Although many of us might associate NFTs with viral and expensive Twitter profile pictures, but the technology can do so much more. A great example of this is the ownership of real estate. We've seen this happen in the virtual world already (oh, the infamous metaverse) but BlockPark is bringing it to the real world.
In a nutshell, they offer fractionalized ownership of real estate in the form of NFTs. Rad, right?
The BlockPark platform will list properties that have been fractionalized into multiple NFTs of $1,000 (this figure may change from property to property).
That is to say that if the full asset was worth $1 million, the property would be represented by ~1,000 NFTs. So if you own 10% of the NFTs for a property, you'll receive 10% of the profit the property makes.
The current problems in real estate
Blockchain solves two major issues when purchasing real estate: the barrier to entry and lack of transparency.
In the current market, many are unable to join the real estate game due to the huge capital required to purchase a property. Even if you do have a big chunk of savings (hi Mr. Whale!), you have to jump through many hoops in order to buy a property.
In a seller's market, the buyer holds none of the cards. Thus, transparency in the real estate world is hard to come by.
Daniel Riceberg, the Founder and CEO of BlockPark, elaborated, "Blockchain solves a lot of the bullshit. If I put in an offer for 10 properties, I would get 10 different PDFs showing how much the property makes. [...] No one is going to give me their bank statements to prove the figures are accurate. And if I ask for a long escrow period, my offer will just get rejected."
Real estate with NFTs: the true match?
Riceberg has seen the horrors of the traditional real estate world firsthand during his time as a Senior Loan Officer at Stone Bridge Mortgage. He hates the hoops that his clients have to jump through so he created BlockPark to solve these issues.
As BlockPark is decentralized, a buyer can simply access a property's revenue figures, sell history, amenities, furnishing, and more. Finding this kind of transparency in a traditional real estate market is near impossible.
Once you are a part-owner of a BlockPark property by purchasing an NFT, you join the DAO that controls how the property invests its money, deals with tenants, etc.
"Everyone whether you invested for $1,000 or $100,000, everyone has an equal vote [in the DAO]," Riceberg explains.
This prevents the possibility of investing in an asset where somebody already owns 51% of the NFTs, rendering your investment redundant in terms of governance.
Once a DAO has owned a property for a full year, BlockPark will offer to refinance it. Refinancing a property means investors can take out a loan using the initial property as collateral. This will allow the DAO to retain 75% of the original property value to invest in a new asset or assets.
"Let's say it's a $10 million property, the DAO now has $7.5 million in capital to acquire additional assets," Riceberg said. "The money you're making on the initial property goes down [due to refinancing] but you're using leverage to acquire more properties so the overall revenue goes up".
To summarize, this function allows a DAO to turn from investors in one property to holding a portfolio of properties. In turn, increasing the cash and PROP (BlockPark's native token) coming in. This is a one-of-a-kind idea.
Who does BlockPark want to attract?
Community, just like other NFT projects, becomes key at this point. Unlike Bored Ape Yacht Club or Cryptopunks, there isn't one target demographic for BlockPark. Instead, they are attempting to bridge the gap between real estate chads and crypto bros.
They have recently launched their Discord which should soon harbor their prime investors. Once this is up and running, it'll be interesting to observe how their community shapes up.
On the one hand, you’ll have real estate chads that look down on crypto as a fad or a scam. And on the other, crypto bros look at a 5% ROI and scoff. What demographic will take to BlockPark's vision quicker? That’s the ultimate test.
Research from within the company has shown that the crypto community is keener on the project than the real estate community.
"[The study showed] the real estate sector had an open rate of 15% and a conversion rate of less than 5%. Whereas crypto had an open rate of almost 60% and a conversion rate of like 30%, where they would fill in a form saying how much they would commit to a property." Riceberg said.
Clearly, the crypto community is behind the idea. But one innovative way that non-crypto enthusiasts could be more interested in the BlockPark ecosystem is through tenancy. Let me explain.
What’s in it for Tenants?
One of their key features for tenants is: When living in a BlockPark property, if you pay your rent on time, you will be rewarded! 3% of your rent will be paid back to you in the form of their crypto token, PROP. If rent isn't paid on time those tokens go back into the property to be reinvested. A win-win for both tenants and landlords.
With this token, you can do four things:
1) Exchange to fiat
2) Get a discount on next month's rent
Yay, cheaper rent!
3) Save up for enough PROP tokens to purchase a BlockPark NFT
You could buy an NFT of the property you're living in. Essentially, paying yourself to live there.
PROP tokens are tied to the performance of BlockPark. So, of course, the price IS highly volatile. However, if the company goes on to become one of the biggest real estate platforms in the U.S., your token could skyrocket in price. Equally, the project could fail, and PROP could plummet in price. Let's hope for the former. 🙏
As someone who is currently looking to rent, I just hope the property I live in is a BlockPark property. I want 3% of my rent back every month… please landlord.
What’s in it for BlockPark?
Wait a second… so how is BlockPark making any money from this? Well, the company will own 2% of every property's NFTs on their network. That means they can vote in the DAO as well as earn income from every property. They will also earn a small percentage through platform fees and NFT sales on the secondary market. Additionally, BlockPark will have a reserve of PROP tokens to help grow the community.
"Our biggest hurdle is to find investors. We have to build trust for people to trust us with their money." Riceberg told us. "That is where the money will be spent. Growing that community, building that trust."
The Bigger Picture: Tying Stakeholders Together
In real estate, there are four primary stakeholders — the investors, the property managers, the tenants, and the property itself. With this project, BlockPark aims to align every stakeholders’ needs.
For instance, The investors benefit from a network that allows them to be a stakeholder in real estate with a lower barrier for entry and higher levels of transparency. Tenants benefit from BlockPark because of that sweet, sweet 3% cashback in PROP tokens.
But, how do property managers benefit? Aside from getting their salary and a percentage of PROP tokens every month, the DAO can choose to give good property managers a bonus.
The property itself gets 1% of rent paid back into itself in PROP tokens. At the end of the year, the DAO can vote on how to use this additional pot of money. Be it a bonus for property managers, investing in a new lick of paint, or, well, anything really.
Riceberg’s vision For BlockPark
"The asset (property) benefits the most — which benefits everybody!" Riceberg said. "It is being well taken care of by the investors, it is performing well by the tenants because they want to earn those rewards, and it is getting its own yield for just standing there. If everyone's focus is the asset, everyone wins."
He compares it to collecting baseball cards — we promise this makes sense. Back in the day, baseball cards had a thing called a Beckett that told you how much your card was worth. If you wanted, you could send your card to a company called PSA that would check the quality and condition of the card. They would put it in a big plastic case rating it as an 8/10 or a 10/10. If it is well-maintained and authenticated, a card intrinsically worth $20 could be sold at $100. Similar to the recent Pokémon mania.
That is what keeping a well-maintained property on the blockchain will be like.
If the investors, property managers, and tenants work together to take good care of the property, it will flourish. And so will the company. The transparency that blockchain allows will act as the company verifying the baseball cards. Allowing outsiders to see how well maintained the asset is, inviting them to join the party. And where better to host a party than at a beautiful home?
Check out writer Ryan S. Gladwin's website, follow him on Twitter, and of course, subscribe to the weekly Hedgehog newsletter!