If you’ve been reading our blog for any amount of time, you know we mostly talk about long-term investment strategies around here.
However, we can’t deny that as alternative assets become more mainstream, there’s a growing opportunity to generate cash flow by reselling assets on an accelerated timeline. This seems to be especially true in the fast-paced NFT market.
So let’s talk about that! Keep reading to learn more about the NFT space and a straightforward strategy for flipping NFTs to boost your income.
Quick Primer: All Things NFTs and Crypto
If you’re new to this space, before you run off and start investing in NFTs, stick with us to make sure you understand the ins and outs of this fast-paced world.
The first thing you should know is that NFT is short for non-fungible token. Non-fungible basically means non-interchangeable. One NFT does not equal another because each is unique. This is different from some other asset types. For example, one U.S. dollar will always be exchangeable for another U.S. dollar. The non-fungible aspect is what makes NFTs different from digital files that can be copied and shared over and over again. Each NFT is created with a one-of-kind signature. This is what makes owning and selling them possible.
NFTs are programmable digital assets within themselves, which represent other digital or even physical assets. At the time of this writing, most NFTs are digital art. However, NFTs can also consist of gifs, videos, audio clips, and Tweets. There has been some movement toward using NFTs to represent physical real estate as well as land in digital spaces, such as the Metaverse.
NFTs are hosted on blockchain technology. A blockchain is a digital database that makes transactions transparent, which is what enables NFTs and other assets to be traded without an in-between (like a financial institution) or any centralized oversight (like the Federal Reserve provides in the U.S.). Currently, Ethereum is the name of the blockchain where most NFTs live.
Since NFTs and crypto are often brought up in the same conversation, the last thing we want to touch on is the relationship between the two.
Many think of NFTs as an asset that falls into the cryptocurrency category. This is because both live on blockchain technology, and crypto typically still has to be used to purchase NFTs. Both asset types attract similar investors and are impacted by similar news and events, meaning their performance is closely correlated.
The difference is that cryptocurrency is fungible and it’s, of course, a currency. NFTs are non-fungible and derive value from how collectible they are at any given moment. While NFTs can be traded just like art and other collectibles, they can’t necessarily be used to “pay” for things the same way crypto coins can.
With that rundown complete, now we can talk about a method for making fast and healthy profits from your short-term NFT investments: flipping.
What Does Flipping NFTs Mean?
“Flipping” is just a term for buying an item at a certain cost, holding it for a short amount of time, and reselling it at a higher cost to generate a profit.
The concept of flipping is nothing new. You’ve probably heard of people flipping real estate or buying items at yard sales and thrift stores to flip somewhere like eBay.
The concept of flipping in the NFT world is the same. And here’s why it may be even more interesting to modern investors.
Why Flip NFTs?
The main risks of NFT flipping are the same risks that come with flipping any asset type — the asset could decrease in value, never gain value, or never land with the right buyer.
That said, there are a few undeniable upsides when NFT flipping goes right.
Ease of Flipping
NFT flipping often takes less work than other forms of flipping! No cleaning, no rehabilitation, and often no relisting online is necessary. The only effort needed to flip an NFT is holding it until the market deems it more valuable.
There is Money to be Made
The NFT space is worth over $20 billion in 2022 — a value that’s set to almost quadruple by 2026.
So while the early frenzy might have died down and it may be trendy to hop on the “NFTs are dying!” hype train, data indicates that there is still plenty of money to be captured by buying and selling NFTs.
Demand is Plentiful
Because NFTs are inherently unique, there is an element of scarcity around every asset. And as basic economics dictates, scarcity (aka a limited supply) increases demand.
Some NFTs, like one-offs or those released in small batches, are likely to generate more demand and attract more investors who are willing to take them off your hands for a profit.
A 4-Part Guide to Making Your First NFT Flip
The following four-part strategy will take you through choosing, buying, and reselling your first NFT.
1. Identify a Desirable NFT Project
A profitable flip is pretty dependent on choosing a desirable NFT in the first place, and that will require some up-front research. Here are five key factors to consider when searching for an NFT with promise:
Founders: The team that creates an NFT — often referred to as an NFT project — is important. You want active, trustworthy founders. Bonus points if their background lends them credibility in the NFT space.
Fame: An NFT with a previous owner who’s famous, or a project that currently has well-known collectors, should generate increased desirability among potential buyers.
Utility: In the NFT world, utility is like a set of perks that come with an NFT purchase. These perks usually include access to an exclusive community and more. The community around the Bored Ape Yacht Club NFT collection is a great example. Buyers prioritize features like these on the resale market.
Buzz: NFTs that have some talk around them may attract buyers more quickly. Look for NFTs, projects, and founders that generate buzz on the social media channels where people are discussing NFTs.
Style: It doesn’t hurt if the NFT in which you’re interested also looks good! NFTs with an especially pleasing or unique and memorable style may garner more interest.
2. Mint or Buy Your NFT
With your NFT chosen, it’s time to make your purchase.
Some NFTs are minted, aka published to the blockchain, at the moment they’re purchased. Others are minted by the creator sooner, and are already waiting on the blockchain for you, the buyer, to come along.
Purchasing an NFT before it hits the secondary market is what most resellers aim for, as this is when the asset is usually at its most affordable. However, it can also be a competitive time to try to make your purchase, because many other investors could be gunning for the same item.
For a better chance at snagging your preferred NFT the moment it drops, try to get on a whitelist so you know the second it goes live. You can do that by joining the communities — Discord, Reddit, Twitter, etc. — where they hang out and share news.
If you need to purchase an NFT second-hand, no worries. Here’s what that process generally looks like:
- Choose a marketplace where NFTs are bought and sold. If you have a specific NFT in mind, you can go straight to the marketplace where it’s hosted. If you’d rather just peruse what’s out there, start by exploring one of the popular NFT marketplaces like OpenSea or Nifty Gateway.
- Once you’ve chosen a marketplace, identify a “trending” tab or something similar that displays the hot NFTs of the moment.
- Dig through the options, you might want to sort by price, to start identifying items that look like a good flip — such as those that are undervalued or likely to grow in value.
- If this is your first time considering a certain NFT, don’t forget to look at the five “flippability factors” we laid out in the above section. Usually, NFTs will have properties attached to them that enable you to view things like the founding team, rareness, etc.
- Finally, take a look at the activity associated with the NFT you’re researching. You want to see high trading volume, with a history full of listings and sales. This indicates that an asset has good liquidity. Good liquidity will enable you to sell NFTs and generate cash quickly.
For more guidance on all the steps for finding and using an NFT marketplace for the first time, read our guide to NFT investing.
3. Monitor NFT Value in Your Fiat Currency of Choice Using Kubera
It’s going to be hard to sell your NFT for a profit when you don’t know its current value or what you paid for it in the first place.
Why wouldn’t you know these seemingly simple facts?
Because chances are you purchased your NFT in cryptocurrency, which means its value will be displayed in that cryptocurrency when you go to view it on the marketplace where you purchased it. Since the relationship between Fiat currency and every crypto coin changes multiple times a day, it can be tough to understand — in your native currency — what an NFT is worth at any given time.
While this isn’t the end of the world for the casual investor with just one or two NFTs, what happens when you have an entire NFT collection — all of which you need to sell at the exact right moment to make a profit?
The old way of pulling up several different websites or apps every time you want to see the value of an NFT simply isn’t sustainable for modern, DIY investors who have diverse portfolios and tight turnarounds.
You’re why we added the IRR for investments calculator to Kubera.
Kubera is personal balance sheet software that’s fully equipped to help even the most diversified investors track net worth, portfolio performance, and of course return on assets all from a single dashboard.
It only takes minutes to organize and start tracking all of your assets and debts inside Kubera’s clean interface. Add the credentials for your account-based assets (mortgages, crypto wallets, bank accounts, etc.) and watch them update in real-time inside Kubera. For those assets that don’t have a live account attached (physical artwork, precious metals and jewels, cash, antiques, etc.), it’s easy to keep their details up to date in your user-friendly Kubera account.
Using all that great information you’ve added, Kubera will automatically calculate internal rate of return (IRR). IRR is a more accurate form of ROI that takes things like holding time and cash flow into account. And not only does Kubera display your IRR in your preferred currency, the platform will even show the performance of some leading indices and cryptocurrencies on the same screen. This provides you with a benchmark against which to compare performance.
With Kubera, you are truly empowered to understand the value of every asset — NFTs included — so that you can make the quick decisions that are necessary to flip assets at the right time and increase portfolio value in a fast-paced market.
Want more details? Read this help center article to see Kubera’s IRR calculator in a real-life scenario.
We weren’t lying when we said earlier that successful NFT flipping is all about the up-front work. Even though reselling is the culminating step in your NFT flipping journey, it’s the easiest!
After using Kubera to determine that your NFT has reached a value you’re happy with, it's time to sell. Most marketplaces will have some sort of “sell” button that makes this exceedingly simple. Even transferring your NFTs to a different marketplace to sell should be pretty simple. Most NFT platforms will provide step-by-step guides that will help you get your NFT listed in minutes.
The most important piece here is choosing the right price. Do some research on floor price as well as what comparable assets have gone for. Of course you also want to take your original purchasing price and Kubera’s current value data into account. You may be able to choose between selling your NFT auction-style or for a flat price. If you’re in a hurry to see that return on your investment, the latter is what we recommend.
You Have Everything You Need to Flip Your First NFT
NFT flipping doesn’t have to be confusing, scary, or even all that time-consuming. Especially now that you know what you’re doing — and have the tools you need to do it!
The only thing standing between you and your first NFT flip now is a Kubera subscription.
Sign up to get started with Kubera in just minutes, right now.
Working with a financial advisor or wealth manager? That’s no problem! They can even use Kubera’s white-label solution to create a modern experience for a modern breed of investors just like you.