Cryptocurrency and the blockchain have made their way into many industries. And as more and more of our lives move into the digital arena, the ways in which we buy and sell products are continually changing. Real estate is seeing its own shift toward the blockchain with the creation of nonfungible tokens that represent physical properties. This technology is sure to have a dramatic impact on the future of commercial real estate.
So, what exactly are NFTs? They are unique tokens issued on the blockchain that represent something that’s one of a kind. They’re currently used mostly to sell digital products such as art or music, certifying ownership of the product with a unique, unforgeable signature. But NFTs are slowly branching out to represent ownership of physical items in the real world, making them an excellent option for buying and selling real estate properties.
I’ve been delving into NFTs for the last year, and in that time I have amassed a seven-figure portfolio that I plan to hold long-term. As I fell in love with the NFT space, I began to develop my own NFT project that is still in the development phase. I am partnering with a prolific national developer to raise a real estate development fund while creating additional revenue streams and guaranteeing authenticity through NFTs.
Why Use NFTs For Real Estate?
One of the downsides of investing in real estate is the hassle of transferring property ownership. It currently takes a tremendous amount of paperwork to buy a property or open an equity line. With an NFT, the transaction process is streamlined, allowing a buyer to assume ownership of a piece of real estate within minutes.
Digital transactions are often susceptible to cyber fraud. However, by using blockchain and NFT technology, you can achieve higher levels of security and data integrity. This protects both buyers and sellers and makes it much easier to transfer assets without any problems. Buyers can then borrow against the NFT using decentralized finance (DeFi) or traditional finance (TradFi) products on the blockchain, skipping the arduous due diligence required by most big banks when taking out a mortgage.
How Does It Work?
In order to sell real estate as an NFT, the first step is to undergo the necessary legal preparations to ensure it meets regulations. This requires involving legal counsel with experience in blockchain technology. Staying within the confines of the law is always a priority, but it poses challenges with the introduction of new technology. Think about online banking and how far it has come since the advent of the internet.
Once you’re prepared to move forward, you can mint an NFT with descriptive and legal data about the property. Minting is a process that can be done by anyone by uploading a JPEG and smart contract to an NFT marketplace — a website that provides NFT creators and buyers with a safe environment to buy and sell NFTs. This imbues the NFT with all the necessary paperwork, disclosures, and reports to give it the legal authority to represent proof of ownership.
Once you’ve created the NFT, you can enter it into an NFT marketplace to be sold to potential buyers. Buyers will bid for the property, and the winner of the auction will pay for the property in fiat money or cryptocurrency. Once the funds have been released to you and the NFT has been transferred to the buyer’s wallet, the buyer will complete the paperwork to finalize the transfer. Once the buyer owns the NFT, they own the property.
Many more use cases of NFTs in real estate are sure to change the industry as a whole. All in all, the process of transferring ownership should take only minutes, which is revolutionary compared to the length of time it currently takes to buy property. With our tendency to desire a “one-click” option for buying and selling, it’s only a matter of time before NFTs and real estate go hand in hand.
The Challenges Of Using NFTs For Commercial Real Estate
As we’ve learned with the introduction of new technologies like cellphones and the internet, with the good comes the bad, and there are certainly challenges facing the adoption of NFT and blockchain technology in commercial real estate. First and foremost, from what I’ve seen, commercial real estate is primarily owned by those in older generations. Needless to say, older generations are often less enthusiastic about adapting to new technology compared to younger generations.
Second, blockchain technology is so incredibly powerful that I think it could eliminate many of the intermediaries in the commercial real estate industry. Title companies, for example, stand to have a run for their money and may go the way of Blockbuster and payphones. This will take time, of course.
Considering how we have seen the internet change almost every aspect of our lives, I believe the NFT space will change real estate, and if that is in fact the case, there will no doubt be many more challenges along the way.
Preparing For The Future
So, how can you prepare for the imminent changes to the commercial real estate industry? First, if you have read this article, you are off to a great start. Education about this space is key. Without a fundamental understanding of blockchain technology and NFTs, it will be difficult to understand all of the benefits that the technologies will bring to commercial real estate.
Next? Get to buying. There’s a learning curve when it comes to buying and selling NFTs. The only way to learn is to practice. Buy an NFT, and then sell it. Familiarizing yourself with the process will pay dividends in the long run.
Original Article :
Author : Aviva Sonenreich
Contact : https://www.forbes.com/sites/forbesbusinesscouncil/people/avivasonenreich
