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3 Elements of a Good Metaverse Real Estate Investment

By Kristi Waterworth – Jan 3, 2022 at 9:30AM

Key Points

  • Metaverse real estate can vary widely between platforms, making it vital to research your new world before anything else.
  • Location is still a huge factor, though.
  • Other, more traditional commercial real estate metrics can also apply.

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Buying real estate means analyzing the property to determine if it will meet your investing needs. The same applies to the metaverse -- with some caveats.

Choosing the right piece of investment real estate in the real world can be extremely complicated, requiring not only a good understanding of the local real estate market but also the wider economic environment, should you plan to develop or rent the property. The many factors to consider can be completely overwhelming.

Now, imagine you're going to do that, but on a totally new planet with sparse development.

Buying investment real estate in the metaverse can feel just like buying some of the first commercial blocks on the moon, but it doesn't have to be that unfamiliar. After all, real estate is still real estate, and a lot of the elements that make good investment properties on the old-fashioned, three-dimensional Earth still count on the moon, or in this case, the metaverse. Here are three things to keep in mind.

A purple wireframe of a city skyline stands in front of a wireframe Earth.

Image source: Getty Images.

1. The right platform

Although location, location, location, is a big deal for any sort of real estate, when you're investing in the metaverse, there are levels of location to consider. And the most important is the platform you're buying in. You can think of each platform like its own little planet, or a walled city, if you prefer. The rules of each platform are as different as the demographics of the users.

For example, some platforms, like Decentraland, set a hard limit on how many lots exist but have rules that allow the users to vote if they should choose to increase the number in the future, which should protect you from any new lots being created and devaluing your property.

2. The right grid location

Yes, this is also location, but did I mention how important location is? It's kind of a big deal. When choosing a metaverse property, it's vital you choose the right location for whatever it is you want to build, have built, or speculate on. It makes no sense, for example, to buy lots in designated business districts that may cost a pretty penny if you intend to build a billboard, rather than choosing the lot across the street from said district that just so happens to be in a more residential area.

On the other hand, since there's not really a lot of zoning in the metaverse, even though you can, it might not make a lot of sense to build a mall meant to rent to commercial ventures in the middle of a neighborhood. Your project's location still needs to correspond to the highest and best use of the property in the metaverse, just like it would need to in a brand-new settlement on the moon (or on Earth).

3. The right neighbors

There are commercial real estate investors already in the metaverse, some of which are doing some pretty incredible things there. If you're looking for synergy with what's already around, considering your neighbors is absolutely vital. Just like in the physical world, some types of property just flow together.

For example, if you'd like to build an apartment building for long-term leasing to people in the metaverse who just need places to put their stuff, you don't want to locate that as far away from everything as possible. There's a reason these people aren't buying or leasing quieter individual lots that they can build on themselves: They want to experience the world they're in without all the hassles of maintaining a building. (Sound familiar?) They want to be near the action in that metaverse, be it an experience, a shopping district, or a venue.

Traditional metrics still apply

It's easy to say that you should just remember to apply all the traditional metrics to a metaverse lot because it's the same as real-world land, but this kind of oversimplifies the problem. Because the history on most metaverse platforms is very short by comparison to real-world real estate, you'll be forced to take a lot of leaps of faith. This is why I compare buying metaverse real estate to buying in a brand-new moon colony.

We don't know who will ultimately be in your metaverse just for the novelty and who will be there to stay. Some platforms have a few years of history to work with, but the metaverse boom has kind of changed the whole equation. Suddenly people who had no idea this whole thing existed are interested, and some percent of them will stick around to use the platforms and invest in them emotionally.

Those people will need services and structures that are handy for them in that world. It's not simply an "if you build it, they will come" kind of situation. You have to anticipate who will use your investment property, as well as how they'll use it. Those traditional metrics like foot traffic and visibility can come into play here, as long as you keep in mind that you're working with a dataset that's still largely being collected.

Kristi Waterworth owns Decentraland. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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