digital real estate explained
A few years ago, investing in virtual or digital real estate sounded somewhat absurd. But today, the story is very different. As of now you can buy slots of virtual land in digital worlds like Decentraland and with the metaverse on the horizon, investors are starting to pile in each and every day. If you're thinking about tapping into the digital real estate market, now may be the time to invest and unlike most other markets, digital real estate is something you can invest in without massive risks. In this blog we will share how to purchase digital real estate and why buying digital real estate in the metaverse may give you a head start before this trend becomes worldwide.

A few years ago, investing in virtual or digital real estate sounded somewhat absurd. But today, the story is very different. As of now you can buy slots of virtual land in digital worlds like Decentraland and with the metaverse on the horizon, investors are starting to pile in each and every day.

If you’re thinking about tapping into the digital real estate market, now may be the time to invest and unlike most other markets, digital real estate is something you can invest in without massive risks. In this blog we will share how to purchase digital real estate and why buying digital real estate in the metaverse may give you a head start before this trend becomes worldwide.

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What is the Metaverse?

The metaverse is now often explained as an alternative and digital reality that combines virtual reality and augmented reality where human beings will be able to work, play, and digitally live.

The Metaverse is a concept that has been in existence for over three decades, but it wasn’t until recently after Facebook announced plans to become a Metaverse company that the idea of the metaverse shot up in popularity.

As a result, more and more investors are exploring investment opportunities in this fast growing new space. Buying virtual land in leading digital worlds is one of these opportunities.

What is digital real estate and how does it work?

Digital real estate is often considered a subset of digital assets. A digital asset is anything that exists online and has value.

Typically, people consider things such as domain names and 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. With digital real estate investing, people can literally own digital blocks of real estate in virtual worlds.

These blocks of land exist on a blockchain technology. For example, let’s say that Justin Bieber hosts a digital concert which he has actually done before. In theory, someone can own the arena where he’s singing it. You start charging people admission to this arena, it becomes no different than owning The O2 Arena in London, for instance.

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 you can shop, hang out, and 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 or an NFT that’s attached to a virtual plot of land.

If you are not familiar with the term, 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.

Similarly, when you purchase a real estate NFT you receive a digital code. This code lives on the blockchain and it’s proof that you own the NFT itself. It verifies the sale of the asset.

Once you own the NFT you can rent, build or even sell it or you can also hold on to it in hopes that the asset will go up in value.

How to get started with investing in digital real estate - Digital Real Estate Explained in 5 Minutes
How to get started with digital real estate investment | OEA Real Estate Blog

How to get started with investing in digital real estate

Okay, so where can we get started investing in digital real estate?

Right now there is no official Metaverse that you can visit. Lots of companies are hard at work creating their own metaverse. This means that you have to visit different sites depending on what virtual land you want to buy.

Imagine your great grandfather asking you to help him get started on social media for instance, there is no one social media to sign him up on. Instead he has to choose between making a Twitter, Tik Tok, Instagram, or Facebook account or he could choose having accounts with each platform as different platforms have different functionality and rules.

Buying digital real estate is very similar to that. There are a few different platforms that all use different blockchain networks and new ones are being launched very frequently.

Keep in mind that things happen quickly in the metaverse and 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 take a deep dive into all existing marketplaces.

What is virtual land and why are investors buying?

Virtual land is intangible land that exists in virtual worlds. Just like physical land, it’s also sold as plots and can be purchased using a specific land’s currency.

Let’s say for instance that you wish to buy physical land in Ghana, of course, you would need the Ghanian Cedis to pay for the land. In a similar way, you would need the native currency or token of the blockchain where the metaverse land is located to be able to purchase such land.

Today, there are several virtual worlds that allow you to buy virtual real estate. Decentraland is arguably the most popular of them.

Virtual land in the budding Metaverse has been selling for hundreds of thousands of dollars. In June of 2021, a piece of land sold for more than $900,000 in Decentraland, and that’s just one prime example.

You see, investors are able to put their virtual pieces of land into use and earn a solid income. If you own a virtual land, you can host exclusive events or parties and charge those who want to attend.

For example, let’s say American rapper Snoop Dogg hosted an exclusive party on the SandBox’ NFT platform to reconstruct his real life mansion. People who attended needed to have an NFT which acted as a pass and gave them access to the event.

Investors can generate regular income from their virtual lands. For example, you can build a virtual house using NFTs on your virtual land and rent it out for a monthly income or set up an NFT Art Gallery and rent this space to up and coming crypto artists to showcase their work in the metaverse.

The Pros and Cons of digital real estate investing

Now let’s talk about the pros and cons of digital real estate investing.

As far as the upsides go, with the rise of Blockchain, DeFi, Cryptocurrency, and NFT, 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 Maitama during the 1930s.

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 can happen?

The downsides of digital real estate investing are 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’ve already said, the metaverse is not currently one single destination, instead, what we have are many different metaverses that are all under construction.

In 5 to 10 years people might have abandoned the metaverse where you bought land and plug into another one. Or maybe the company responsible for developing it went bankrupt. Or maybe people could flock to another Metaverse and ignore yours entirely.

Or maybe the entire Metaverse movement just never gained steam with consumers and eventually died out.

There are hundreds of things that could possibly go wrong.

Digital real estate investing is also currently the Wild West. By this I mean that there are 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 happen. You will largely have to do your own research, trust your guts and stick by your decisions.

The best advice I can offer is to never invest any money that you aren’t comfortable losing.

Now I hope you’ve found this blog helpful? When it comes to learning everything you need to know about digital real estate investing, don’t forget to subscribe to the blog. We put together an entire series on how to get started in real estate investing.

We’ll see you in the next blog.

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