How NFTs will shape the future of Real Estate

Published on
July 31, 2022

Introduction

The past year has seen NFTs become a huge hit with the Web3 community, and some record-breaking sales have grabbed the attention of mainstream media.

But, what are NFT’s and why are they selling for millions of dollars? We’ll give you a brief explanation of NFTs, their use case, and why they could be a huge hit in the real estate industry.

What are NFT’s

NFT stands for Non-Fungible Token. NFTs are issued on a blockchain; the ‘non-fungible’ part means that they’re completely unique, and there’s no other collection of data like it. Cryptocurrency itself is fungible, meaning that they’re interchangeable with each other.

NFTs became popular as pieces of digital art, the idea being that because they’re unique, they can provide a receipt of authenticity stored on the blockchain. Even in the real world, having the original piece of art is a huge deal, but it’s a lot harder to verify.

If you have digital artwork, this can easily be verified and passed on to the next owner once sold, securing authenticity via the blockchain record.

Ways NFT’s Are Used

Like we mentioned before, NFTs are a huge thing right now in the Web3 community; brands like Nike, Rolex, Adidas, and many more are coming up with their own way to hop on board the hype train. But why are they so popular?

Collectibles

Collecting items isn’t unique to NFTs; we’ve all collected something in our life, whether that be stamps, baseball cards, soccer cards. We’ve all enjoyed the idea of owning more of something than someone else interested in the same thing.

NFT Collectibles

The same goes for NFTs; a lot of people collect NFTs because they just enjoy the artwork. This can be in the form of game characters or in-game items like armor, weaponry, etc.

Music and digital artwork are both huge areas that interest collectors; as NFTs, they’re more easily traded for a profit. Video NFTs could come in the form of historic moments in TV history, such as sporting events.

The collectible aspect of owning these NFTs is understandable because people can appreciate art without needing to do anything or have a utility. Does the Mona Lisa do anything other than collect dust? No. It’s simply an appreciation of the artwork that gives it its value and, for some people, bragging rights. It’s no different with NFTs.

The highest selling NFT was sold for $91.8 million, called Merge, and its owned by 28,983 people as they all own individual pieces of the artwork.

Metaverse Items

The Metaverse has also become popular over the past six months as the crypto markets were booming.

Popular virtual worlds such as Sandbox and Decentraland, along with Facebook bursting their way into the metaverse scene, had propelled virtual worlds onto the world stage, popularity soared, and so did the valuation of NFT projects that promised in-world items to flex on their companions.

A great example of this would be RTKFT (pronounced artifact). An NFT clothing studio that was recently acquired by Nike.

And not only that, but digital real estate became incredibly popular too; a plot of land on the Sandbox virtual world sold for a record-breaking $4.3 million.

Money Makers

The most obvious reason for owning an NFT is for profit. Take a look at this list of the most expensive NFTs ever sold.

You can buy and sell NFTs like baseball cards, and if you’ve got something unique, they can sell for millions of dollars.

But, guessing what’s going to be popular isn’t the best strategy; this method has lost plenty of folks a lot of money. The most important thing to ask yourself when buying NFTs is, “Do I think this NFT is cool.”

And if the answer is yes, then a lot of other people probably will too, and if they don’t think it’s cool enough to buy, then you’ve still got your NFT to enjoy.

NFTs and Real Estate

We’ve spoken about NFTs and the many virtual applications on offer, but what about NFTs in the real world? The real estate industry is notoriously known for its slow processes, expensive closing fees, and lack of innovation.

City Skyline

Blockchain has powered its way through many sectors, swapping the old for the new, and the same is currently happening to the real estate industry.

Could we see NFTs as a way to improve the system around the transfer of ownership or even mortgage approval? Let’s find out.

Mortgages

NFTs could work in the way of borrowing funds in order to buy a property. For example, if someone issues an NFT backed by ownership of a current property or asset.

Investors could buy this NFT which represents a small piece of debt, and in turn, the NFT holders would receive repayments in the proportion of what they initially invested plus some interest. It’s basically a mortgage payment without the need for a central authority.

Fractional Ownership

Fractional ownership is another huge way NFTs could be useful. Properties can be minted as fractional ownership NFTs, meaning that a small section of the home can be put up for sale.

The NFT owners can then be paid regular rental income as an incentive along with the appreciation of the real estate NFT as real-world prices increase.

This method of investing certainly opens up the possibility of the average person gaining exposure to the real estate market. There is a downside and that many fractional ownership platforms can’t offer broad exposure to the real estate industry, meaning that just aren’t many investment opportunities out there.

Authentication & Verification

Fraud is a major issue for the US real estate market and, in 2020, has cost victims over $200 million. Considering that NFTs are minted via the blockchain, minting your title deeds and any other property documents as an NFT could make life much easier at such a time you have to verify ownership or even pass on these documents to the next owner.

Transfer of ownership typically takes up to 6 weeks to complete, and that’s not taking into account if you’re a bit reckless with your paperwork; it could take some spring cleaning to actually find the documents in the first place. NFTs can make it easier, cheaper, and less risky to transfer and verify ownership of a property.

Conclusion

The past year has seen NFTs become a huge hit with the Web3 community, and some record-breaking sales have grabbed the attention of mainstream media.

But, what actually are NFT’s and why are they selling for millions of dollars? We’ll give you a brief explanation of NFTs, their use case, and why they could be a huge hit in the real estate industry.

NFTs, just like the underlying blockchain technology, has spread like wildfire throughout internet communities and are slowly beginning to make their way into various business sectors. Real estate is an area that requires some technological upgrading, and NFTs could offer a great starting point for change.

However, like every new technology, everyone is skeptical until money is involved. The moment real estate brokers, banks, or property platforms see profits being diverted away by blockchain-based competition, this is when blockchain will see its greatest adoption rate as they won’t want to be left behind.

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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