Investing in Virtual Real Estate: Is Buying Real Estate in the Metaverse a Smart Investment?
Digital real estate is an opportunity. It is a blank space to build whatever you want. Read on to learn about how to invest in virtual real estate.
Investing in virtual real estate expects a return on the investment – ROI is the main motive for the investment. Investors can purchase a plot of land in the metaverse and build whatever they want, be it a performance venue for music events, a stadium, a monument or a business space.
For example, hip hop star Snoop Dogg is creating his own virtual world, the Snoopverse on the Sandbox, within the metaverse. And an NFT collector recently spent $450,000 on a plot of virtual land in Snoopverse to become Snoop Dogg’s neighbor. In addition, 122 plots of the virtual land were for sale and three smaller estates were auctioned on the crypto marketplace OpenSea.
What is the Metaverse?
Metaverse is an online virtual world that incorporates augmented reality, virtual reality, 3D holographic avatars, video and other means of communication. As the metaverse expands, it will offer a hyper-real alternative world for you to coexist in.
Some video games where players can build their own worlds have metaverse tendencies, as does most social media. If you own a non-fungible token, virtual-reality headset or some cryptocurrency, you’re also part of the metaverse experience.
The metaverse offers its users to work, play and stay connected with friends through everything from concerts and conferences to virtual trips around the world.
Metaverse is an alternative world where users can live, work, and play.
Digital Real Estate vs. Physical Real Estate
- Real-world real estate includes places to eat, sleep, do laundry, breathe, and exist. And it’s almost impossible to live without real-world real estate. Whereas metaverse real estate is about retail, recreation, and social activities, which can all be very fun but are not necessary for life.
- No central governing body records your ownership in the metaverse: it’s essentially anonymous to anyone but you. The record of your property ownership stays with you in a virtual wallet. If you lose your wallet passwords you will lose your property.
- Event space and even storefronts can be more streamlined in the metaverse as there is no danger to public health, you may forget about social distancing here.
- The metaverse is a nice opportunity for real estate investors looking for something a little different. You can mix a little metaverse property with your real-world real estate portfolio and create an interesting balance. There’s no gravity in the metaverse and the structures you erect are only limited to what you can imagine and what will fit on your lot. It is also pretty nice that there are not currently any taxes in the metaverse.
How to buy Virtual Real Estate?
Step 1: Create a Digital Wallet
To purchase virtual real estate in Metaverse, you’ll need cryptocurrency. It is impossible to buy digital real estate in real-world money. The users need to create a crypto wallet (Metamask, Fortmatic or Portis). After creating, the wallet can be funded by exchanging your preferred currency for Ether (ETH).
The currencies differ from land to land. On Decentraland it is known as MANA, whereas on Sandbox the currency is known as SAND. For buying land on Decentraland you will need MANA and for Sandbox, you will need SAND. Take into account that the currencies are not interchangeable.
After choosing the currency, you must write down or remember the seed phrase. It will appear when you open your wallet. It is like your “virtual bank account” information which is very hard to recover when lost.
Step 2: Choose a Plot of Land for Buying
After setting up the digital wallet, you can choose to buy property directly on a metaverse platform, such as Decentraland or the Sandbox, or you can go through a third-party platform such as OpenSea.
Metaverse platforms such as Decentraland or Sandbox provide you with information on what kind of amenities are around and who your neighbors are. These are the most important points you should take into account as a digital real estate investor.
You should fund your digital wallet with an appropriate cryptocurrency that is compatible with the platform chosen by you. After everything is done, all you must do is press the ‘buy’ button.
Step 3: NFTs
After the transaction is completed and the virtual real estate is purchased by you, it gets stored in the form of NFTs in your linked digital wallet. You can view your acquired land under the ‘NFTs’ tab in your digital wallet.
What are NFTs?
Transactions in the virtual world are made using cryptocurrency. Non-fungible tokens (NFTs) are the primary method for exchanging value within the metaverse.
What you must remember before buying property in the metaverse
- Virtual real estate investing is a new form of investing and is rapidly changing. If the platform that you bought the land from fails or goes offline your digital land in the metaverse will become non-existent.
- The other important point is the high volatility associated with cryptocurrencies. Thus the valuation of the property you own in the metaverse fluctuates proportionally as well.
But is Buying Real Estate in the Metaverse a Smart Investment?
People spend thousands or even millions of dollars to buy fictitious “property” in a virtual world. Let’s be frank, this sounds absurd, doesn’t it?
Metaverse is a virtual 3D world with a lot of investors, where people can create their avatars and interact with others in real-time and buy/sell products including real estate. This is possible by leveraging technologies like Artificial Intelligence (AI), Virtual Reality (VR), and Augmented Reality (AR).
How do the Lands Derive Value?
Metaverse is not infinite. Virtual worlds are limited in size. The lands in the wolds are also limited, and they can’t be added. This contributes to the appreciation in value, like Bitcoin. Only 21 million bitcoins will ever be released into circulation and there will be no further addition. It will propel its value.
Decentraland, for example, has 90,000 pockets of land, each measuring 2,704 square feet. These lands are still being resold on the Decentraland marketplace as their value continues to rise. A plot in this virtual universe sold for a whopping $2.43 million was the biggest real estate deal in Metaverse that measures 6,090 sq. feet.
When buying virtual real estate, you should take its location into consideration. The places bubbling with energy are valuable to brands.
How can Virtual Real Estate be Used?
Taking ownership of virtual assets is a secure and safe transaction. Here is what the owners of virtual land can do with it:
- They can develop the land by building malls or shops.
- The land can serve for running businesses or the owner can lease it to other businesses
- They can organize professional or social meetings
- When the price increases, the owner can re-sell the land for a profit
- Mortgage property for an alternate source of income
- Create adventure parks to engage others
Investing in real estate in the metaverse is very speculative: before it was possible to own a piece of digital real estate for a few hundred dollars. In 2021, you had to spend a few thousand just to get started.
Considering the ROI
The most important question gets to whether you can make money from digital real estate. Does it have the potential to grow? It’s a really tough question.
While some companies hesitate about whether there’s a profit opportunity in the metaverse or not, other companies are answering this question with a resounding “yes”. A digital currency investor, Grayscale, has estimated that the goods and services in the metaverse will soon be worth $1 trillion. And it makes people think of laying a stake in that digital ground.
People think they will be able to resell their virtual property to someone else at a higher price later on. But It’s not like physical real estate, where you buy property to nest or for the neighborhood. The only force that’s adding value to digital real estate is the popularity of the digital world.
Do we Want Life to Look Like This From a Human Perspective?
Is it sensible to move our experiences from the real world to a digital one?
Should we start a whole new universe when we haven’t quite figured out how to be good to this one?
Instead of spending millions of dollars (or mana) for creating a new world people could help the ones who are in need in this world, the real world.
Investing in digital real estate is the same as the play of lottery: there is a chance that you will make a ton of money, but the chances of that happening depend on factors beyond your control. In any case, a tried-and-true and safer investment opportunity has a higher likelihood of working out for you.
Republic Realm’s researchers find that the citizens of the Metaverse are generally sophisticated investors who understand that this is a derivative trade of crypto and that total loss of principal is one likely outcome.
To sum up, I don’t want to prevent you from becoming the next digital real estate tycoon, I just want you to make the decisions that have the highest chances of working out in your favor.
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