Have you purchased fractional ownership of property using NFTs?

Question

Many of you probably have heard about Beeple selling a piece of digital artwork for $69 million recently. This was done using Non-Fungible Tokens (NFT). Recently I received an offer to purchase fractional ownership in a property in Memphis from a startup called Lofty AI. Being interested in new technology, I decided to test the waters and purchased 1 NFT worth $50. So, theoretically I now own a $50 share of a single family house in Memphis. This technology is in its infancy for use in real estate but I think it will really take off due to the security of the transactions and ease of investing. Thoughts on this? Pros? Cons?

Yoann Dorat · Answer

@Chris Schorre NFT's are trendy right now but it's still at the early stage, a guy pitched me a similar project a year ago, they were using blockchain technology to sell fractional ownership of houses and multifamily in Detroit. I think the underlying tech is amazing and full of possibilities but unless the SEC kicks in and starts to regulate it's still very risky. But I'd pay the $50 bucks to see ;)

David Luu · Answer

Just looking at the site, for one property listing, I see this note on the timeline on that property's status "PROPERTY DUE DILIGENCE & PURCHASE PROPERTYSPV paperwork is complete and LLC is tokenized." So I believe one is investing in a share of the LLC via tokens. It looks like one earns (a fraction of the) rent on the property while owning the tokens to the LLC/property, without the property management hassles from a direct investment. So it's not just an investment solely for future ROI, you may get payments monthly from the rent proceeds.

This is nothing new for fractional investment to a property via LLC, it's just the tokenization part of it.

For equity appreciation, I'm wondering if that's just translated as property value divided by your share of ownership in it. Since the token is just mapped to an equity stake in the LLC which owns the property.

Also the LLC I believe is on a per property basis.

Joe Wang · Answer

NFT's are in their infancy, but I believe will become the de-facto method to securing ownership for many assets (not just digital) in the future. This is a really cool use case. I think if they can support tokenized governance, establish a stable liquidity pool, and reduce the bottleneck of Lofty as the single point of failure, they can really differentiate themselves. Also love that they're on ALGO.

Chris Schorre · Answer

Hi everyone thanks for the replies. I am optimistic about the long term viability of this technology and chose to invest a mere 50 bucks as a way to learn about NFTs new rather than instantly dismiss it as fraud or fad. Will it catch on for real estate? Nobody knows but it sure will be fun to watch.

Stephen Stokes · Answer

So you bought a video game token for $50? Was there a contract associated that grants proportional ownership rights? Was the contract notarized and filed with the county? How is the deed to the property secured to ensure your ownership rights are upheld? If none of that was done, you just made a $50 voluntary donation to someone....I suspect it will be a matter of time until the individual that received your "donation" receives a visit from the FBI for wire fraud.

Daniel K. · Answer

I don't see the point of this when REITs exist. I'm not saying there isn't a point, just that I personally don't see one.

James Wachob · Answer

@Chris Schorre I'd love to learn more about this. Keep me up to date with your property in Memphis. I'm based in Memphis and always looking to learn about new and creative real estate investing strategies.

I'm curious what area of town is your SFR located in, and what is the property value?

Nina Hayden · Answer

Makes me wonder how and if SEC plays into this situation.  On top of this and that it smells like a scam....I found it so intrusive to be emailed when I didn’t solicit for such thing.  Glad I use a bogus email so I can separate the scams.

Nina Hayden · Answer

Got that email “offer” and in a nutshell, it’s not for me.

Have you purchased fractional ownership of property using NFTs?

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