Real estate has always been an important part of most people's investment portfolios. Much, if not all, of that real estate has been "real." Today's real estate investor, however, may also be considering something a little less touchable: virtual land. Virtual land is a unique type of property that has a deed and exists in a digital world. It represents land in said world, allowing you to own your own little corner of one of many digital villages, just like in real life.
Building a virtual real estate portfolio could be the next big thing for investors who aren't afraid to take a chance on new technology. Land in the metaverse -- the collection of virtual worlds where buying virtual land is possible -- can be as valuable as a piece of land in the real world and has even attracted the attention of celebrities like Snoop Dogg and businesses like PricewaterhouseCoopers.
How does virtual land work?
If you choose to buy virtual land in a virtual world, it's a lot simpler than buying real land in the real world. Virtual lands are often sold in marketplaces within the world that you wish to buy. For example, The Sandbox has a marketplace to buy, sell, and resell virtual land.
Once you own it, you can do whatever you want with it, within the rules of the world. Many people use their virtual land as a status symbol and a way to escape the real world, and might build their own fantasy structures there. Others, however, have discovered that they can rent portions of their virtual land, either for full-scale branded displays or billboards that can be rotated or changed.
Why would you buy metaverse real estate?
Interest in augmented reality, virtual reality, and metaverse real estate spiked after social media giant Facebook (META -1.74%) changed its name to Meta Platforms and announced its intention to invest in this virtual reality space.
Even so, plots of land in the virtual real estate market may seem like odd investments. The truth is that they're very similar to real-world real estate. Two factors make them very interesting to investors.
- Virtual property is in limited supply. Owning virtual real estate means you own a unique parcel of land in a world in the metaverse, and you can do things with it, including creating income-generating properties such as leasable buildings or interactive venues that charge admission or promote a brand.
- Each parcel of metaverse real estate is wholly unique. Each is secured by a non-fungible token (NFT), which is proof of ownership for something digital (or real) that can be identified uniquely. Your virtual real estate NFT guarantees your ownership and allows you to resell the property to another owner. It also automatically records all transactions for that property, eliminating the need for title work. It is basically a 21st-century digital deed.
How is virtual land valued?
Virtual land is sold at auction on sanctioned platforms with programming that enables the immediate transfer of the property upon the completion of a sale. It's valued much like real-world real estate, with potential buyers comparing properties that are similar in size, function, and desirability to determine the property's worth.
However, unlike real-world real estate, values are determined by those directly involved in transactions; usually, no independent appraisers are involved. Like all crypto assets, the value of land in virtual worlds tends to ebb and flow.
How do you buy and sell virtual land?
It's not difficult to buy and sell digital assets in the metaverse. Most metaverse platforms can be accessed easily with a desktop computer, making it very simple to inspect virtual real estate before you make a purchase decision.
Once you've chosen a piece of virtual real estate, you can research it on one of many third-party reseller platforms, such as OpenSea.io or NonFungible.com. These sites can show you the sales history, if any exists, and allow you to do the same for nearby properties that might serve as decent comparables.
You'll need to open a digital wallet that can hold your digital assets, including the cryptocurrency you'll use to make your purchase. The wallet you choose will depend on the metaverse platform you're using. Each site will explain which are preferred and how to link them.
You must also purchase the amount of cryptocurrency you'll need for the real estate transaction. For example, if you're buying in Decentraland (MANA +6.69%), you'll need to purchase MANA coins. If you're buying in The Sandbox (SAND +9.18%), you'll want to stock up on SAND. These can all be purchased on open cryptocurrency exchanges using your local currency or other cryptocurrencies.
Unlike real-world real estate transactions, the purchase itself is almost anticlimactic. Once you have your digital money in your digital wallet, you simply go to the platform's marketplace or a third-party site and click the button to buy. It takes a few seconds for the platform to verify the transaction, which includes ensuring that your wallet contains enough currency and that the property can be legally conveyed to you.
Related investing topics
With those checks complete, the money comes out of your wallet, and an NFT representing your purchase goes into it. An anonymous identifier connected to your wallet and belonging to you alone is recorded as the new owner of the property.
It works essentially the opposite way to sell a virtual property. You'll list your property for sale, and someone else will do the clicking and go through verification before their crypto is traded for an NFT, and your wallet will trade one NFT for a pile of crypto -- at a profit, with any luck!
FAQ
About the Author
