NFTs appear to be the latest fad in investing. So, how do they stack against real estate for investors?

If you’ve heard your kids chatting about NFTs, but haven’t explored them yourself yet, it stands for Non-Fungible Token. These are forms of digital art that people can buy and invest in.

Almost anything can be a NFT today. From digital movie tickets, to collectible pictures, to in game purchases.

Some of these have sold for tens and even hundreds of thousands of dollars. Like the cryptocurrencies which are often used to buy them, they may go up and down in value. But, how do they stack up against proven investments like real estate?

Buyer Pool

One of the strengths of real estate is that there is a huge resale market for it. At the right price point the potential resale market for a wholesale property, house flip or rental apartment may be tens of millions or even of a billion customers. That creates liquidity and value.

Not many people are in NFTs yet. Meaning that there aren’t many people to sell your virtual Logan Paul playing card, virtual home in a game, or old movie tickets to.

Need

Real estate is a need. A forever need. People will always need shelter. It is even more urgent than food and water. This will never change. Even in a recession people need shelter.

When things get tight, there may be little need or desire for digital art.

Hard Assets

Even physical artworks used to be valuable because they were rare and tangible. Going digital changes these dynamics.

The problem with public stocks, crypto and other virtual assets is that they can go to zero and leave you with nothing.

Even in the worst case scenario in real estate. You still have the hard asset. You can still get cash flow from it. It’s value will eventually exceed its previous high.

Cash Flow

It may be possible to get cash flow from NFTs. Perhaps there is someone willing to pay to rent your virtual playground online, or to pay for a viewing of your favorite athlete's photo.

However, we do know that people will for sure pay for rent on real homes and other property. Being able to generate that consistent cash flow is a critical financial difference.

Leverage

You may be able to borrow against your bitcoin or use a credit card to leverage your NFT purchases. Though, the market for financial leverage in real estate is clearly far larger, more liquid, and can provide even the average new investor access to millions of dollars in financial leverage to scale quickly.

Summary

NFTs may be fun and interesting. They may even be a gateway for getting your kids interested in investing and to teach them some valuable financial lessons.

They may not be the safest or most profitable investments by any means, but if you are tempted, then it doesn’t hurt to throw $10 or $100 of play money at them that you make from investing in real real estate.

 

This is one of the best times for wholesaling property that we’ve ever seen. Just make sure you aren’t falling into these mistakes that many wholesalers are making out there right now.

Buying Flooded Property

Disasters like hurricanes and floods can yield some great inventory and discount opportunities. Yet, for the many real estate wholesalers who are now working remotely online, it is important to know what you are getting.

You can’t expect to buy a flooded out, underwater property and sell it for the same amount as local comps which are high and dry. This is a big issue right now with record amounts of storms and rainfall.

If you do find you’ve bought a property like this, then you are probably going to have to at least seriously discount it below other comps to move it.

Properties With Non-Performing Tenants

There are end buyers who may be willing to take on these properties. Yet, expect that number to be far fewer than there were two years ago.

Now there is really no telling when they will ever be able to get that occupant out, and what their real financial bleed and costs will be until that happens.

Again, this is something that needs to be priced into your offers.

Accepting Cashier’s Checks

Payments have changed a lot in the past few years. Now some can not only pay for properties with credit cards, but PayPal or bitcoin transfers. Still, some old school investors are relying on some antiquated payment methods like cashier’s checks. They used to be considered guaranteed funds. They are not any longer. They don’t have any more value than personal checks. Do not sign over any property until you have cleared funds in your account.

Pricing In Costs For The End Buyer

Not only may your offers and asking prices fluctuate with the market, but they should also take into account inflation and property specific costs.

End buyers, especially landlords and rehabbers have to price these line items into their offers and what they are willing to pay.

Recently there has been massive inflation in installing utilities, new construction, labor, and building materials for rehabs.

If it is costing them 30% more today, then if you don’t price that in you may be sitting on that deal for too long.

Property Values

Property values seem to have been soaring. Yet, there is a massive difference between actual sold and recorded transfers and asking prices. Don’t rely on rumors or listing prices. Overpriced properties may still have been sitting on the market for two years or more. Look at recently closed comps.

Not Maximizing Financial Leverage

It is a fantastic time to scale your real estate wholesaling business. Yet, many are feeling uncertainty about the future. Maximizing your leverage with transactional funding will dramatically reduce your risks, while greatly elevating your capabilities to do more deals.