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What is NFT real estate? Explaining the investment of attention now! [Characteristics, how to start, future potential]

Official | 2022.12.12

Text by きど

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NFT is leading the field of art, but its use in real estate is also being promoted in Japan and overseas.

What happens when “real estate investment”, which has a complicated and difficult image, and the topical technology “NFT” are multiplied?

For those who want to know more, we will thoroughly explain the characteristics, domestic and foreign cases, and future prospects.

1. What is NFT real estate investment?

NFT real estate investment is an “investment method for trading NFT real estate”.

The real estate referred to here includes real estate as well as land in a digital space called the Metaverse.

NFT is a technology that proves the uniqueness of digital data and is expected to be applied in a wide range of fields.

In the past, digital data was easy to copy, and difficult to prove its uniqueness once it spread over the Internet.

With the advent of NFT, the issuer, owner, and transaction history are recorded, and it is difficult to falsify, making it possible to prove uniqueness.

As an investment method, it is the same as real estate investment so far, to get price increase profit and rental income.

By using NFT for real estate investment, it is attracting attention that it can shorten the procedure time and simplify transactions.

2. Case of NFT real estate investment

The following three examples of NFT real estate investment are introduced here.

  1. Case 1. Buying and selling land in the metaverse space
  2. Case 2. Digital house wins bid
  3. Case 3. NFT sale of one room in an apartment

When it comes to NFT real estate, land in the metaverse space tends to be the focus of attention, but there are increasing examples of its use in real land and buildings. Let’s go through them one by one.

(1) Case 1. Buying and selling land in the metaverse space

Image: From The Sandbox official website

Metaverse means digital virtual space.

In the Metaverse, it is possible to create buildings and roads on land, and run avatars. Furthermore, you can also hold events on the land and collect participation fees, or create a showroom and manage a store.

The land in the metaverse space is sold as NFT, and anyone can purchase it at the marketplace (sales office).

For example, The Sandbox offers an NFT land called LAND. By the way, the average price per LAND plot is around $2,000 as of June 2022.

Since the number of LANDs is limited to 166,464 parcels, scarcity value is created in the same way as real land.

The Sandbox is also famous for being funded by the Softbank Group, and LAND also owns Avex and Square Enix.

Since it is a “metaverse land” that is attracting attention from global companies, the price will rise further depending on future development.

(2) Case 2. Digital house wins bid

Image: Winning bidder Krista Kim’s Twitter

In March 2021, a work that turned a digital house into an NFT was sold for about 56 million yen (at that time) and became big news (Reference: World’s first digital NFT house sold for $500,000│CNN ) .

It has been announced that the digital house named “Mars House” can also be uploaded to the Metaverse space.

In fact, it is possible to upload externally produced 3D models to the Metaverse platform “Decentraland”.

As part of people’s lives move to the Metaverse, more and more people will want to own a digital home.

This is a good example not only for the Metaverse and NFT industries, but also for the real estate industry, which has sales know-how.

(3) Case 3. NFT sales of one room in an apartment

Image: Ouchi Finance official website

Ouchi Finance is an initiative to convert one room of an apartment in Nerima Ward, Tokyo to NFT and sell it in small lots.

NFT has the advantage of clarifying ownership because the owner’s record is stored on the blockchain. This is an example of taking advantage of such NFTs, linking NFTs to rooms that have already been built, and selling NFTs instead of real estate itself.

Also, NFT can be purchased by anyone with a wallet and funds. It can be said that it is easy for people who thought that real estate investment has high hurdles to start.

3. Advantages and disadvantages of NFT real estate investment

Of course, there are advantages and disadvantages to NFT real estate investment. Investing involves risk, so make sure you understand the pros and cons before considering it.

I will explain each of them two by one.

(1) Benefits

The advantages of NFT real estate investment are as follows.

  1. You can invest from a small amount without management fees
  2. You can trade real estate all over the world

① You can invest from a small amount without management fees

With digital real estate, there are no administration or maintenance costs. Furthermore, there is no risk of aging or natural disasters.

A major advantage of NFT real estate is that it reduces the costs and risks involved in real estate investment.

In addition, there is also the merit that the cost can be kept lower than the actual real estate price as much as there is no extra cost.

② You can trade real estate around the world

The Metaverse can be accessed from anywhere as long as there is a viewing environment, so there are no “location restrictions” that come with real estate.

Viewing and contract signing can be completed online.

Furthermore, when investing in overseas properties or selling domestic properties overseas, the procedure is simple because it is sold as an NFT.

If the number of cases of NFT x real estate increases, it can be expected that the number of entrants to real estate investment will also increase.

(2) Disadvantages

The disadvantages of NFT real estate investment are as follows.

  1. Lack of information on NFT real estate
  2. Legal development is immature for a new field

① There is little information on NFT real estate

Currently, there is little information on NFT real estate, including cases.

Originally, the technology itself called NFT was born around 2017, and it started to become a hot topic in Japan around 2021, so it is a fairly new field.

Insufficient information may lead to the risk of being caught in a malicious project or reducing assets.

Therefore, it is important to capture information from the two perspectives of “NFT” and “real estate investment”.

② Legislation is immature because it is a new field

In some cases, legislation has not yet caught up.

NFT is leading the field of art, but regarding the transaction of NFT art, there is no clear legal system in Japan.

In addition, the laws that apply to real estate differ depending on the country or region, so it is necessary to carefully check the rights and taxes of NFT real estate.

However, recently, the development of the environment related to “Web 3.0” such as Metaverse and NFT has finally started to move in Japan (Reference: Regarding the points to be addressed in the Intellectual Property Promotion Plan 2022 (content-related part) (1 ) Content strategy in anticipation of the WEB 3.0 era, etc.│Prime Minister’s Office ).

NFTs and NFT real estate will also attract more attention if they become accessible to many people. Information exchange will also become active, and it will be easier to prevent troubles.

4. How to buy and sell NFT real estate

I will explain how to buy and sell NFT real estate, using Coincheck NFT (β version) to buy “LAND” of The Sandbox as an example.

(1) How to buy NFT real estate

There are 3 steps to purchase:

  1. Open a Coincheck account
  2. Deposit Japanese yen to buy crypto assets
  3. Purchase with Coincheck NFT (beta version)

① Step 1. Open a Coincheck account

Access the official website of Coincheck and open an account.

All you need are three things:

  1. email address
  2. phone number
  3. Identity verification documents

If you have a smartphone, it will be completed in about 10 minutes.

② Step 2. Deposit Japanese yen to buy crypto assets

The crypto asset required to purchase NFT real estate (LAND) is Ethereum (ETH, Ether).

Deposit Japanese Yen into your account and buy Ethereum.

By the way, credit cards cannot be used at cryptocurrency exchanges in Japan. This is because the credit card company prohibits the use for gambling purposes.

③ Step 3. Purchase with Coincheck NFT (β version)

From the Coincheck home screen, access Coincheck NFT (β version) and select the NFT real estate you want to buy.

The Sandbox LAND is listed from approximately 1.6 ETH (approximately 300,000 yen) (as of June 2022).

(2) How to sell NFT real estate

Image: From Coincheck NFT (β version)

If you want to sell the NFT real estate (LAND) you own, follow the reverse procedure of buying.

The procedure for converting to Japanese yen is summarized below.

  1. check the market
  2. determine the selling price
  3. Once sold, you will receive ETH
  4. Sell ​​ETH on Coincheck
  5. Converted to Japanese Yen

The important thing is “1. Check the market price”. In addition to the NFTs listed on Coincheck NFT (β version), let’s decide based on information such as external NFT marketplaces.

5. The future of NFT real estate investment

Since NFT real estate investment is a new field, there are disadvantages and risks.

However, in terms of reducing the hassle and cost of real estate investment, the use of NFTs will be a solution.

In addition, NFTs have the characteristic of “clarifying ownership”, and are expected to be used not only for real estate investment but also for recording and sharing registration information.

If the number of cases increases and it becomes easier for many people to use it, it is believed that NFT real estate investment will spread.

Just like real estate investment, this is an area where the first mover can easily make a profit, so let’s make an investment decision while scrutinizing various information.

6. “NFT x real estate” is an investment product that needs attention from now on

So far, I have explained the characteristics, advantages and disadvantages of NFT real estate investment.

Finally, summarize the content.

  1. NFT real estate can reduce the time and effort of procedures and management costs
  2. NFT lowers the hurdles to real estate investment
  3. There are disadvantages and uncertainties, but there are plenty of possibilities

NFT real estate is a field that is expected to grow in the future. As mentioned in the article, let’s comprehensively judge the merits and demerits.

The NFT marketplace “HINATA” collects various NFT information such as “NFT art” and “NFT music” as well as real estate.

If you are interested, please take a look at “HINATA MAGAZINE”.

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