What you need to know about virtual real estate
Find out what it takes to succeed when it comes to your virtual real estate investments
It seems like there’s always a big new thing in real estate, whether it’s REITs or crowdfunding—or bitcoin. Well, that’s the kind of opportunity you have right now, today: to buy real estate in the metaverse. Maybe.
On the other hand, it could turn out to be nothing. But there’s an element of risk even in a conventional, high-quality real estate investment, isn’t there?
In order to make an informed decision about whether or not to buy into this latest innovation, you have to have a basic understanding of a few issues: what is the metaverse? How can you own real estate in a place that doesn’t physically exist? And what are the metaverse’s realistic prospects of taking off and becoming the “next big thing”?
Read on for answers to all these questions, and more.
What Is the Metaverse?
Think of the metaverse as an immersive, interactive version of the internet. Instead of browsing Amazon by swiping away at your phone, or clicking away on a mouse, you’ll put on a virtual reality headset like the Oculus, or a pair of mixed reality glasses, and walk down a virtual—or metaversal—shopping mall.
The metaverse is a little more complicated than that, but that should give you a basic idea of what it is, and how it’ll work.
Can You Really Own Non-Physical Real Estate?
This is the biggest mental hurdle for many potential investors in virtual real estate. The appeal and the value of conventional real estate is rooted in its physicality—you own this piece of property right here, that you can touch and develop and do with as you please. It’s value is also rooted in the limited supply of real estate—as the saying goes, they aren’t making any more land.
So how do you wrap your head around buying virtual real estate? Well, it might help to not think of it as real estate, per se, but rather an intangible investment. Think of art or luxury goods, which have far more value than their physical components.
To look at a more recent parallel, you can think of metaverse real estate as the next wave of domain names. Just as it was an extremely valuable investment if you bought your business’s domain name — its online address, essentially—in the early days of the internet, it could be very wise to acquire virtual real estate now.
The metaverse is also more secure. While early “cybersquatters” were often forced to give up their domain investments by the courts, investors in virtual real estate would be able to be legitimate landlords.
Is the Metaverse Legitimate?
Many experts think so. According to futurists interviewed by the New York Times, the metaverse will soon be as embedded in our daily lives as much as email or social media. That could mean two years or a decade, but if you accept this forecast, you’ll want to get in as early as possible.
However, the metaverse isn’t going to replace traditional real estate. If virtual feels too risky, you can always stick to regular real estate investing with the help of 1031 exchange companies and discount services.
How Do You Pay For Virtual Real Estate?
In some cases, people have paid real dollars for virtual real estate. Investors are paying up to $200,000 for plots in the virtual realm Genesis City.
In other metaversal realms, investors are using cryptocurrency to secure millions in virtual real estate. In one recent transaction that made headlines, a virtual parcel in Decentraland sold for 618,000 mana—the equivalent to $2.5 million. Many experts are saying crypto will be the preferred currency of the virtual realm, so it makes sense that metaversal transactions will use crypto.
So Where Do You Start?
Deciding to invest in virtual real estate is just the first step in a long and complicated process. However, choosing the right metaversal world to invest in is a bit more difficult than choosing a good real estate agent.
Several companies have gotten in early on the metaverse: Decentraland, The Sandbox, Somnium Space, and Upland are all open for business.
If you’re not sure where you want to invest yet, you could survey a third-party platform that operates as a clearinghouse for real estate parcels across virtual worlds. Sites like OpenSe or NonFungible let you see what kind of virtual real estate is out there to buy and list prices in your local currency. Think of them as Zillow for the metaverse.
At this point, it’s anyone’s guess which metaversal world is going to be the biggest success. While there’s certainly an advantage to being first on the scene, it’s no guarantee of ultimate success. A famous example of this principle is how Xerox put out the first personal computer only to watch later entrants into the industry surpass them.
When it comes to your virtual real estate investments, it’s going to take savvy analysis, vision, and a little luck to come out ahead — but isn’t that some of the fun of any real estate investment?
Luke Babich is the Co-Founder of Clever Real Estate, a real estate education platform committed to helping home buyers, sellers and investors make smarter financial decisions. Luke is a licensed real estate agent in the State of Missouri and his research and insights have been featured on BiggerPockets, Inman, the LA Times, and more.