Non-fungible tokens (NFTs) seem to be in the news almost every day, now more than ever. NFT’s are not just for digital art, since they were first introduced, they have helped to change the world and the way people buy things.
One of the biggest investments in the world is real estate. Over the years the way people buy real estate has been changing. That includes buying real estate with family and friends, and with investors as well as through crowdfunding campaigns. Now it is changing again, and NFTs are being used to purchase real estate, shaking up the whole property world.
With the way the property world is changing and how NFTs are playing their part, this new innovation will generate many new opportunities for real estate investors. One man who knows how NFTs are playing their part in these exciting times is Darren Olayan.
Darren Olayan is a blockchain advocate who is deeply experienced in the development, promotion, and services. Olayan has become proficient in the vague constantly shifting regulation side of blockchain and spent years advising companies on licensing procedures. He is also an expert in the world of NFT.
We got together with Darren to look at the popularity of NFT in the real estate investing world.
Can you explain what NFT is?
An NFT is proof of digital ownership of something unique. This can include anything from art, concert tickets, copies of music, car ownership, a loan, a graduate degree, real estate to even a receipt for something paid for. It is simply understood as digital ownership of something.
You mentioned in a recent interview how popular NFT have become, why is that?
NFTs are on fire and the rave right now, both for good and bad. It is so popular because the market cap for NFTs is growing about 10 times faster than bitcoin. Everyone is talking about it yet very few understand what an NFT is. They are becoming popular because so many celebrities are jumping into the market as a source of additional revenue.
In the interview you also mentioned how NFT is being used in real estate purchase, can you explain more about that?
Yes. When you buy real estate, you are given title to the property which means you own the property. If you get a loan from a bank, you then give the title of the property to the bank, and they hand you a trust deed meaning you owe the bank a certain amount of money and the property is the collateral for the loan. Once you pay the loan off completely, the bank then gives you title to the property and removes the trust deed from the property. Now you own the property. An NFT is the digital equivalent to title to the property. The real estate industry both domestic and international is trillions of dollars and over the next decade, NFT technology will be integrated into this sector of business because it is efficient, saves money and transparent.
Is buying real estate with NFT legally binding like it is when people purchase property with cash or a mortgage?
At the moment, it is not legally binding. The local governments do not recognize the NFT as title to the property. When they do recognize it, then of course it will be legally binding. The current real estate industry moves very slow when it comes to change, especially technology improvements. NFT technology has the capability of changing the industry at lightning speed.
What has been the most expensive property that has been purchased through NFT?
There have been a few projects here and there that have created NFTs of their properties to allow investors to participate in the gains the real estate creates. As I mentioned, this is on a private basis still and difficult to find publication.
There are lots of crowdfunding sites that allow people to buy a share in a property as investment, are we going to see this happen with NFTs?
Yes 100%. You will see this part of real-estate explode faster with NFT technology than any other. My #1 recommendation as people become more aware of crowdfunding real estate projects is the legality side of things. Is there a proper legal documentation? Are you dealing with accredited investors or not? Is the exchange where you transact the actual NFT licensed by the US government? I’m excited to see how the crowdfunding part of NFTs and real estate evolve this year in 2022. I am currently working with the only FINRA licensed NFT exchange that I know of, and we are excited about providing a safe, transparent and legal way for investors interested in real estate NFTs to participate.
Is NFTs just another trend that will slowly die off, or can you see this being around for a long time and become the normal
Absolutely not. I believe that we are in NFT 1.0. So yes, this part will lose hype and excitement. Then we will transition into NFT 2.0 and will see billion-dollar businesses appear out of nowhere like Airbnb, Uber and Amazon. I say that in jest because each of those companies took many years to develop and evolve but NFT technology will make this next crowdfunding venture explode with growth.
If NFTs continue to be popular then how could this work with mortgages?
As I gave an example earlier, NFTs will greatly affect mortgages. For the customer that obtains a mortgage, the NFT can be fractionalized and as the loan/lien is paid off, the balance will decrease. The fractionalized NFTs can be awarded to the client paying off the mortgage. Each of these fractionalized NFTs can be representative of the loan and/or the real estate ownership. We will see where that goes.
The really interesting thing about this question is what will happen in the secondary market of mortgage back securities. With NFTs, it will make transaction speed faster, more transparent and will be a trillion-dollar industry. Mark my words. The government will need to be pro-active and understand the NFT technology before we see massive billion-dollar banking schemes take place right in front of our eyes again.
Can you see a time when banks start dealing with NFTs?
Yes. NFTs are digital ownership of something. Banks manage securities and every security can be represented by an NFT. Wow, I’m very excited about what is to happen over the next 3 – 5 years. I hope you buck up because this is a rocket ship to the moon.
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