You might expect crypto enthusiasts to look down their noses at landlording as an antiquated way to earn a fortune, not worth their time when they are busy democratizing money. But in finance, everything old is new again.
“Fractional ownership” of “tokenized real estate,” the latest crypto scheme, works like this: a company sells investors tiny shares of a property, then represents the purchases on the blockchain. Investors profit when the company pays a dividend funded by the property’s rent, when the company sells the building, or when the investor sells the holding.
These activities are “utilizing blockchain technology to break down the traditional barriers of traditional real estate investment,” as United States Property, Inc. characterized it for the Securities and Exchange Commission. “This allows token holders to become a fractional landlord by owning a piece of a multi-million dollar real estate portfolio.”
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If that sounds familiar, you might be thinking of every other property-related security already on offer. Real estate investment trusts (REITs), which have been around since 1960, pool money from many investors to fund the purchase of income-producing properties, like apartment buildings. Investors draw income generated by rent, and as with the tokenized strategy, don’t have to manage the property themselves. Mortgage-backed securities similarly allow investors to buy a portion of residential mortgages and earn money off monthly payments.
There is one major difference, however. Traditional real estate investments are regulated (or at least they’re supposed to be). The on-chain ones definitively aren’t. Crypto executives are arguing that all the rules mortgage-backed securities and REITs have to comply with shouldn’t apply to tokenized real estate, because they’ve slapped the word “blockchain” into marketing material and use distributed ledger tech to create a redundant trading record. It’s part of a “very, very diligent movement” to argue that laws and regulations shouldn’t apply if you’re operating on the blockchain, said Amanda Fischer, policy director and chief operating officer for Better Markets.
“Right now I would say it’s dumb. It’s big dumb,” she said.
Tokenized real estate doesn’t yet pose a significant risk to the overall market the way financialization of mortgages did in 2008, Fischer and other market researchers said. Investors haven’t allocated much to the strategy yet—less than $300 billion last year, according to consultancy Deloitte. But that risk will grow as the asset class increases, and removing regulation from the equation juices the risk further, as past history illustrates.
“If the funding [for tokenized real estate] is coming from retail investors, what happens if the rental market craters and the rental income can’t service the investment return?” Fischer said, adding that while there is an established process for someone to renegotiate the terms of a mortgage loan from a bank, there isn’t one for thousands of investors in a tokenized property, each with a $100 investment.
This was a key problem in the mortgage securitization bubble of the 2000s. Trustees for the securities claimed they could not get authorization to restructure loans from the myriad investors. Some mortgages simply became uncollectible, but the ability to trade ownership would resurrect attempts to foreclose. These “zombie mortgages,” thought to be extinguished but brought to life through securities sales, are active even to this day, as a recent Bloomberg exposé showed.
There is strong potential for similar mischief in the rental market under a tokenized scheme. More than a third of multifamily housing professionals said this summer that more tenants were defaulting on their rents this year, listing cash constraints, job loss, and rent affordability as the reasons why, according to an industry report by TheGuarantors and JTurner Research. Eighty percent of the more than 400 people surveyed said those problems would persist over the next year. Mortgage delinquencies are also on the rise, according to ICE Mortgage Technology. So are home foreclosures, which as of August had risen for six months in a row, according to ATTOM Data.
As with the 2008 crisis, individual investors will suffer the most if the real estate market crashes.
According to Wall Street soothsayers, the tokenized real estate market won’t stay small for long. Over the next decade, it will grow from the equivalent size of a single large-cap company to $4 trillion, Deloitte predicted this spring, thanks to interest in tokenized private real estate funds and ownership of loans, securitization, underdeveloped land, and construction projects in progress. Tokenized loans and securitization will make up most of the growth, the consultancy said, and will likely reach $2.4 trillion by 2035.
Deloitte acknowledged that “securitized products may not be considered a likely candidate for tokenization, given their association with products that contributed to the 2008 global financial crisis and regulatory oversight.” Still, wrote John D’Angelo, real estate solutions leader at the firm, “blockchain asset-backed securities are attracting a notable pool of investors.”
Association with crypto will likely expand the number of people who can invest in real estate, use blockchain technologies to trade quickly and seamlessly, and create another form of secondary-market collateral via issued tokens. Some early success stories are from the blockchain company LiquidFi, Deloitte said, which claims to have reduced reporting time for mortgage-backed securities from 55 days to 30 minutes. Another, Figure Technologies, claims to have cut mortgage costs by about $850 per $100,000 loan.
Companies hawking tokenized real estate are luring investors with bargain-basement prices and astronomical returns. The Florida company Reental, for example, says it can turn a $100 investment in a luxury Miami building into $9 million in six years. That’s the investment minimum and estimated return, 91,290 percent, listed on its website for the property Miami 2.
“By investing in MIA 2 with Reental, you can enjoy passive income while we take care of the property’s day-to-day management,” the firm says of the 44-story tower, which allows owners to operate their units every day of the year on Airbnb. The building also has a restaurant with a giant mirrored whale sculpture plunging through the ceiling.
Reental offers shares to investors around the world, but only in the U.S. if they’re accredited, a distinction that typically means someone with a net worth of at least $1 million, professional investment industry credentials, or other markers of financial expertise. But other companies don’t have that safety feature and are marketing themselves as a way for everyone to finally get in on a piece of the real estate industry. United States Property says it is “closing the gap between average retail investors and institutions” and urges investors to buy its USP token to “become a real-world landlord for $1 or less.”
At the Wyoming Blockchain Symposium 2025 in Jackson Hole, Wyoming, this August, venture capitalist Bill Tai, who founded American Bitcoin with Eric Trump, said his new tokenized real estate project would democratize the sector. Anyone could own any part of anything at any time, he said of the venture. His co-founder, Danny Yang, who also founded Taiwan’s largest cryptocurrency exchange, MaiCoin, told the Prospect that the plan was to “tokenize blue-chip properties” across the U.S., and investments would only be available for foreign investors, at first.
Under a functioning Securities and Exchange Commission, tokenized real estate would draw regulatory attention, especially with its boastful claims to turn retail investors into landlords, market researchers said. Correspondence between the SEC and companies shows regulators were indeed concerned under the Biden administration, and in some cases asked for explanations about why certain companies thought they could just say whatever they wanted.
Last July, for example, the SEC asked Tirios Propco Series why it made statements on its website about its platform and tokens that were inconsistent with offering statement disclosures and previous representations to SEC staff. The company subsequently told the commission it had removed 16 blog posts with titles such as “Tokenizing Real Estate: The Key to Unlocking Affordable Housing for All” and “Learn How Tirios Is Using Blockchain To Help Millennials Overcome Real Estate Investment Barriers,” as well as a video titled “Truly a platform for everyone. See why.”
That concern ended when crypto fan Paul Atkins became chair of the SEC under Trump. Without strong oversight, blockchain companies can resume their fast and loose representations to investors, Fischer said. Their only constraint now, she said, is fear of private liability and whether any trial lawyers would bring a class action lawsuit.
“It’s mostly a gimmick,” Fischer said. But it’s also “a camel’s nose under the tent to get out of post-Great-Depression laws.”
