recovery of his investment, without a date, would be linked to the destination of the property."
The tokens, as contracts registered with Blockchain technology, are easy to transmit. The sector, however, does not have a regulated secondary market in Spain, such as the stock market, unlike what is happening in Germany, where the stock market and the Commerzbank have just created a secondary market, 360X, where the platforms will be able to take out to list their token issues.
Thus, the investor depends on the platform in which he has invested to obtain liquidity. In Reental, explains Sánchez, the platform has 5,500 registered investors from 55 countries to whom it can sell them. But to provide liquidity "with a single click" it is each platform itself that maintains a liquidity pool or "liquidity pool".
"No company in the sector has, not even remotely, 10% of the capital invested in the pool," admits Alarcón. "If there was a massive desire to sell we could not supply immediately, but when the property is sold" explains the director of Reental. Sánchez recognizes that the pool of liquidity comes from the investors' own contributions, managing the cash flows.
The platforms are recently created companies, in both cases with the minimum share capital of 3,000 euros: they cannot provide liquidity with their own funds. Reental charges a commission "between 6% and 10%" on the purchase and sale of the property, explains Sánchez, to cover its operating expenses. "All the platforms are very young companies and we are still consuming capital," admits the co-founder of HauxT. In addition, the novelty and the risk of the business means that none of them have the support of financial groups.
In the United States, a pioneer in tokenization, a new avenue of liquidity has been opened: “Peer to Peer” platforms have appeared that grant loans with the token as collateral, allowing the lender in the event of non-payment to execute the guarantee and keep the token. Alarcón points out that the pioneer has been ReaIT, a platform that has already raised 66 million dollars, and that links each property to a company and is always backed by an appraisal.
On the Spanish platforms, on the other hand, real estate is bought with a click and just a few photos: there are rarely plans, not even the exact address and no document that supports the price for which it is put up for sale. The companies are also not audited. In fact, the investor cannot know if he has really bought the property or if it has already been sold. "We buy very cheap real estate," says Sánchez, from Reental. All that would be more expenses and lower profitability. In addition, our issues are endorsed by an independent expert registered with the CNMV”
