Real estate in the Metaverse is now among one of the hottest properties people can buy, and according to reports, virtual land sales in 2021 reached $500 million, with roughly $85 million sold in January 2022 alone.
It is estimated that Metaverse real estate sales could reach nearly $ 1 billion in 2022, making it an asset class to watch for investors worldwide. By purchasing digital land, you could earn an early-access advantage to what promises to be a fast-moving and high-growth sector.
Defining Metaverse Real Estate
The Metaverse is a three-dimensional, immersive virtual platform where users can interact with each other, digital objects, and AI-powered avatars in a highly realistic and natural manner.
The spatial communications platform is also interoperable, meaning users can move between virtual worlds and different platforms can coexist in one environment, allowing virtual games and collaborative spaces to exist on one solution.
The metaverse is also democratized and isn’t owned by a single organization, person, or entity. Anyone can invest in it and make use of available space, technologies, and environments.
To achieve these capabilities, the Metaverse relies on technologies such as virtual, augmented, and mixed reality (VR/AR/MR) as well as blockchain, artificial intelligence (AI), 5G, and cloud computing.
It also has the potential to become a virtual replica of our physical world, where Metaverse users can rely on virtual environments to monetize goods and services and earn profits. A popular way to do this is by purchasing land in the Metaverse, where buyers or a renters can develop monetized properties.
Individual Metaverse real estate plots are called virtual ‘parcels,’ which are blocks of 3D space where developers can superimpose objects, design VR worlds, overlay experiences, build interactions, and so on.
Typically, a Metaverse will have a democratized governance body that will decide how new parcels are created, allocated, and opened up for investment to real estate buyers.
Most virtual land sales today happen on four Metaverse platforms such as The Sandbox, Decentraland, Cryptovoxels, and Somnium. The parcel exists as a non-fungible token or NFT, which is a non-interchangeable asset class hosted on the blockchain.
Once ownership of the NFT is transferred to the buyer, they will ‘own’ full rights to the land just like in real life, and can resell it, build virtual property on it, lease it out, and so on.
How Do You Buy Land in the Metaverse?
If you are interested in purchasing real estate in the Metaverse, there are three options to consider:
1. Speak with a metaverse real estate broker
The Metaverse has its own real estate industry, with mortgage providers, brokers, and agents who specialize in this space. While digital real estate is still in its infancy, brokers like brothers Tal and Oren Alexander are finding their own niche.
Previously, they dealt with high-value real estate purchases in top US destinations like New York City, but are now expanding into the Metaverse.
In December of last year, they announced they will act as brokers for luxury properties in the metaverse, with location and design as the prime considerations.
The duo has partnered with virtual land developer Republic Realm, which recently purchased a Sandbox property for $4.3 million. Interested buyers can work with brokers and agents such as these to find and invest in the best Metaverse properties.
2. Explore an affordable metaverse mortgage
The second option is to explore a Metaverse mortgage, which could prove more affordable for regular buyers. Metaverse mortgages are an emerging idea and there are only a few companies offering this facility.
Terra Zero is one of the providers on the market offering users to buy land on the ‘Big Four’ Metaverse platforms like Decentraland, Somnium, The Sandbox, and Solana Portals.
Currently, TerraZero offers Metaverse mortgages for virtual land, which are empty parcels that can be developed from scratch or leased out for profits, and virtual real estate, or pre-designed landscapes, prefabricated buildings, etc. that act as ready-to-use environments for events or gaming.
3. Purchase metaverse land outright using cryptocurrency
This is the most straightforward way to buy land in the Metaverse and is most suitable for small and affordable purchases. To make purchases, customers can:
- Visit the property marketplace on the Metaverse platform of your choice. This will be similar to app marketplaces for software platforms.
- Log in, consider the location and design of the land, compare pricing, and arrive at your shortlist.
- Set up a digital wallet that is compatible with the Metaverse real estate selected. For example, land in Decentraland can only be purchased through a token called MANA, and you need a wallet that will support the transaction.
- Link your digital wallet to the Metaverse account and ensure it has the specific type of crypto required.
- Click on the buy or purchase button to transfer the crypto amount in exchange for the real estate NFT.
- As the last step, you can work with a company like Metaverse Properties to manage and develop your virtual real estate for better profits.
The steps are similar if you opt for a mortgage, and the only difference is that the mortgage provider will hold the full ownership rights to the land NFT until you have paid it off, but you can manage and develop the property during this period.
What Are the Risks of Buying Land in the Metaverse?
Like any investment, buying land in the Metaverse comes with its share of risks. To begin, you cannot ‘live’ on the land, meaning it is purely for investment and value generation.
Second, profitability from real estate will depend entirely on the location, surrounding development, and the platform’s actual adoption over time. It could be a while before you can see returns from your investment unless you resell the property immediately.
A 2022 poll by professional social network Blind found that only 13 percent of technology specialists are buying virtual real estate. But regardless of the risks, there is no denying that Metaverse real estate has become an increasingly important asset class for investors and may prove crucial for portfolio diversification in the future.