Is Virtual Real Estate a Good Investment?
Along with a surge in the value of the real estate, virtual real estate also saw a significant uptrend in the latest bull cycle. Prices of land parcels across different metaverse platforms soared by more than 10,000%, delivering triple-digit gains to early investors.
While some of these prices have taken a hit amid the recent market downturn, virtual real estate is still considered one of the most lucrative investment options. This is particularly true given that the metaverse is going to play a crucial role in our future lives.
What is Virtual Real Estate?
Real estate has always been an important part of most people’s investment portfolios. Much, if not all, of that property, has been “real.” However, today’s real estate investor may also be considering something a little less touchable: virtual land.
Building a virtual real estate portfolio could be the next big thing for investors who aren’t afraid to take a chance on new technology.
Virtual real estate is a unique land that is deeded and exists in a digital world. You can think of this world as a video game, but with more social and community components.
Land in the metaverse, the collection of virtual worlds where virtual land can be purchased, can be just as valuable as land in the real world and has even attracted the attention of celebrities like Snoop Dogg and companies like PricewaterhouseCoopers.
What Can You Do With Virtual Real Estate?
Companies that want to get a piece of the action are jumping on the metaverse bandwagon to create some kind of digital economy where they can innovate, sell and buy goods. This includes real estate. In a virtual world.
With that said, virtual real estate is a type of online asset that one can buy rent, or sell. It’s pretty much the same as buying an Airbnb property for profit in the real world. As long as it exists online and has a certain value associated with it, it is considered digital real estate.
Virtual land is usually purchased from non-fungible token (NFT) marketplaces like Sandbox and Decentraland. Ownership of the virtual property is then recorded on the blockchain where the NFT is located. This virtual property can be used to build structures such as mansions, art galleries, or whatever else you have in mind.
For example, award-winning rapper Snoop Dogg is in the process of developing his own virtual world, aptly named Snoopverse. In it, he is currently building a digital version of his actual Diamond Bar CA mansion to hold concerts and virtual private parties.
How To Invest in Virtual Real Estate?
Like investing in real-world real estate, the supply of virtual real estate is limited. Also, once you buy virtual real estate, you own a unique parcel of land in the metaverse.
Just like physical real estate, you can do various things with your virtual land. For example, you can create properties that generate income, such as leaseable buildings or interactive venues.
Additionally, each parcel of land in the metaverse is unique and backed by a non-fungible token (NFT). An NFT is essentially proof of ownership of something digital, making it uniquely identifiable.
When you buy virtual real estate, your NFT guarantees the property and makes it possible to sell the property to another investor, it automatically and instantly records transactions, eliminating the time you would wait to close on a property.
How to Buy and Sell Virtual Real Estate?
It is not difficult to buy and sell digital assets in the metaverse. Most metaverse platforms are easily accessible with a desktop computer, making it a breeze to inspect virtual real estate before making a purchase decision.
Once you’ve chosen a piece of virtual real estate, you can search for it on one of the many third-party reseller platforms, such as OpenSea.io or NonFungible.com. These sites can show you sales history, if any, and allow you to do the same for nearby properties that could serve as decent comparables.
You will need to open a digital wallet that can hold your digital assets, including the cryptocurrency you will use to make your purchase. The wallet you choose will depend on the metaverse platform you are using. Each site will explain which ones are preferred and how to link them.
Why is Virtual Real Estate Hot?
The metaverses beat the real world with the possibilities you can unfold with your piece of “land.” In a matter of minutes, you can set up a shopping center, a mansion, or a skyscraper. Because transactions are quick and easy in the metaverse, the value of a digital property increases exponentially.
Investing in virtual real estate is similar to playing a game of Monopoly. The ideal would be to acquire as much property as possible. Location plays a big role in selecting which parcel of land to buy. As expensive as they are, the areas with the most user traffic will have a higher value over time.
In fact, Snoop Dogg won over a neighbor in the Sandbox metaverse, who bought the neighboring land for the price of $450,000. In Sandbox currency, that equates to 71,000 SAND. As Snoop Dogg’s digital mansion attracts people every day, the neighbor also benefits from the traffic his “land” receives, which in turn increases the value of his digital property.
The race to virtual real estate investments is strikingly similar to the domain name frenzy. Just as people rushed to secure unique domain names on the Internet, virtual land is a limited commodity. There can only be so many virtual owners on the existing metaverse platforms.
Buying a plot of virtual land opens a door of opportunity for you and the rest of the population of the metaverse. As an owner, you can choose to share the experience of working on the land with others in the digital world. Malls, stores, and event centers allow creators to showcase their collection of content.
Is Virtual Real Estate a Good Investment?
Virtual real estate comes with many promising features. First of all, you can earn impressive income by leasing your virtual property to brands or businesses that need a workspace within the metaverse. You can also sell your “land” for a price that only you can dictate.
Virtual real estate, in essence, brings together different sectors of the labor industry, with a different efficiency than the real world full of traffic jams, months of construction, etc.
As exciting as it is to bring reality into a digital world and simulate real-world experiences through pixels, virtual real estate, or the metaverse in general, it’s a risky investment.
The metaverse is a highly speculative platform, with no one knowing what exactly will happen in the next few months or so. The metaverse is powered by cryptocurrencies, which are a very volatile market. The sharp fluctuations are enough to drive unprepared investors out of business.
Virtual real estate may also charge higher fees to interested buyers. Since special technology may be required to get the detailed experience of a tour, potential customers may decrease significantly.
Not to mention, misleading representations of an apartment or studio interior can greatly affect buyer satisfaction.
