Digital Real Estate

Digital Real Estate: Web3 Will Forever Change Real Estate Investing

July 31, 2022
4 mins
Digital Real Estate: Web3 Will Forever Change Real Estate Investing

Anyone that is under the age of 35 and has grown up and experienced the emergence of modern technology such as smartphones, it's more likely that instant gratification is a common issue experienced by this group of people.

To the millennial, investing in real estate is as unattractive as possible in terms of an investment. The process of buying a property is long, tedious, and out of date. The generations growing into money, power, and influential positions will subconsciously view "modern" real estate investing as outdated and requiring an upgrade into the modern, digital world.

This new generation of investors and homebuyers is looking for a method that doesn't require a costly, lengthy, and untrustworthy property acquisition process. The search for an "Easy Buy" button for real estate could be provided by NFTs, DeFi, and the wider Digital Real Estate ecosystem.

What is a Real Estate NFT? 

A real estate NFT is when you mint all the required ownership documentation of a property as an NFT; when bought, that ownership is immediately transferred to the buyer without the need of a middleman, in turn making the whole process cheaper, faster, and more secure than traditional real estate transactions.

The CEO of Propy, a real estate transaction platform specializing in property NFTs and using blockchain to make transactions faster, safer, and more efficient, perfectly outlines the need for upgrading the current real estate market using real estate NFTs.

"We have already seen a new generation of home buyers looking for other solutions beyond the status quo. Unaccustomed to the costly and lengthy, drawn-out process of home-buying, with its reliance on outdated methods of transacting business and multiple middlemen, they are demanding a transparent, “one-click” process that is quick, efficient, and reflective of the era they live in. They’d rather not buy a home than get into a hideous process."

The process is an issue, but it's also not financially possible for many Americans, specifically millennials. When surveyed, 70% of Americans agreed that young people have it harder than previous generations getting on the property ladder. Bringing the real estate sector to the 21st century using modern technology to decrease prices could be a way to combat this.

Minting your home as an NFT makes the process of transferring and verifying ownership easier and faster. Propy has recently proven the concept by selling a Tampa property as an NFT for $654,000. However, Natalia Karayaneva, CEO of Propy, said they faced a few logistical and legal issues:

  • Creating the actual real estate NFT
  • Wrapping the NFT within the U.S. legal framework
  • Inventing the “know your customer” process since most art NFT transactions are anonymous 

In her Forbes guest posts, Natalia outlined how they went about working around these issues.

They created the NFT by switching the property ownership from individual ownership to a US-based legal entity. This allowed them to transfer ownership of the entity via NFT, which in turn transferred ownership to the property.

As the entity held the property title, they didn't need to record the title again in the county, which according to Natalia, saved a considerable amount of time and money.

She added: "Then we developed a protocol that would transfer an asset from one wallet to another, collect personal names,  and complete simple background checks − all of which ensured the transaction’s integrity."

Propy has since opened up its application process to more individuals to begin minting their homes as NFTs. Another case of this happening is in Utah, where developer, Dave Wilkes, is building a house that he'll eventually sell-off as an NFT.

The Opportunity To Use Blockchain Technology

Blockchain technology has been popular in recent years as being the next big innovation to "Revolutionize" many industries, including Finance and now Real Estate. But, what exactly can Blockchain change or improve upon?

To find out, you need to understand what Blockchain is. Simply, Blockchain is a digital record of transactions, and this information, once embedded on the Blockchain, cannot be altered in any way, making it the most trusted system of data verification and storage on earth.

And depending on which cryptographic network you use, the most popular being Bitcoin, Ethereum, and Solana, will provide you with cheaper, lightning-fast transactions.

Blockchain technology won't completely rebuild our real estate market from the ground up, but it will raise it up further than its current capabilities.

The main ways that Blockchain will benefit our current real estate industry are by firstly significantly lowering the processing times of real estate transactions.

Typically, from the time it takes to gain a mortgage to the close of the deal, it can last up to 16 weeks. Many people are involved in that deal that'll take a cut of the money transacted.

If we utilized technology such as real estate NFTs, we could implement all of the documents required within that NFT and use a smart contract to read and verify the information.

Which would take mere minutes, depending on the extent of verification needed. This would ultimately remove dozens of middlemen and their fees, making homeownership and investing cheaper.

Another way to make real estate investing more accessible is by using digital real estate as a way to gain exposure to physical markets.

This is what our team at Parcl is working towards providing. Millions of people acr0ss the US are priced out of owning a property and gaining exposure to a multi-billion dollar market.

Mainly due to institutional investors buying up properties they'd typically be able to afford, the shortage of housing stock is another major factor.

Parcl utilizes web3 synthetic asset technology to provide custom exposure to US neighborhoods, which would have allowed you to hedge against the effects Covid-19 had on the real estate markets of major cities across the US.

We can also offer increased liquidity to investors, which is a common issue in the traditional real estate market. Thanks to a technology called liquidity pools, we can supply consistent funds for both buyers and sellers.

Crypto-Backed Mortgages Are The Way Forward 

One of the greatest goals of crypto investors over the past few years is to be able to buy a piece of real estate using their cryptocurrency holdings.

For a long time, you'd have to recognize those crypto gains in order to pay for a mortgage; now, with companies like Milo, you can borrow up to $5 million over a 30-year mortgage period. They offer rates between 3.95% and 5.95%

With mortgage fraud sitting at 1 out of every 120 applications, using blockchain technology with the help of companies like Milo and Propy, we could remove this risk altogether.

Shared content and posted charts are intended to be used for informational and educational purposes only. Parcl does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. Parcl does not accept liability for any financial loss or damages. For more information please see the terms of use.

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