Real Estate NFTs are coming! Be ready!
From art, music, collectibles, and now real estate, NFTs are slowly disrupting major industries in the world.
If you’re interested in how NFTs will disrupt the real estate industry, then you’re going to love what I have in store for you today. Don’t skip a beat, and this article is packed with a lot of information about how NFTs can fully embed into the primed real estate industry.
In this article, I’ll be talking about NFTs and how they will impact the real estate industry.
NFTs have been making the rounds in recent times, and their popularity has grown significantly in recent times in the art and avatar space, and this is just the beginning. But did you know that an NFT was used to sell real estate years ago?
Going back to 2017, the first NFT apartment was sold with blockchain technology by Michael Arrington. Michael Arrington is the founder of Techcrunch. He went on to sell an apartment in Kyiv, Ukraine, as an NFT to showcase the ability of blockchain technology and how it can impact the real estate industry.
This transaction led to a revolution in the real estate industry.
What are NFTs in the real estate industry?
NFTs in real estate are distinctive digital titles to virtual or real estate properties. NFT titles are compiled on a blockchain ledger. The goal is to mitigate fraudulent activities and provide proof of ownership to titleholders. With the blockchain ledger, ownership can be observed and verified by anyone.
There are two types of tokens in NFT real estate they are 1) Fractional Ownership and 2) Entire Asset.
Fractional Ownership is more straightforward as it parallels a crowdfunding platform or identical settings that permit users to buy part shares in a whole asset. Every holder of a fractional ownership token owns a certain number of tokens, which represent shares in the real estate property or project.
Entire Asset tokens are a bit more complex as they cannot be used if the virtual property deed is not converted to an NFT. There are several rules and laws guiding real estate transactions that make converting virtual deeds to NFTs tough. However, more work is being done to make the process run smoothly. On the bright side, a new class of assets that allows the EA token to function as a real estate deed has been created.
Now let’s talk about three major benefits NFTs can bring to the real estate market.
1) NFTs Simplify Fractional Ownership of Properties
NFT tokens can be used for more than digital assets. They can also be used as titles for real estate or other physical assets. For example, a homeowner can sell part of the property to many people by giving out tokens on the blockchain. Investors can buy and hold this token and earn rental income. If there is an increase in the value of the property or the property is sold, the holder gets a percentage of the profit. All of which is done through a smart contract.
This development also allows the buying and selling of fractional ownership in rental properties without a middleman. The benefit of this is that it expands the market and gives more people the opportunity to invest in real estate.
2) NFTs Can Document Mortgages
NFTs not only impact the ownership of the real estate, but soon people might also be able to borrow by giving out NFTs supported by property ownership. When NFTs are issued out, investors could buy and hold them to represent a portion of the debt. The holders will be paid through the blockchain depending on how much they lent.
These are incredible possibilities. Just imagine being able to carry out any real estate transaction with NFTs, with no need of lawyer or bank fees. The bigger question is, why are NFTs in real estate?
One of real estate’s biggest problems is the endless paperwork that needs to be filled and the requirements that differ in different states and countries.
This is why NFTs were introduced to the real estate market; to make real estate transactions easier, faster, and cheaper.
3) NFTs Leverage Smart Contracts for Perfect Transactions
Efficient blockchain technology enables NFT transactions. This technology allows users to develop practical contracts depending on their needs and establish the nature and regulations of the transaction.
Numerous blockchain technologies allow users to create NFTs on their network; examples are flow and Ethereum.
When someone buys an NFT, they are issued a certificate that implies that they own the property. To complete transactions, users connect their crypto wallets to the NFT marketplace to enable the transfer of funds from the buyer to the seller. Some of the popular crypto wallets used are Enjin, Metamusk, and Ledger.
An NFT real estate marketplace also has requirements to regulate listing and buying NFTs. Let’s talk about these features that enable the NFT real estate market to function the way it does.
Strong security regulations
Every NFT marketplace is equipped with effective blockchain technology and strong security. Blockchain technology is very secure from hackers and cannot be controlled by one person or group. This powerful security feature of blockchain technology makes the NFT real estate marketplace safe for users and eliminates fraud and theft.
Transferability
Another essential feature of an NFT real estate marketplace is the ease of transfers. This is one of the features that make NFT marketplaces grow. The platform makes transferring assets from one user to another easy, quick, and efficient which attracts more users to the platform.
Verification of Ownership
The NFT real estate marketplace thrives on the verification process of blockchain technology which is efficient and precise. Blockchain technology ensures that every NFT marketplace is properly verified.
Low transaction charges
The owner of an NFT marketplace can decide to make the marketplace exclusive. This exclusivity reduces the crowd in the marketplace and effectively reduces the transaction charges.
Now that we know the features of NFTs in the real estate industry, how do you purchase real estate using NFTs?
Buying real estate in an NFT marketplace is not different from buying any other type of NFT. The basic requirements are a crypto wallet and cryptocurrency, and you’re ready to transact. We’ll discuss how to buy virtual real estate as this will be very close to the process for buying actual real estate as this becomes more common.
Step 1: Choose an NFT platform
Before you purchase real estate on NFT, you need to choose a platform or marketplace depending on the type of real estate you want to purchase. Your reason for making the purchase is also an important factor for choosing a marketplace. Some of the most popular real estate platforms are Decentraland, Upland, Axie Infinity, and Decentraland. Some other NFT platforms that will expand to virtual and real-life real estate are Theta Drop, Open Sea, Larva Labs, Mintable, Rarible, Foundation, SuperRare, and Axie Marketplace. Next…
Step 2: Set up your wallet
Before carrying out a transaction, you need to be able to send and receive funds. The only way to achieve this is to set up a crypto wallet that allows you to transfer your cryptocurrencies. You could opt for a mobile wallet or a browser-based wallet. Or have a hardware wallet which then you connect to a browser based wallet to conduct transactions. It is always better to choose wallets that support multiple blockchains like Binance chain and Metamask. Finally…
Step 3: Connect your wallet to the marketplace
After setting up a wallet, link it up to the marketplace of your choice. You will not be able to bid on any property or make purchases in the marketplace until your wallet is linked to the NFT marketplace. Once your wallet is linked, you can bid on properties and make purchases.
Every NFT real estate & NFT platform has a token that users can use to purchase different types of NFT real estate. Examples such as Decentraland use MANA tokens to conduct transactions, and the Sandbox uses SAND tokens to complete transactions. Bitcoin or other cryptocurrencies can be exchanged for either of these tokens to transact on land purchases.
What is the future of real estate NFTs
And what is the future of real estate NFTs? The union of NFTs and real estate is still too new to make predictions of how big this will be, but given the perfect fit, it’s going to be very disruptive to the real estate industry. Ideally, the NFT real estate marketplace will make buying and selling real estate properties easier and quicker with more efficient ways of transferring funds and ownership, and once this process is proven and larger firms and development companies start to put trust in the process, then most likely it will grow to be commonplace. Just like the adoption of the smartphone across all demographics took a decade to complete.
However, we don’t expect to be transferring whole properties in the near future as the few NFT real estate transactions carried out were part of an NFT package. And real estate laws in different states make transferring real estate properties as NFTs difficult. The way we see it playing out is initially opportunities to transact using NFTs to confirm title & deed, allow for hold fractions of real estate properties will come first, but then group investments, and mortgage debts held by banks and brokers will follow.
The NFT industry continues to grow and evolve every day as the world begins to embrace blockchain technology and the digitization of transactions. My advice is to take advantage of any opportunity that comes your way to invest now in virtual real estate, so you don’t miss out on the benefits later when real-life real estate transactions become available.
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