Did you know that someone had actually offered their house for sale in the form of an NFT?
Maybe you’re wondering about how NFTs could change the real property business?
But what exactly is virtual real estate?
You’re in the right spot because we’ll be able to help to understand the world of real estate NFT and provide the essential differences between virtual and digital property and the physical estate that is offered through NFTs.
In this article, you’ll learn how NFT real estate is currently working and how it can reduce bureaucracy, and possibly create new ways of doing business.
Let’s get started.
What Is Virtual Real Estate?
There are two kinds of NFT real estate: physical and virtual. Real estate that is owned by physical entities (such like a house in Virginia) is able to be tied to an NFT through tokenization.
How Does Virtual Real Estate Work?
The virtual real estate refers to the land, or structures in virtual worlds in which people can spend the majority of their time. The properties can be bought by buying the NFT in exchange for crypto. Based on the kind that virtual is used, such properties could offer benefits that carry an economic value.
Believe that it is possible to purchase areas that cover land in the world of today..
For instance, Decentraland has 90,601 individual plots of land , and they can be bought with their local currency MANA.
Although this may appear to be a bit crazy don’t underestimate the number of people who are playing in the virtual realms.
Physical Real Estate In The NFT Space
Physical property can be represented as a whole property or through fractional ownership. This is accomplished through “wrapping” the property to create a legal persona. The the ownership of the entity is represented with the form of an NFT or a set quantity of tokens.
Real property NFTs are basically the same as every other NFT.
You purchase them with crypto They are kept in an electronic wallet.
Yet, many people wonder how to link physical assets to the NFT.
This is a valid inquiry because when you purchase an NFT you’re simply purchasing an asset that is digital via a blockchain.
There are two ways that real property can be tokenized.
Fractional ownership is relatively easy and is similar to crowdfunding.
Based on how you structure your investments the owner could own some or all fractional share of the real property.
The shares may be depicted in the form NFTs or tokens of regular value also.
Websites such as JuiceBox currently allow large groups of individuals (e.g. DAOs) to pool their resources and collectively bid on assets.
This was done using the famous art work (e.g. assangeDAO and ConstitutionDAO) and could easily be done using real estate, too.
It’s likely to be necessary to wrap it up into a kind of legal entity, but this is not uncommon and requires tokens’ registration with SEC.
First Home Sold An NFT
In April 2021, a California real estate agent attempted to auction off a portion of property in the form of an NFT.
In the absence of any bidders, the world believed that it was the wrong decision.
The main issue was that the minimum price was set at $2 million which was much higher than the market value of the property.
In the beginning of February 2022, prop-tech business Propy was able to facilitate the first property purchase in Florida as an NFT in real estate.
The Gulfport property attracted more than 7000 bidders. the real estate property NFT eventually sold at $650,000..
It is worth mentioning that this was precisely the kind of “Entire Asset” tokenization that we were talking about in the past.
The purchaser of the NFT will be owners of an LLC that’s sole property is its house.
Naturally, all the documentation for the transfer of control of the LLC is still required within the actual world.
Let’s say that we’re still in the very early stages.
Conclusion: The Future
A lot of people affirm that NFTs are not able to be tied with physical asset.
The law is catching up to catch up to create a solid regulatory framework to allow tokenization and monetization of the assets.
It is incorrect to claim that it’s not possible in the present.
Tokenization is feasible however it requires an additional structure to ensure it is fully compatible with real world requirements “real” real world.
We are convinced that real property is among the sectors that will reap greatly from the NFTs and some truly creative business models will cause jaws to fall.