New for 2023 – Luxury Real Estate Investing with The Hideaways | Ingram Yuzek Gainen Carroll & Bertolotti, LLP
As we enter 2023, some investors may be in need of some aid to cover their painful crypto losses from 2022. Enter The Hideaways, where NFT investing meets real-world utility. The Hideaways claims to be the world’s first luxury real estate investment platform that allows users to invest in a fully managed portfolio of luxury properties across the globe. The Hideaways is looking to become a solution to the large start-up cash needed for traditional real estate investing by offering fractionalized NFTs backed by physical properties for as little as $100.
Unlike other crowdfunded real estate investment platforms, The Hideaways will be powered by the platform’s newly founded crypto token, HDWY, which can be used to purchase fractional ownership of NFTs. The NFTs purchased using HDWY will be minted and characterized by distinctive digital artwork to represent the property the user is buying into. The Hideways claims that its platform will not only provide passive income through real estate investing, but also secondary capital appreciation through the trading of the HDWY token. The Hideaways also claims that users will be able to trade their fractionally owned NFTs to reshape their investment portfolio and are allowed to vote and decide on every property purchased.
The Hideaways appears to be quite bullish on their investment strategy and the potential investment yield for its users. The Platform claims that users can earn more profit than traditional real estate investments by owning the Hideaways NFTs as they generate yield for you from short-term holiday leases, large events held at the properties such as weddings and purchasing the properties at a discount (though it is unclear how exactly The Hideaways will achieve discounted purchase prices).
Because real estate cannot be transferred solely through the transfer of an NFT, the real estate tokenization of HDWY requires a special-purpose vehicle (SPV) to legally hold the real estate in the jurisdiction where the property is located. SPVs are commonly used in certain structured finance applications, such as asset securitization, joint ventures, real estate deals, or to isolate parent company assets, operations, or risks. Though there are many legitimate uses for SPVs, they have been used in the past to misrepresent the financial health of a company or alter a company’s financials (see the famous Enron scandal), which is why it is critical to carefully analyze SPVs along with others aspects of a company’s financial statements before investing.
The Hideaways claims that their SPV’s will have a dedicated bank account which will be used to collect rental income and to pay the property-related expenses. The net rental profits, if any, will then flow to NFT owners in $USDT or $ETH through their HDWY dashboard, and will be distributed based on NFT ownership on the last day of every month.
With the recent downturn in virtual land investing, NFTs connected to real-world physical properties appear to be what analysts are betting on. Real estate investors are now more interested in placing their money on fractionalized and tokenized actual properties, rather than virtual properties with little to no utility. With that being said, the traditional hurdles of real estate ownership, transfer and investing remain. It remains to be seen whether the NFT aspect will add value and make luxury real estate investing more accessible or if it will simply add just another hurdle to real estate investing. Regardless of the outcome, The Hideaways will be an interesting project to follow over the next year.