Fractional Ownership Mechanics

Real Estate · Lesson 7.3

In most tokenized real estate, you don't own the building directly. You own part of the entity that owns it. A sponsor buys the property and places it in a special purpose vehicle, often an LLC, which holds the title. Ownership of that entity is divided into units, and each token maps to a unit. As a simplified example, 1,000 tokens issued against a $250,000 house would each represent $250 of the entity's value, before costs and fees. Rent goes to the entity, the operator pays management, maintenance, insurance and property tax, and the rest is distributed to holders on a set schedule. Your rights as a holder, including any voting rights and whether holders can force a sale, are set out in the operating agreement.

1. PROPERTY
2. SPV (E.G. AN LLC)
3. UNITS
4. TOKENS

Wally’s note: your token won't open the front door

Read the operating agreement, not just the listing. It sets the fees, the payout schedule and what say you have over the property.

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