THE METAVERSE is developing at a rapid rate, and in the event that the digital world becomes mainstream – building a virtual real estate portfolio could be the next big thing for investors.
Land in the metaverse can be as valuable as land in the real world, and has attracted the attention of businesses like Gucci and Samsung.
What is virtual land in the metaverse?
A parcel of land in the metaverse is a piece of virtual real estate that is represented as an NFT.
Each parcel of land in the metaverse is registered on a blockchain and can be verified for authenticity easily.
Like land in the real world, virtual land is purchased for a price – paid for in cryptocurrency.
Parcels of land are either available in virtual real estate projects such as Decentraland or The Sandbox or can be bought on third-party platforms such as OpenSea.
Users who buy virtual or NFT land can then build experiences on top of them.
Users can also rent out virtual land or sell it on for a profit.
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Why would you buy digital land in the metaverse?
Like real estate in the real world, your reasons for buying virtual land in the metaverse might differ.
Some people are buying a virtual homes for their avatar and furnishing it with virtual household items and artwork.
Others are wanting to create augmented-reality experiences at a specific geographic location.
Some companies, such as Samsung, have even built virtual stores as another way to sell real-world products.
And others are simply buying it as an investment.
Many have already made tidy profits, with a virtual property next to Snoop Dogg’s digital land in The Sandbox recently selling for $450,000.
For those looking for a regular income, land can even be rented out to fellow users.
Some are even hosting exclusive events on their land and charging users for admission.
How is metaverse land priced and what determines valuations?
The current record for a single land sale is $4.3 million, set in November 2021 when the virtual-land developer Republic Realm bought a plot in The Sandbox.
However, land can still go for as little as 0.1ETH, or around $270.
That’s the floor price for an individual plot in SuperWorld, a metaverse that divides the planet into 64.8 billion unique 100-meter-by-100-meter virtual plots of land.
On all metaverses foot fall plays a part in determining the price.
For example a parcel of land in one of Decentraland’s most visited locations – Fashion Street – sold for $2.4 million while other parcels in not as popular areas are currently on the market for around $10,000.
The main factor determining value, however, is supply.
Some worlds are not tethered to the actual world and have room to build as much as they want.
But why would they?
The less space you have, the more valuable it becomes.
Ultimately, each piece of land is only as valuable as what someone is willing to pay for it.
How are virtual and physical land similar?
The owner of a plot of land can build as they please and rent it out, just like in the real world.
However, unlike in the real world, most plots of digital land are not already developed.
“Everything that you’re seeing in the physical real-estate market will have its parallels in virtual real estate, whether you’re talking about financing, whether you’re talking about development, whether you’re talking about brokerage. You name it,” said SuperWorld CEO Hrish Lotlikar, who previously worked in real-estate investing for HSBC and UBS.
“The idea is the potential for monetiSation is infinite because you’re not restricted to space and time and costs of building like you are in the physical world,” he added.
How to buy land in the metaverse
Step 1: Get a digital wallet
The first thing you need to do is set up your digital wallet as you can’t buy digital real estate in fiat, so you’ll need cryptocurrency.
On Decentraland, the currency is MANA, while in The Sandbox the currency is SAND.
You’ll need MANA to purchase land on Decentraland and SAND to purchase land on The Sandbox.
The currencies aren’t interchangeable.
Step 2: Choose a buying platform
When you have your digital wallet set up, you have a few options when it comes to buying land.
You can choose to buy directly on a metaverse platform, such as Decentraland or The Sandbox, or you can go through a third-party platform such as OpenSea.
OpenSea allows potential buyers to shop around for virtual land parcels without having to continuously jump from one platform to another.
On a third-party platform, buyers can also see asking prices in their real-world currency equivalent, which can make it easier to understand.
The advantage of purchasing land directly within metaverse platforms such as Decentraland or The Sandbox, is you get a strong sense of what amenities are around and who your neighbours are.
This is the more popular route to take once you’ve gained experience as a digital real estate investor.
Step 3: Make an offer on the virtual real estate
Once you’ve found a parcel you’re interested in purchasing, all you have to do is click on it and buy it.
There are sometimes opportunities to negotiate on price, for example, Decentraland allows you to put in an offer, which can be accepted or rejected by the owner.
The transaction is recorded on your wallet and generates an NFT title to the property which is exclusive to you.
Is the digital land craze a bubble waiting to burst?
It’s difficult to predict the future of crypto given how volatile prices are and nobody is really sure on what role blockchain technology will play moving further.
But a total of $9.3 billion worth of institutional money poured into crypto last year, and the number of jobs in the industry continues to grow which suggests further adoption.
However, it’s important to remember the metaverse is still uncharted territory.
Digital real estate investing is an extremely new form of investing and is rapidly changing.
A few months ago, you could own a piece of digital real estate for a few hundred dollars whereas now you need a few thousand just to get started.
There’s currently not enough transaction history and data on digital real estate deals to determine how the virtual land market will behave in the near future.
Investing in it is highly speculative and the market is currently volatile.
