What are the requirements for investing in Metaverse real estate? The metaverse has gained popularity in recent years. Its promise of a new digital world that transcends traditional boundaries is what makes it even more appealing to digitally savvy individuals and businesses.
As the metaverse continues to evolve, investors are exploring its potential for growth and returns. Metaverse real estate is one of the areas investors can profit from. It promises great returns to people who are looking to own virtual properties in the digital world.
With over $120 billion already invested in the metaverse, McKinsey projects that the market will be worth $5 trillion in 2030. That is too valuable a resource for companies and interest-savvy individuals to ignore.
This article discusses what investing in metaverse real estate entails: the opportunities, risks, and important things you should consider before buying a virtual property in the digital world.
What is Metaverse Real Estate?
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Metaverse real estate refers to virtual properties, such as lands and buildings, within the metaverse. These properties are owned and traded by users on the metaverse and can be used for various reasons, such as gaming, socializing, meetings, and even conducting virtual businesses.
Properties on the metaverse are traded with cryptocurrencies and secured by non-fungible tokens (NFTs). Investors can purchase real estate from various metaverse platforms such as Sandbox, Decentraland, Metahero, Horizon Worlds, etc.
However, just like purchasing physical real estate, there are many benefits and risks attached to owning a virtual property in the metaverse.
4 Benefits of Investing in Metaverse Real Estate
Investing in Metaverse real estate can offer the following benefits:
1. High Returns
The metaverse is rapidly growing as individuals and companies are constantly researching its usefulness. Many have also made substantial investments, while lots of others are on the verge of doing so.
As the demand for virtual real estate grows, so does the value of virtual properties. This is evident in the $450,000 sale of a virtual land close to singer Snoop Dogg’s virtual property in December 2021. Since then, most of the metaverse platforms have recorded property sales worth millions of dollars to individuals and companies.
At this rate, investing in metaverse real estate is likely to earn you greater returns than some physical real estate.
2. Diversification Opportunity
Metaverse real estate is a new and different class of asset from what most investors are used to, and as such, it provides a great opportunity for diversification. Investing in virtual properties can provide a hedge against traditional real estate market volatility and economic uncertainties.
3. Low Maintenance Cost
Unlike traditional real estate, you do not need to constantly maintain your metaverse real estate to increase its value. There’s no need for physical maintenance of any sort, such as property taxes, repairs, or renovations. This makes virtual properties in the metaverse even more valuable, as you’ll only have to pay the initial cost of the purchase to own a property.
4. Access to the Global Market
Since the metaverse is not bound by geographical restrictions, investing in metaverse real estate gives you access to the global market. Through the metaverse, investors can have access to customers from any part of the world, giving them opportunities to sell their properties at the highest possible prices.
4 Risks of Investing in Metaverse Real Estate
As with any investment that has numerous benefits, the metaverse also has risks that every investor should take note of:
a. High Volatility
Cryptocurrency is the acceptable currency for metaverse transactions. And as a highly volatile currency, its volatility greatly influences the value of metaverse real estate. What this means is, the value of your real estate properties in the metaverse will fluctuate according to fluctuations in the real estate market.
b. Technical Risks
The metaverse is reliant on technology, which can fail at any time, be hacked, or experience other technical issues. These issues could lead to you losing your assets or causing a decrease in their value.
c. Lack of Liquidity
One of the critical challenges metaverse real estate investors face is its lack of liquidity. This is mainly because metaverse real estate is a relatively new and small market, making it difficult to sell virtual properties quickly.
This lack of liquidity in the market can pose a major problem when you have an important need to sort out and your funds are locked up in a metaverse property.
d. Reputation Risk
The metaverse is still a new and evolving industry, meaning there’s a high risk of investing in unproven companies or platforms. As an investor, the failure of a metaverse project could damage your reputation.
Now that you know what the metaverse is and the risks and benefits that come from investing in it, you’ll be wondering how you can invest in it.
How Do You Invest in Metaverse Real Estate?
Investing in metaverse real estate requires you to purchase virtual properties using cryptocurrency, such as Ethereum or Bitcoin, on a metaverse platform. You can also invest in real companies that are developing and creating metaverse technologies and platforms.
Here are some simple steps you should take to purchase a virtual property in the metaverse:
1. Choose a Metaverse Platform or Marketplace
There are many platforms or marketplaces available in the metaverse, such as Sandbox, Decentraland, Treeverse, Voxels, etc. Research their specific characteristics and choose the one that suits your needs and preferences.
2. Create an Account
After you’ve selected a metaverse platform, create an account and set up your digital wallet. This wallet will enable you to store and exchange cryptocurrency in your metaverse transactions. At this stage, you can fund your wallet with the right amount of cryptocurrency you need to purchase properties.
3. Research Properties
Now that your account is set up and you have cryptocurrency in your wallet, you can browse for lands and buildings that fit your budget and preferences in the metaverse.
4. Place a Bid and Make a Payment
The next step after you’ve found a property you want and can afford is to place a bid for it. The bid will be in the seller’s preferred cryptocurrency. Once the seller accepts your bid, you make payment for the property.
5. Transfer Ownership
Once the payment is complete, the seller will transfer ownership of the property to your virtual wallet. This gives you access to your newly acquired property and the features therein.
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How Much Are Properties Worth on Metaverse?
According to Nar.Realtor Magazine, regarding virtual property in the metaverse, a parcel of land was sold for $20 in Decentraland (one of the biggest four metaverse platforms) in 2017, and by 2021, the land had sold for $6,000, increasing to $15,000 in 2022.
The value of virtual properties is not stable; it fluctuates as the value of cryptocurrency fluctuates. Therefore, you might get to buy it at a cheaper price than it was yesterday or at a costlier rate.
What You Should Consider Before Investing in Metaverse Real Estate
Here are some factors you should consider before investing in Metaverse real estate:
There are many platforms in the metaverse, and more are still being created. You should know that not all metaverse platforms are created equal. Find the one that fits your investment goals, risk tolerance, and other preferences before you invest.
You need a certain level of technical know-how and expertise to invest in metaverse real estate. Ensure you have the necessary skills and resources to make informed investment decisions.
The metaverse real estate market is highly volatile and may require a longer investment horizon to turn out the expected profit. Ensure you have funds in other liquid investments to fund your other needs.
As an evolving market, the regulatory landscape of the metaverse is still evolving. Ensure you stay informed of the changes that may affect your investment and take action when necessary.
Wrapping it Up on Investing in the Metaverse Real Estate
Investing in metaverse real estate offers significant rewards. However, it also carries risks that you should carefully consider before making any investment decisions. You should ensure to research thoroughly, stay informed of market conditions, and seek the guidance of a financial advisor where necessary.