NFT and Real Estate-- what are the uses and will ppl use it?!
Rental Property Investor · San Francisco, CA · Member since 2016 · 118 posts · 90 votes
I've been reading about NFT technology, it's so fascinating and there can be so many use cases in RE. I'd love to hear what others think and/or if others are building anything in this space. If you're not familiar with NFT's, there's a great list of articles here.
Some potential use cases:
- Title- one of the main value props of NFT is that it establishes provenance, given this is one of the most important (and expensive) pieces of real estate transaction, I think there can be a huge innovation in how titles are established, recorded, etc. in the future
- Fundraising- With Smart Contracts you can partition out equity in a property, making it easier to crowdfund and raise capital
- Royalties- the other value prop of NFT's is that it allows for second market royalties and such, this could be a new model of RE agent commissions? A new way for developers to monetize?
These are just a few ideas and would love to hear what you think in terms of the above use cases or other innovative ways NFT can transform the RE industry!
I believe there's already some NFT real estate implementations in the crowd funding investment area.
https://vave.io/tokenized-real...
https://app.reinno.io/campaign...
in terms of these, I wonder if anyone, say folks here in BP would participate or invest in these platforms. Sadly some, like RealT only allow for accredited investors at the moment for U.S. investors.
It kinda sounds to me like those options are doable but not necessarily better than how it's done now. To overcome the initial inertia of adopting new processes it has to have a big benefit.
I think title should be on block chain and in theory eliminate title searches and junk like that.
the only re related NFT I've thought of is buying virtual real estate in software and video games. You can buy a strip mall with real money in a video game and collect real rent!
Agree title is a no brainer and the way they're organized right now is so outdated and archaic. Wow! I knew that folks were buying virtual properties, but had no idea that people are actually paying rent to live in them in virtual worlds. That's mind blowing!
Wow This Is Was Put In Here To Flourish Greatly Love IT..
Hey Katrina. I think all your examples are genuine use cases for NFTs. I look forward to seeing them implemented in the RE space. Hopefully soo!
The rehab is finished on my first fix and flip. I signed an agreement with an agent to get it listed. I also listed it for sale as an NFT on a marketplace. I am not expecting someone to buy it but hoping it brings some publicity to help raise the bidding price. I have to start marketing it now. I would appreciate any feedback.
I believe there's already some NFT real estate implementations in the crowd funding investment area.
https://vave.io/tokenized-real...
https://app.reinno.io/campaign...
in terms of these, I wonder if anyone, say folks here in BP would participate or invest in these platforms. Sadly some, like RealT only allow for accredited investors at the moment for U.S. investors.
the only re related NFT I've thought of is buying virtual real estate in software and video games. You can buy a strip mall with real money in a video game and collect real rent!
Collect royalty or rent? It's hard to imagine an efficient economy where people pay rent to virtual landlords
@Dillon Cook Check out SandCoin, I think it'll change your perspective. Beyond NFT's we're just on the cusp of some amazing advances for Block Chain applications when it comes to Real Estate. I'm very excited to see what the community comes up with next!!
@Aaron Stuiber
I was on that bandwagon 3 years ago, end of 2017. Not much of value has come from the projects from that era. Lots of hype, but I'll check back in when products or services are rendered.
@Dillon Cook
Check out REINNO, Securitize Markets , Vertalo , RealT, Realio and many more. It’s taken a few years but we’re finally here.
Let's see in the future.
I'm also excited about the possibilities of NFT's. I think it will happen with titles for sure but also with short term rentals.
Here's an article on the first NFT Title sale in California that didn't live up to the hype.
Came across https://www.solidblock.co and lofty.ai recently.
Hey @Katrina Razavi your thoughts on this are actually quite intuitive! We have been working on Pocket Properties App for months and are getting really close to launching our App for IOS and Android soon! if you would like more information on our project feel free to reach out to me at any time.
I think physical real estate will be turned into NFTs and DOAs created to govern/manage the asset on the blockchain in the near future. Not sure how it will be accepted but I feel like it will see more traction in 2022. I think NFTs in general will be huge for 2022. For artist and musicians NFTs give a lot of power and control back to the artist and away from managers, record labels and stuff like that. Meek Mill is getting ready to release an album on the blockchain as an NFT. I think real estate NFTs will have a similar benefit to owners and buyers cutting out a lot of other players, like title companies. The seller can put the royalty into the smart contract also and sell the real estate or fractions of it online without the use of realtors.
@Katrina Razavi @Ian Cherkowski @David Luu @Aaron Stuiber @Jonathan Hickerson
Point of discussion on this awesome topic: If crypto is classified as property by the IRS, then can a person 1031 exchange a real house for an NFT house or some other cryptoasset? Any examples of someone who's tried?
I'm ready to invent a model where current renters buy houses, or utilize houses/units/buildings that I own, using smart contracts. The core idea is that ownership and rental income (to them as owners) are both fractional. Ownership is also temporary and they must occupy the space while they own it. There's a market for shorter term ownership. That is, people own their share of the building or unit for shorter lengths of time than would be required if they went all in to buy a house or condo. I envision smart contracts with easier and quicker in/out terms than traditional ownership. This would make real estate ownership more nimble, more affordable and accessible to more people. Starting idea: REITs that are owner-occupied, local and much easier to enter and exit. Anyone want to get a more focused discussion group going on this?
I'm ready to invent a model where current renters buy houses, or utilize houses/units/buildings that I own, using smart contracts. The core idea is that ownership and rental income (to them as owners) are both fractional. Ownership is also temporary and they must occupy the space while they own it. There's a market for shorter term ownership. That is, people own their share of the building or unit for shorter lengths of time than would be required if they went all in to buy a house or condo. I envision smart contracts with easier and quicker in/out terms than traditional ownership. This would make real estate ownership more nimble, more affordable and accessible to more people. Starting idea: REITs that are owner-occupied, local and much easier to enter and exit. Anyone want to get a more focused discussion group going on this?
@Katrina Razavi @Ian Cherkowski @David Luu @Aaron Stuiber @Jonathan Hickerson
Point of discussion on this awesome topic: If crypto is classified as property by the IRS, then can a person 1031 exchange a real house for an NFT house or some other cryptoasset? Any examples of someone who's tried?
This is an awesome idea.
@Joan MacDonald do you know anyone who can do or has done a smart contract for real estate?
do I know anyone who's done a smart contract for real estate? no. but i'm going to know shortly bc this idea will transform this industry imo.
this is a good article on the idea of sc's in r.e. https://www.finextra.com/blogp...
this is a consulting company that deals in smart contracts https://www.itransition.com/se...
I'm ready to invent a model where current renters buy houses, or utilize houses/units/buildings that I own, using smart contracts. The core idea is that ownership and rental income (to them as owners) are both fractional. Ownership is also temporary and they must occupy the space while they own it. There's a market for shorter term ownership. That is, people own their share of the building or unit for shorter lengths of time than would be required if they went all in to buy a house or condo. I envision smart contracts with easier and quicker in/out terms than traditional ownership. This would make real estate ownership more nimble, more affordable and accessible to more people. Starting idea: REITs that are owner-occupied, local and much easier to enter and exit. Anyone want to get a more focused discussion group going on this?
Hello
I am a real estate investor and smart contract developer. I am not an attorney or financial advisor so do your own research and seek professional advice. These are my personal opinions.
Smart contracts can be used to operate your idea of fractional ownership, rent, reits etc in virtual real estate projects like Decentraland. If you use smart contracts for a tenant and they stop paying then how will you evict them? You still have to do the traditional legal eviction steps. A smart contract is not going to help in this problem. A smart contract can represent ownership in a REIT and allow someone to sell their share by accepting a payment with cryptocurrency. Shares in a REIT are securities and the laws require that the operator has a document roll of all owners with their identification. This might make it easier to do transactions in private equity deals but is largely the same as a REIT listed on a stock market. The token used would be a security and must be registered with the SEC. The marketplace that trades the token must be a licensed security broker so it can't be traded on a DEX like uniswap. All token holders must be accredited investors and most people interested in making money with cryptocurrencies are not. All these concerns have made real estate smart contracts a very small market.
The opportunity I do see is with a DAO model which is a distributed autonomous organization. A DAO is a smart contract where everyone that invests cryptocurrency is given a token that represents their ownership in the DAO. The owners of the DAO can make proposals on the smart contract. Then the owners vote on the proposals using the smart contract. If a proposal vote is accepted then the smart contract sends cryptocurrency to the address in the proposal.
The state of Wyoming has created a law that a smart contract DAO can form a corporation in the state of Wyoming. That corporation can then buy real estate in Wyoming and I believe at least 1 DAO has done this already. The DAO can decide if owners can stay on the property, rent it out, receive rent distributions, sell the property etc. It is also possible for the Wyoming DAO corporation to form a corporation in another state like California. Then the Californian corporation could buy real estate in California. This solution is not as ideal but does allow the DAO to buy real estate in another state. So bottom line this idea would allow a group of investors to pool their money together in a smart contract, buy real estate and operate as they vote on. It looks similar to a private equity deal except it uses cryptocurrencies and smart contracts.
So far the SEC has not taken much action against DAOs but it probably is a security and might have to be registered with them. There are crowd funding laws that would allow non accredited investors as well but they limit the size. In the past many ICO were considered unregistered securities and have legal battles with the SEC with fines, closures etc including the current dispute with XRP Ripple.
So first need to spend money on lawyers to get the legal structure setup so it can buy real estate without problems from the SEC. There are DAO sites you can use to setup the DAO smart contract, handle proposals, voting and payouts. The biggest challenge I see is to find and convince investors to invest cryptocurrency into the DAO. This requires a marketing campaign, influencers, presentations etc and could take months to raise the funds. Investors will have to overcome their concerns of a DAO, the legal setup and buying large amounts of cryptocurrency. The sponsor will need enough real estate experience for investors to trust them. If you can raise the funds then the DAO can vote on which property to buy and move ahead. Once the DAO corporation owns the real estate it can use the traditional legal steps to handle buying, selling, renting, evictions etc.
I would be interested in working on a DAO project but I am not interested in finding investors and convincing them to invest. I would require someone in the team to have past successful experience in raising funds.
Regards,
Ian
do I know anyone who's done a smart contract for real estate? no. but i'm going to know shortly bc this idea will transform this industry imo.
this is a good article on the idea of sc's in r.e. https://www.finextra.com/blogp...
this is a consulting company that deals in smart contracts https://www.itransition.com/se...
I'm ready to invent a model where current renters buy houses, or utilize houses/units/buildings that I own, using smart contracts. The core idea is that ownership and rental income (to them as owners) are both fractional. Ownership is also temporary and they must occupy the space while they own it. There's a market for shorter term ownership. That is, people own their share of the building or unit for shorter lengths of time than would be required if they went all in to buy a house or condo. I envision smart contracts with easier and quicker in/out terms than traditional ownership. This would make real estate ownership more nimble, more affordable and accessible to more people. Starting idea: REITs that are owner-occupied, local and much easier to enter and exit. Anyone want to get a more focused discussion group going on this?
Hello
I am a real estate investor and smart contract developer. I am not an attorney or financial advisor so do your own research and seek professional advice. These are my personal opinions.
Smart contracts can be used to operate your idea of fractional ownership, rent, reits etc in virtual real estate projects like Decentraland. If you use smart contracts for a tenant and they stop paying then how will you evict them? You still have to do the traditional legal eviction steps. A smart contract is not going to help in this problem. A smart contract can represent ownership in a REIT and allow someone to sell their share by accepting a payment with cryptocurrency. Shares in a REIT are securities and the laws require that the operator has a document roll of all owners with their identification. This might make it easier to do transactions in private equity deals but is largely the same as a REIT listed on a stock market. The token used would be a security and must be registered with the SEC. The marketplace that trades the token must be a licensed security broker so it can't be traded on a DEX like uniswap. All token holders must be accredited investors and most people interested in making money with cryptocurrencies are not. All these concerns have made real estate smart contracts a very small market.
The opportunity I do see is with a DAO model which is a distributed autonomous organization. A DAO is a smart contract where everyone that invests cryptocurrency is given a token that represents their ownership in the DAO. The owners of the DAO can make proposals on the smart contract. Then the owners vote on the proposals using the smart contract. If a proposal vote is accepted then the smart contract sends cryptocurrency to the address in the proposal.
The state of Wyoming has created a law that a smart contract DAO can form a corporation in the state of Wyoming. That corporation can then buy real estate in Wyoming and I believe at least 1 DAO has done this already. The DAO can decide if owners can stay on the property, rent it out, receive rent distributions, sell the property etc. It is also possible for the Wyoming DAO corporation to form a corporation in another state like California. Then the Californian corporation could buy real estate in California. This solution is not as ideal but does allow the DAO to buy real estate in another state. So bottom line this idea would allow a group of investors to pool their money together in a smart contract, buy real estate and operate as they vote on. It looks similar to a private equity deal except it uses cryptocurrencies and smart contracts.
So far the SEC has not taken much action against DAOs but it probably is a security and might have to be registered with them. There are crowd funding laws that would allow non accredited investors as well but they limit the size. In the past many ICO were considered unregistered securities and have legal battles with the SEC with fines, closures etc including the current dispute with XRP Ripple.
So first need to spend money on lawyers to get the legal structure setup so it can buy real estate without problems from the SEC. There are DAO sites you can use to setup the DAO smart contract, handle proposals, voting and payouts. The biggest challenge I see is to find and convince investors to invest cryptocurrency into the DAO. This requires a marketing campaign, influencers, presentations etc and could take months to raise the funds. Investors will have to overcome their concerns of a DAO, the legal setup and buying large amounts of cryptocurrency. The sponsor will need enough real estate experience for investors to trust them. If you can raise the funds then the DAO can vote on which property to buy and move ahead. Once the DAO corporation owns the real estate it can use the traditional legal steps to handle buying, selling, renting, evictions etc.
I would be interested in working on a DAO project but I am not interested in finding investors and convincing them to invest. I would require someone in the team to have past successful experience in raising funds.
Regards,
Ian
Hi,
I am not an attorney but this is what I heard. Two friends can own a house by being members of an LLC that has title to it. This does not make it a security and does not involve the SEC. You can create an NFT for a house and say that when someone buys the NFT then the owner will transfer the title using escrow to the NFT buyer. This NFT represents an asset. The buyer could rent it out and make a profit but it is still considered an asset sale. If you create an NFT that is for ownership of 10% of a house then the buyer is not getting the asset but a share of an asset. You are likely advertising that they should buy the NFT because they will receive rental income or the house will appreciate in value. So the buyer has an expectation of profit and so it is a security. It is possible to ask your friends and family to partner with you but as soon as you do any public advertising for a partner then it must be an SEC registered security.
There is no way to avoid the security laws unless you change the structure of the deal so that it is not a security. The way to avoid large lawyer fees when dealing with a security is to use the crowd funding laws. Startengine.com helps you setup a security offering for up to $5m for around $5000. You have to write and provide all the documentation needed. They will review and ask for changes. Once it passes then your offering is listed on their site. They provide no marketing so you still need to find investors and convince them to invest. There are probably other crowd funding sites that are more real estate focused.
The USA security laws are designed to protect investors so that they can read all the information they need before they make an investment decision. It is difficult to fit cryptocurrencies, ICO, NFT etc into the current security laws in the USA which is why most of the innovation in cryptocurrencies is now outside of the USA.
If you are determined you will be able to get start engine approval but the biggest challenge remains finding and convincing investors to buy. It is much easier to sell the property as a whole by using a real estate agent. They do the marketing and find the buyer for you. Then you 1031 into something bigger. The IRS has clarified that a 1031 is only for exchange of real estate for real estate. You can't 1031 exchange bitcoin for ethereum or a real estate building for a real estate NFT.
Ian