Web3 and blockchain are redefining real estate’s traditional model to create a new virtual world called the ‘metaverse’ where digital parcels of land can be bought, sold or developed. These digital spaces create unique investment opportunities and can be utilized for hosting events or online workspaces. Owning digital land or property creates monetization opportunities as you can buy and sell it at a profit, rent it out, or set up a virtual business. However, to understand which type of digital real estate is the best investment option, keeping in mind critical aspects like your goals, risk appetite, and market trends is vital.
What is digital real estate?
Digital real estate is digital property or land that exists as coordinates (or parcels) in virtual worlds like the metaverse.
These digital spaces can be bought and sold on several marketplaces like Decentraland, The Sandbox, CryptoVoxels, or through LandVault for a price based on different factors, from utility to proximity to other top attractions. Users of the metaverse are free to design the digital land parcels they own and can also find channels to monetize them. However, these pieces of land don’t work precisely how physical real estate would in real life (IRL). Building and managing these land parcels varies from conventional real estate based on the technical expertise and time required to the risk they possess.
What is the point of buying digital real estate?
Buying digital real estate can be significantly beneficial for several reasons. Here are some of the benefits that digital real estate provides:
Unique Investment Opportunities
Firstly, virtual real estate provides a unique investment opportunity with the potential for high returns. The metaverse, Web3, and blockchain landscape are developing rapidly. It will only increase in relevance, making investing in digital land on these platforms a prime opportunity to earn a good return on investment. Virtual properties can be bought and sold at a higher price or even rented out to other members in the metaverse to profit from the land’s appreciation rate. Land prices in the metaverse are skyrocketing, and the opportunity to gain from it is potent. For instance, the smallest parcel of land on Decentraland and The Sandbox was worth under $1000 in 2021 and multiplied to $13,000 in under a year. Although the market is experiencing a temporary decline, prices could recover in the coming years.
Secondly, owning digital real estate can give individuals a sense of status and prestige within online communities. Big names in the industry like Snoop Dog and global businesses like PwC, Adidas, and Samsung have already created a digital presence in the metaverse - others who follow also have an opportunity to be a part of the same league. A metaverse user even went to the lengths of paying $450,000 just to be Snoop Dogg’s neighbor in The Sandbox.
Variety of Use Cases
Digital real estate can open up extensive opportunities to utilize digital land in new ways. Users can host virtual events, start an online business, open an art gallery, or create space to interact with others. In addition, several fashion brands and consumer goods companies have built digital experiences and stores in the metaverse to capitalize on business opportunities.
Which digital real estate is best?
Choosing the ‘best’ type of digital real estate will depend on your goals and objectives. We’ll cover some of the different kinds of virtual estates you can invest in and their benefits and drawbacks to give you a better idea of what you should include in your portfolio.
Types of digital real estate
Online metaverse platforms such as Second Life or Decentraland offer opportunities to purchase virtual land. These spaces can be made more valuable by developing them further and creating experiences, games, event spaces, museums and more on the land purchased.
Investors can build on their land and make it as interactive and creative as they want.
Owning land creates the potential for it to be monetized in various ways.
Virtual land prices can fluctuate based on the metaverse’s popularity and user engagement metrics.
Digital land prices are somewhat volatile, making them unsuitable for risk-averse investors.
Another type of digital real estate is virtual storefronts that individuals or businesses can use to showcase and sell products or services. Virtual storefronts are a big part of the retail industry as they allow customers to engage and immerse themselves in brand experiences - creating a new way to connect with businesses. Digital storefronts also help brands collect rich data on consumers' likes and dislikes to make better strategic decisions.
While a physical store can only reach a limited number of customers, a virtual storefront can reach a global audience.
Virtual stores also require much less overhead expenses than physical locations.
Ensuring that a virtual store attracts the right audience that turns into customers requires brands to invest in strong digital marketing campaigns and create a user-friendly platform.
A virtual store’s success in the long run also depends on which platform would be the dominant one in the future, attracting the most users and customers.
Virtual apartments or properties
Virtual spaces like residential apartments or commercial properties are also abundant on metaverse platforms - presenting opportunities for users to rent or inhabit these spaces. These spaces could be homes, workspaces, art galleries, social spaces, event venues, or any other property type.
Virtual residential or commercial spaces can generate passive income through rental fees.
Input costs for these digital properties are much lower than in real life.
Investing in apartments or other properties requires regular maintenance and updations as the platform develops.
Ensuring consistency in tenants inhabiting properties requires significant marketing efforts.
Facts to consider when choosing digital real estate
Before investing in digital real estate, you should consider these critical factors to maximize your benefits :
Investment strategy: When choosing the best digital real estate, you must first determine your investment goals. Investing in a well-established platform with a proven track record may be beneficial if you're looking for long-term growth. Conversely, relatively newer platforms with more significant growth potential could be a good option if you're looking for short-term returns.
Interests: It’s wise to ensure that investments in digital real estate align with your hobbies or passions to keep you engaged with your investment. For instance, if gaming interests you, investing in gaming-related NFTs would be a good bet.
Market trends: Investments in digital assets must also consider popular market trends and shifts. For instance, if a specific metaverse platform is beginning to attract more users, it could be an excellent place to invest. Similarly, if particular metaverse experiences are gaining traction, investing in assets adjacent to facilitating those experiences will be favorable.
Community: The success of digital real estate often depends on the engagement and growth of the online community surrounding the platform. Investing in platforms, properties, and areas with high traffic or the potential to increase traffic in the future is essential.
Risk tolerance: Digital real estate, like any other asset, has risks that investors must consider. Potential risks to watch out for are platform closures or declining user engagement that could negatively impact investments. Therefore, assessing your risk appetite before making an investment decision is essential.
How to monetize real estate in the metaverse
Here are some ways to monetize real estate in the metaverse:
Rent out your virtual property
If you own digital real estate in a prime location, renting out your property could be a lucrative source of income. Businesses and individuals always look for spaces to display their products, provide services or advertise their offerings. However, several factors would determine the rent price - from proximity to popular areas to the size of the spaces. These parcels of land can be listed for sale on the metaverse itself or through secondary marketplaces like LandVault. A great example of a company capitalizing on this opportunity is Metaverse Group. It purchased large virtual plots of land in Decentraland and The Sandbox to rent out to third parties. In one particular instance, it rented out a plot of land for $2.5 million for the Metaverse Fashion Week.
Set up an online store
Members of the metaverse can also develop and sell virtual products or services on the platform to earn revenue. Individuals or businesses can set up virtual ventures in popular, high-traffic locations populated by their primary target audience to attract customers. These businesses could offer anything from virtual clothing and digital accessories to event-hosting services.
Buy and sell digital real estate
You can earn good money through land sales if you own or buy land parcels that are highly sought-after properties or locations. Like the real world, you can buy and sell real estate in the metaverse at a higher price and pocket the profit. Bloomberg predicts that the metaverse market could reach $800 billion by 2024, and if these forecasts hold, land prices can be expected to increase further, making it a prime investment opportunity.
Digital real estate has incredible potential for individuals and businesses to leverage the metaverse to generate a high return on investment, create immersive experiences and build another channel for retail. Virtual properties like land, storefronts, and residential or commercial spaces can be invested in and utilized to create new avenues for monetary gain. However, making the right investment choice for yourself or your business depends on conducting the proper research, ensuring alignment with goals, interests, and current market developments to maximize the potential of the investment.
Are you or your business looking to invest in digital real estate? We can help you buy, develop and monetize your land in the metaverse to maximize your returns.
Get in touch with us