Are NFTs the future of real estate? This Tampa Bay expert bets yes
The explosion of NFTs or “non-fungible tokens” over the past two years has left many Americans scratching their heads, wondering why anyone would pay millions of dollars for a picture of a cartoon monkey.
Although digital art has been one of the most popular applications of this technology, virtually anything can be turned into NFT. Earlier this year, a modest 4-bedroom home in Gulfport made headlines when it became the first US property to be auctioned as an NFT.
Since then, a handful of other local homes have been turned into NFTs, including one currently for sale in St. Petersburg.
Local real estate agent Andrew Daniels is leading the charge and working to educate consumers about the intersection of NFTs and real estate. He is responsible for blockchain development for the New Wealth CoLab, a real estate investment group that also hosts its own co-working space in Tampa.
Can you explain what blockchain technology is?
The blockchain encourages peer-to-peer transactions. The blockchain is the system that records all these transactions and allows everyone to refer to it once a transaction is made. It just allows everyone to act in a decentralized way between peers.
Can you explain what an NFT is?
NFT stands for non-fungible token. So there are fungible tokens and non-fungible tokens.
An example of a fungible token would be a $20 bill. If I have a $20 note and you have a $20 note and we exchange $20 notes, we will not exchange any value.
An example of a non-fungible token could be real estate. You have the tax identification number, the legal description, the address of the property. It would be very easy to distinguish this token from another property in Georgia as they would not have the same value. It wouldn’t be the same.
An NFT can represent property, car registration, digital art. It’s just the vehicle that represents ownership on the blockchain.
How can blockchain technology be applied to real estate?
Right now we use the county clerk’s office for central registration, and it’s a very redundant, very archaic, very (expensive) system. We probably involve 15 to 20 different people to support a real estate transaction whereas if we were to record all of these transactions on a ledger system like blockchain it would be a convenient central registry agency that everyone could go to refer.
Currently, we are waiting for government agencies to recognize blockchain as a source of verifiable information. Until that happens, we will not be able to register property deeds with the blockchain.
What we are currently doing is tokenizing properties as NFTs. We first create an LLC. This LLC will hold the property we want to sell as NFT. The owner’s operating agreement stipulates that ownership is represented in the form of a token number and held in a wallet (crypto) address. So whoever holds that token in the wallet address owns the LLC and in turn owns the property.
What are some of the benefits of tokenizing a house as an NFT?
With a typical home, your equity is not liquid. You need to go to a bank and get a home equity line of credit. When you tokenize a property, that equity becomes liquid. You will be able to connect your assets to decentralized financing platforms that will lend to you in real time.
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If you rent the property, you can separate the equity from the income it generates. This way, you can take advantage of the value of the house while selling the rights to the rental income.
Tokenization also allows you to fund crowdfunding and split the asset so multiple buyers can own a coin.
What kind of people are interested in buying and selling homes this way?
They will be mostly crypto enthusiasts. But it also attracts international buyers. There are crypto mortgages and types of loans where they can borrow against their crypto so they don’t have to exchange currencies and use US dollars.
Do you think NFT properties will become more common in the future? What will it take to onboard real estate agents and consumers?
The United States lags behind many other countries in this regard. So if you were to search for Norway, Switzerland, they actually use blockchain technology for identification and land records.
It will probably take 10-15 years, but soon every asset will be a digital asset. For a car, for a house, for memberships, for ticketing, for subscriptions, for our identifications or registration or insurance, we will have individual non-fungible tokens that we can authenticate with third-party companies in real time.
I think the government will come up with a central bank digital currency, probably within the next two years. So, people will start to understand what blockchain is without even recognizing it. This will be the first point of mass adoption.