The previous articles studied the basic concepts of real-world assets (RWA), as well as the tokenization of assets such as Treasuries, stocks, and gold.

This time we continue with another important category: tokenized real estate.

Real estate is one of the largest asset classes in the real world, but traditional real estate investing has an obvious barrier: buying a property usually requires a large amount of capital, and the transaction, transfer of title, and management are all fairly complex.

As it enters Web3, some projects have begun trying to split properties into digital tokens, letting investors take part in real estate with much smaller amounts of money.

So if you buy a real estate token, do you own the property? And how is rental income distributed?

1. What is real estate tokenization?

Put simply, real estate tokenization means using blockchain tokens to digitize the ownership of a property, part of its interests, or a related debt claim.

For example, a company buys a rental apartment building worth 1 million dollars, places the property under a separate legal entity (such as an LLC), and then splits the interests in that entity into 100,000 tokens.

Each token corresponds to a share of the economic interests.

By buying tokens, investors receive the corresponding rights according to the product's legal structure, such as rental income and the proceeds from a future sale of the property.

One thing to note here:

Buying a real estate token is not necessarily the same as directly owning the property title.

Some tokens represent equity in an LLC that holds the property, some represent shares in a real estate fund, and others represent mortgage debt on real estate.

What exactly you own depends on the issuance structure and the legal documents.

2. How does real estate get onchain?

Let's use a simple example.

Suppose an institution buys a rental apartment building worth 1 million dollars.

  1. Buying the property: the institution uses 1 million dollars to purchase an apartment building.

  2. Setting up a legal entity: the property is registered under a separate LLC.

  3. Issuing tokens: part of the LLC's interests are split into 100,000 onchain tokens.

  4. Investors buy in: users purchase tokens through the platform and receive the corresponding interests.

  5. Rental income distribution: the property generates rental income; after property management, repairs, taxes, and other costs are deducted, the remainder is distributed to investors in proportion to their holdings.

  6. Selling the property: if the property is sold in the future, investors receive the corresponding sale proceeds according to their interests.

For example, if you buy 1,000 tokens, representing 1% of the total issuance, then under the product rules you may be entitled to the corresponding 1% economic interest.

But that does not mean you can move into the apartment, nor does it mean you automatically become the titleholder on the property's registration.

3. Which real estate tokenization projects are worth watching today?

1. RealT: splitting US rental properties into onchain interests

RealT is a representative project in real estate tokenization, focused mainly on US residential real estate.

Its model is: buy real properties, place each property in its own legal entity, and then issue the corresponding interests as RealTokens.

Each property has its own tokens, and investors can buy a portion of the interests.

For example, if a property issues 1,000 tokens and you hold 100 of them, you own the corresponding 10% interest under the relevant legal structure.

The rent generated by the property is distributed to investors in proportion to their holdings after relevant costs are deducted. RealT supports receiving the tokens and rent on Ethereum and Gnosis Chain.

RealT mainly uses ERC-20 tokens and offers eligible secondary market trading through venues such as YAM.

Website: https://realt.co/

2. Lofty: a real estate investment platform built on Algorand

Lofty is another real estate tokenization platform worth watching, offering partial-interest investment in US residential and commercial real estate.

Its model is somewhat similar to RealT's.

Each property is held by its own LLC; investors buy interests in the corresponding LLC, recorded and traded on the Algorand blockchain.

One feature of Lofty is its rent distribution mechanism.

The rent generated by a property is distributed according to investors' holdings after deducting property management, insurance, taxes, and related reserves, and the platform supports daily rent settlement.

Investors can also buy and sell property shares through the Lofty Marketplace.

Website: https://www.lofty.ai/

4. What value does real estate tokenization offer?

Real estate tokenization mainly brings three changes.

First, a lower investment barrier.

Traditional real estate usually requires hundreds of thousands or even millions of dollars, while tokenization can split property interests so investors can participate with less capital.

Second, higher efficiency in asset transfer.

Traditional property transactions involve contracts, title transfer, registration, and multiple intermediaries. Tokenization allows eligible interests to be transferred and settled on a blockchain.

However, an onchain transfer cannot automatically replace the title transfer procedures required by law.

Third, bringing real estate yield into onchain finance.

Where relevant protocols support it, real estate tokens can plug into DeFi applications such as trading and lending, giving real estate interests a chance to become onchain financial assets.

5. What are the risks of real estate tokenization?

Real estate tokenization does not mean investing without risk.

  • Property price risk: if the real estate market falls, the asset value behind the tokens may fall too.

  • Rental income risk: vacancies and tenants falling behind on rent all affect investor income.

  • Legal risk: whether the token represents a property title, company equity, or a debt claim needs careful verification.

  • Liquidity risk: tokens being transferable does not mean someone will always be willing to buy them.

  • Management risk: home repairs, property management, and tax handling all depend on real-world operating teams.

In particular, note that real estate tokenization cannot remove the property's own management costs and operational problems.

6. Summary

At its core, real estate tokenization digitizes part of the interests in a traditional property, giving more investors the chance to take part in real estate investing.

Both RealT and Lofty use the model of placing properties in separate legal entities and then splitting the interests into tokens, so investors can receive rent-related income in proportion to their holdings.

But real estate differs clearly from gold and Treasuries: it is not just an asset, it also requires ongoing real-world operations.

Homes need maintenance, tenants need management, rent needs to be collected, and the property title and legal relationships need to be protected.

Blockchains can make real estate interests easier to split and transfer, but what ultimately determines a property's value is still the property itself, the rental market, and the legal structure.

This article remains my personal study notes. If anything is understood incorrectly, corrections from readers are welcome.

This article is for learning and research discussion only and does not constitute investment advice.