Fractional or co-ownership would mean breaking down real estate ownership into several pieces, which different entities can own as NFTs. This idea can potentially revolutionize co-ownership of Real Estate for good.
If it succeeds, it could open real estate investment to a larger class of investors as fractions of an expensive piece of Real Estate can be split among multiple owners with little capital. It could reduce the time and effort involved in Real Estate acquisition to the click of a few buttons. Added to that are the ease of access and exchange that comes with digital assets, and the security of blockchain technology, among other things.
Non-Fungible Tokens are one-of-a-kind digital assets that can be traded and exchanged for value.
Real estate NFTs come into being through tokenization, where the title or ownership info about a piece of Real Estate in the real world is recorded on a Non-Fungible Token. Through this NFT, ownership rights to a property can be transferred.
A fractional NFT refers to a set of fungible tokens tied to a whole or a set of NFTs. As the name suggests, it implies fractional – or proportionally shared – ownership of an NFT. When an NFT is fractionalized, the original NFT is locked up in a vault, and someone issues a limited supply of fungible tokens that represent ownership over that NFT. These fungible tokens can be bought on fractional NFT platforms and can also be traded on secondary markets.
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Tokenization: First things first, for the deed of a property to be minted as an NFT, it is tokenized. In other words, the ownership rights of the property get encoded into the tokens based on the blockchain, where it is traceable and tamperproof.
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Investment Pool: Multiple investors pool money to pay for the property and have joint ownership. This joint ownership happens when entities purchase the Fractionalized NFTs from real estate platforms offering the service.
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Returns: Rent and other revenue accruing to the property, including appreciation, gets distributed according to each NFT holder's investment percentage.
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Lower Point of Entry for Investors: One of the biggest problems facing real estate investment is the large capital needed to own properties. Fractional NFTs enable investors with lower capital to enter real estate investment. This single benefit can potentially expand the real estate market as more small-scale investors can now enter the market through fractional NFTs.
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Stress-Relieving: This model is unlike owning real Estate the old-fashioned way, which involves dealing with go-betweens, physically going around to examine properties, dealing with rent collection, and all the hassle associated with it.
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Decentralization: Platforms like Futurent are decentralized. The token Holders are DAO members and can therefore be involved in the governance of the platforms where they hold tokens.
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Web 3.0 and Real-life Integration: Fractional real Estate backed NFTs are an example of the real-world/web3 integration scenarios the digital economy seeks to foster. Success in this area will pave the way for more physical assets to go digital, which will secure the place of NFTs in the global economy as a strong use case for the technology.
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Security: The blockchain is a public digital ledger that makes anything saved on it traceable and tamperproof. It will lend a level of security to fractional NFT holders as there can be no dispute over ownership rights since they are all recorded on the blockchain.
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Easy Transfer of ownership: one only has to sell their NFTs to transfer ownership, saving much legal hassle.
Fractional NFTs make it easy, safe, and stress-free for investors to co-own real Estate. They provide a way for small-time investors to own property with little capital without stress.