If you want to buy shares in a property and real estate, you can do so using NFTs. The idea: if the value of the property increases, the investor’s token is also worth more. Trading real estate tokens is also considered risky.
We know non-fungible tokens (NFT) from the digital world. As a digital certificate of authenticity, they certify that a virtual object is unique. For example, Twitter co-founder Jack Dorsey sold his first tweet as NFT for $ 2.9 million, and artist Beeple received $ 69 million for the NFT file of his digital image collage.
From digital to analog
NFTs are now also more common in the analog world – for example in real estate. Owners of apartments, buildings, etc. can sell shares of their property as NFTs. This will tokenize the property. If investors buy an NFT, they receive a certain percentage of the rental income.
Own part of real estate for little money
For example, the owner of a rental apartment worth 100,000 euros can offer a thousand tokens for sale for 100 euros each. Investors who buy a token own part of the apartment. The owner of the apartment, the tokenizer, continues to take care of all organizational matters relating to the real estate, for example making arrangements with the tenants. And the owners of the NFTs get their share of the rental income. If the value of the property increases and, as a result, the rental income, the investor’s token is also worth more.
Blockchain keeps records
How many tokens there are for the apartment and how high the share of the rental income is on the respective token is recorded on the blockchain. In other words, a decentralized digital database system that practically keeps records. The technical part, such as the distribution of rental income to the investors, is automatically processed and adjusted via the blockchain.
Closed-end funds vs. NFTs
The idea behind it is comparable to closed real estate funds: so that expensive construction projects can be financed, several investors come together and each buy a certain number of shares. The fund will be closed when the amount for the construction has been collected.
Put together a real estate portfolio
The providers of the tokens, the tokenizers, offer the NFTs for their properties on various marketplaces. The tokenizer then transfers the shares to the so-called wallet of the investors, their digital wallet. This can be an app, for example, in which investors can find out how much their tokens are worth on a daily basis. Sometimes they can also use it to sell their tokens directly.
Trading is risky
Especially since trading real estate tokens is considered risky, especially if investors invest a lot of money in just one property. If, for example, tenants move out, the rental income will also be lost for the period of vacancy and thus the profit for the investors, explains economist Cyrus de la Rubia from Hamburg Commercial Bank.
Investors can also lose their money if the token providers go bankrupt. “I would be very cautious about that and would only invest the money that I can get over it when it is gone afterwards,” says Nico Rau. This also means checking how serious the providers are before investing.
San Francisco More than $ 69 million for a picture by the artist Beeple, $ 485,000 for an old photo: The trade in Non-Fungible Token (NFT) is currently experiencing a worldwide hype. A new market has arisen around the tokens, which no longer only attracts art lovers, but increasingly also companies and business people.
Now entrepreneurs in Silicon Valley want to expand the world of NF tokens to real real estate. A first attempt by the real estate agent Shane Dulgeroff in California failed in April, but now the early Bitcoin investor and current brewery owner Jered Kenna dares a new attempt that could make the real estate world sit up and take notice. His unusual auction started on May 5th and the auction will end at the beginning of next week.
“Non-fungible tokens” are a type of digitally generated authenticity certificate that is supposed to guarantee the originality and uniqueness of an object. But in order to use the new technology in the real estate market, some problems have to be solved.
A lot has happened in the last few weeks. After thinking about it for over a year, I decided to put my house in an NFT and put it up for auction. This makes me the very first to sell a real home as an NFT.
The auction ends on April 25, 2021 at 12 noon German time. You can find them here if you should be interested.
I also noticed that NFTs have finally caught the attention of the masses and that the time has come to break the existing limits with a daring project.
Creating an NFTs is actually pretty easy
The NFT minting on opensea.io was pretty straightforward. I already had enough ETH in my wallet to pay the transaction fees.
Creating the token was pretty easy. I only invested about five minutes for it. It took me around a day in total. It took most of the time to create a good description and initiate the auction.
How not to market an NFTs
Since I have no marketing experience and didn’t know any people from the NFT scene, I started writing about the NFT on various social media channels.
I have also posted direct messages to NFT Instagram pages. To my surprise, I initially received extremely positive feedback from a lot of people. Some even told me they’d be happy to share my posts.
However, I was happy too early at first. They didn’t share anything. My motivation fell even further after reading a news article that someone else is supposedly selling their first property as an NFT. At first I was devastated. I thought: So have all my efforts been in vain? Fortunately not really. I checked the date on the item and the house has not yet been put up for auction. The person offered their property for sale as an NFT just two days after me.
How you should market your NFTs – good luck comes with it
On the fourth day it finally worked. A great friend of mine who is very well connected in the crypto scene and loves to bring the right people together saw my post and shared it with her network. From then on, things changed, suddenly items about my auction were showing up in multiple languages and my auction was finally out there.
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