Digital Real Estate Investing: Everything You Need to Know - Investment U
Savvy investors are always on the lookout for the next big thing. Where can they park their money to earn the highest returns? In the 2000s, it was Dot Com stocks. In the mid-2000s, it was real estate financed with cheap loans. For the last decade, it was mainly tech stocks. Now, it’s looking like the next big thing is digital real estate investing. But wait a minute. Two of the scenarios that I just mentioned turned out to be massive bubbles. In 2000 and 2008, tons of investors got burned. Is digital real estate investing a similar bubble that you should avoid at all costs? Or will you be kicking yourself in 10 years for not buying more digital land today?
For years, the digital realm has been expanding rapidly. These days, we’ve grown accustomed to billion-dollar companies built around nothing more than a website. Even though they have no real-world assets, these lofty valuations make sense to us. Online companies perform crucial functions in society. Now, it looks like the digital world is going one step further and morphing into something called the metaverse. Just like the real world, the metaverse has its own real estate.
This article will unpack everything you need to know about digital real estate investing.
What Is Digital Real Estate?
Digital real estate is often considered a subset of digital assets. A digital asset is anything that exists online and has value. Traditionally, people consider things such as domain names, social media accounts or popular websites as digital assets. For example, owning a popular domain name like Hotels.com is incredibly valuable. Hotels.com is super easy for consumers to remember and search for. This can help it rank high in search engines, which gives the owner more exposure. Its simplicity makes it more valuable than complicated domain names.
Other websites, such as Facebook.com, have tons of data and assets attached to them. They are valuable because of the business that runs them. However, digital assets have evolved into much more than just websites or apps.
Now, with digital real estate investing, people can literally own digital blocks of real estate in virtual worlds. These blocks of land exist on blockchain technology. For example, let’s say that Justin Bieber hosts a digital concert (which he has). In theory, someone can own the arena where he’s singing. If you start charging people admission to this arena, it becomes no different than owning Wrigley Field.
Keep in mind that the metaverse is still very much in its early stages. To enter the metaverse, you just put on a pair of VR glasses, create an avatar, and visit a digital world. From here, they can shop, hang out, go to concerts, or buy real estate.
How Does Digital Real Estate Investing Work?
Digital real estate investing works by purchasing a non-fungible token (NFT) that’s attached to a virtual plot of land. If you are not familiar, NFTs are cryptographic tokens that represent a unique product. It’s almost like a digital certificate of ownership. So far, NFTs are mainly used for selling works of art or other collectibles. Now, NFTs are being linked to plots of land in the metaverse.
In the real world, when you purchase a plot of land the previous owner gives you a deed. Once you have this in hand, it’s proof that you own the land. When you purchase a real estate NFT, you receive a digital code. This code lives on the blockchain and is proof that you own the NFT. It verifies the sale of the asset.
Once you own the NFT, you can rent, build, or sell it. Or, you can also hold onto it in hopes that the asset will go up in value.
Where Can I Get Started?
Right now, there is no one official “metaverse” that you can visit. Instead, lots of companies are hard at work creating their own metaverses. This means that you have to visit different sites depending on what virtual land you want to buy.
Imagine your Great Grandpa asking you to help him get started on social media. There is no one “social media” to sign him up on. Instead, he has to choose between making a Twitter, TikTok, Instagram, etc. Different platforms have different functionality and rules. Buying digital real estate is very similar. There are a few different platforms that all use different blockchain networks. New ones are being launched very frequently. Let’s examine a few of the biggest digital real estate investing marketplaces.
Top Marketplaces To Buy Virtual Land
Decentraland: This is one of the largest place marketplaces for digital real estate. It allows you to buy and sell land, estates, avatar wearables and other digital goods. The Ethereum network is the foundation for this digital world.
SuperWorld:This company has created a virtual map of Earth. It allows you to buy real-life plots of land, that now exist in the metaverse. For example, you could buy the Taj Mahal, NYC’s 5th avenue or your own home. Someone already purchased The White House for about $354 USD. In total, it has 64.8 billion plots of land for sale.
Somnium Space: Somnium Space describes itself as “a new virtual reality world.” This includes allowing users to buy and sell virtual land.
The Sandbox: A virtual metaverse where players can play, build, own, and monetize their virtual experiences. It boasts NFT collections by Snoop Dogg, Care Bears and Atari.
Upland.me: This platform is still in beta. However, it will be a digital metaverse where users can buy, sell, and trade digital real estate.
OpenSea: Currently the largest NFT marketplace. It has a section for virtual land. Here you can buy and sell land parcels, wearables, and names from projects like Decentraland, Cryptovoxels, Somnium Space and The Sandbox.
Keep in mind that things happen quickly in the metaverse. New companies are popping up every day with lofty ambitions of creating a new metaverse. As we saw with Meta Platforms, larger corporations are also willing to pivot. If you want to invest in digital real estate, be sure to a deep dive into all existing marketplaces.
Now, let’s talk about the pros and cons of digital real estate investing.
Upsides of Digital Real Estate Investing
With the rise of blockchain, DeFi, cryptocurrency and NFTs it feels like we are literally entering a new version of the internet.
Whether you love the idea or hate it, the metaverse definitely has plenty of potential. It’s not hard to envision a world where you strap on a VR headset and hang out digitally with your friends. This is why many of the world’s most successful people are diving headfirst into blockchain projects. If you get involved early, it could very well be like buying land in Manhattan during the 1800s. Right now, you can buy land in the metaverse for pennies compared to what it could be worth in the future. This, of course, means incredibly high returns and a happy bank account.
So, what’s the worst that could happen?
Downsides of Digital Real Estate Investing
As with any investment, the biggest downside of digital real estate investing is losing your money. Whenever the potential returns are high, you can bet that the risks are high as well.
As I said, the metaverse is not currently one single destination. Instead, what we have are many different metaverses that are all under construction. In 5-10 years, people might have abandoned the metaverse where you bought land and flocked to another one. Maybe the company responsible for developing it went bankrupt. Or, maybe people could flock to another metaverse and ignore yours entirely. Maybe the entire metaverse movement just never gets gains steam with consumers and dies out. There are hundreds of things that could go wrong.
Digital real estate investing is also currently the Wild West. By this, I mean that there is not a lot of resources out there to help you make decisions. For example, stocks have been around for hundreds of years. There are thousands of sites to visit for information on stock investing. Digital real estate, on the other hand, is a new frontier. Nobody has concrete answers for you because nobody knows for sure what will have. You will largely have to do your own research, trust your gut, and stick by your decisions.
The best advice I can offer is to never invest any money that you aren’t comfortable losing!
I hope that you’ve found this article valuable when it comes to learning everything you need to know about digital real estate investing. Please base all investment decisions on your own due diligence and research!
About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.
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