Tokenized real estate promises to make property investment more accessible. By converting housing into tokenized fractionalized tokens, these platforms enable more people to build wealth in housing. However, the idea is struggling to be executed.
RealT, one of the oldest companies in tokenized real estate, recently came into the spotlight. On Wednesday, February 12, the New York Post reported on complaints from many of its tenants.
Surprisingly, tenants claim that the chaotic management creates disarray and disrepairs properties.
One tenant in RealT’s housing, Shirquera Ayers, said, “As far as I can tell, they’re slumlords.” Despite frequent complaints, her apartment is breaking down, and RealT is nowhere to be seen.
For instance, she told reporters she can’t use the shower because the knobs were broken. Worse, black mold is growing in her bathroom, because of the frequently overflowing toilet.
Other tenants told the New York Post about similar issues, including broken air conditioning and garbage disposals. In all cases, RealT did not fix the problem.
Moreover, multiple tenants faced eviction notices despite paying rent on time. Also, RealT’s subsidiary allegedly owes the city of Detroit at least $2 million in taxes.
Why is Tokenized Real Estate Failing in Detroit?
RealT founders Jean-Marc and Remy Jacobson defended their track record in Detroit, stating that mounting issues were the fault of previous property managers.
According to the two brothers, one of the property managers swindled them and stole the money they had set aside for repairs and taxes. This RealT example illustrates some of the inherent risks in tokenized real estate.
Tokenization aims to automate processes using smart contracts, hoping to make the system fairer and more efficient. Still, certain challenges persist.
Potential mismanagement is a major concern besides regulatory risk. While smart contracts can automate certain tasks, property management still requires professionals.
Tenants and investors rely on these property managers to ensure compliance, maintain occupancy, and keep the properties well. Managers can quickly become overwhelmed by the system without proper oversight and accountability.
READ MORE: Former Morgan Stanley director says tokenization feasible if fully developed
