Is investing in metaverse real estate a good idea? Eldorado or risky investment? What return on investment to expect? How to choose the right parcel ? What are the risks ? Overview of the different things you need to know about metaverses before getting involved.
What is the Metaverse?
Before we dive into the investment potential of virtual real estate, let’s define what we mean by “the metaverse.” Essentially, the metaverse is a collective virtual shared space, where users can interact with a computer-generated environment and other users in real-time. Think of it like the internet, but with a fully immersive and interactive experience. Currently, the metaverse is still in its early stages, but it’s already attracting attention from investors and entrepreneurs alike.
The Potential Benefits of Investing in Virtual Real Estate
One of the most significant potential benefits of investing in virtual real estate is the potential for appreciation. As more and more people begin to spend time in the metaverse, demand for virtual land is likely to increase. This increased demand could lead to an increase in the value of virtual real estate, much like how physical real estate has appreciated over time. In fact, some investors are already seeing significant returns on their virtual real estate investments.
Another potential benefit of investing in virtual real estate is the ability to generate revenue through virtual businesses. Just like in the real world, virtual real estate can be used to host virtual businesses, such as virtual stores or virtual nightclubs. These businesses can generate revenue through virtual transactions, such as the sale of virtual goods or virtual event tickets. Additionally, virtual businesses can benefit from lower overhead costs compared to physical businesses, as there’s no need to pay for things like rent or utilities.
Real estate in the metaverse explodes since 2021
Since 2021, there has been a dramatic rise in real estate prices in the metaverse, or metavers in French.
Virtual terrains are considered as a highly profitable investment by more and more investors.
They are also more and more appreciated by brands who want to develop their visibility on virtual worlds. PwC, Adidas, Samsungor the auction house Sotheby’s have already started to invest in the metaverses Decentraland and The Sandbox.
Digital marketing experts agree that the future of marketing will be played out in the metaverserather than on social networks. Thus, more and more brands will want to open their doors in metaverses.
👉 Read also – Samsung lands in the metaverse by opening a store in Decentraland (MANA)
The Samsung 837X, a store of the technology giant in the metaverse of Decentraland
Why such a craze for metaverse real estate?
Virtual real estate is not a new business. Video game players have been buying and selling land in virtual spaces for a long time.
However, metaverses have recently benefited from significant technological advances, such as virtual reality (VR) and augmented reality (AR)allowing a truly immersive experience and interest for the general public.
On the other hand, it is the non-fungible tokens (NFTs) that have enabled the rise of real estate on metaverses, by providing a guarantee of ownership on the blockchain.
The real estate market within metavers has also seen a sharp acceleration since the announcement of the Meta, formerly Facebook, metaverse in October 2021, accompanied by an investment plan of tens of millions of dollars.
How do you buy land and what are the prices?
Land and buildings in metaverses are NFTs, i.e. property titles registered on the blockchain.
So you need a wallet and cryptocurrencies to be able to acquire them.
Land for sale can be found on meta marketplace and NFT platforms such as OpenSea.
To become a landowner on a metaverse, you have to budget at the time of writing this article at least 3 Ether (ETH) for a 96 m by 96 m plot on The Sandbox and 5,000 MANA for a 16m by 16m plot on Decentraland.
For the best placed plots, prices can be tens of thousands of euros, or even several million euros.
In 2021, for example, sales of up to 2.5 million dollars were seen on Decentraland or Axie Infinity. The record to date remains the purchase by Republic Realman American real estate company, of a land of The Sandbox for the sum of 4.3 million eurosin December 2021.
The Sandbox metaverse real estate is booming since the end of 2021
What’s the point of investing in a metaverse parcel?
A commercial and rental investment
First of all, just like real life real estate investment, a virtual land can be built on. One can therefore imagine developing a commercial activity such as a store, an art gallery, an attraction, and thus generate an income.
On the other hand, the parcel can be rented. Although there is still difficult to evaluate the market prices of the rentingWe can anticipate a growing demand for commercial spaces, but also for virtual private residences on the metaverse. Similarly, advertising signs can be installed and rented to advertisers.
In terms of return on investment, little data is available on this subjectbut some indicators allow us to hope for very satisfactory returns.
Thus, according to a Bloomberg Intelligence report, a concert on the metaverse can generate up to ten times more business than in a real concert hall. This was the case for Travis Scott’s Fortnite concert, with a turnover of $20 million.
Similarly, a presence on the metaverse helped Adidas sell $23.5 million worth of NFTs.
A speculative investment
Finally, some investors will buy a property title on a metaverse for speculative purposes, betting on the potential development of metaverses, and thus of a rise in the price of the plots…
Indeed, the experts of the subject anticipate an extraordinary growth of the metaverse industry. Estimates for 2024 range from 800 billion dollarsaccording to Bloomberg Intelligence, to 8 trillion dollarsaccording to the American bank Morgan Stanley.
If these figures give hope of significant gains, it is advisable to study the potential of the various metaverses carefully, in order to bet on the right horse. Indeed, the competition between metaverses is already fierce. As with social networks, it is quite possible that some metaverses will lose momentum, and that today’s leaders will quickly become obsolete.
It is also necessary to compare pitches well. It is also necessary to study the construction rules carefully. For example, on Decentraland, the height allowed for a building depends on the surface of the land.
What are the risks of investing in the metaverse?
If the real estate of metaverses gives hope for a significant upside potential, there are many risks to investing in virtual plots or buildings.
Beware of price volatility
First of all, let’s remember the risk of volatility in cryptocurrencies. The prices of the tokens of the metaverses (SAND for The Sandbox, MANA for Decentraland, or SOM for Somnium Space) are subject to very strong variations, according to the current events.
How to choose a location?
It is quite difficult to judge the interest of a parcel or a neighborhood. Little information is available on current projects and the identity of the owners.
How can one analyze the future activity of a neighborhood and the number of visitors when one does not know the intentions of its neighbors?
Generally speaking, it is possible to identify “districts (or activity zones), with spaces dedicated to casinos, museums, or luxury stores. These zones are still rather vague.
The risk is also to see the development of heterogeneous spaces, with a juxtaposition of mismatched activities (e.g., a luxury store next to a slot machine attraction or a hip-hop concert hall…). The “retail mix” provided by actual shopping centers is not guaranteed in a decentralized metaverse.
Second, if one can estimate that a central lot near a road will benefit from more traffic (“footfall”), is this criterion valid in virtual worldsin which avatars can teleport easily, by simply clicking on a URL link?
Call prices for land on NFT platforms can be artificially low
The pseudonymity of owners also brings uncertainty to the purchase of land on NFTs platforms.
Many lands are for sale in the form of auctions, especially on the OpenSea platform.
These auctions hold many surprises: some land is advertised at low asking prices, to be then automatically outbid by bots.
An unregulated market
Another risk to consider is the lack of regulation.
For example, what happens if you buy a parcel that is partitioned, with no access to a road, and the neighbor builds a large building that prevents all visibility and access to your parcel?
A quantity of land that can change
Finally, unlike traditional real estate, nothing prevents the creation of new metaverses and new spaces to be built in the same metaverse.
This could call into question the element of scarcity of a piece of land and thus its price.
Conclusion: diversify your investments
Metaverse real estate can provide great capital gains and impressive returns on investment. It is also a good way to diversify your investments Between cryptocurrencies and non-fungible assets.
As with managing a portfolio of crypto-currencies, investing in the world of metaverses requires good information and good anticipation of the risks.
It is also prudent to diversify your investments in different fields and in different metaverses. Note the strategy of the investor Republic Realm, which owns land in 23 metaverses.
With the price of these virtual lands skyrocketing since the end of 2021, it is certainly high time to take an interest in metaverse real estate, while taking the time for a good analysis and measuring its risks.
Beware also of the famous FOMO ” Fear Of Missing Out ” or fear of missing something…
The Drawbacks of Investing in Virtual Real Estate
Of course, with any investment, there are also potential drawbacks to consider. One major concern with investing in virtual real estate is the lack of regulation. Since virtual real estate is a relatively new concept, there are few rules and regulations in place to protect investors. Additionally, the lack of a physical asset means that virtual real estate is subject to the whims of technology. A glitch or bug in the metaverse could potentially wipe out an investor’s virtual real estate holdings.
Another potential drawback of investing in virtual real estate is the uncertainty of the future of the metaverse. While the metaverse is gaining traction, it’s still unclear what its ultimate potential will be. Investing in virtual real estate requires a certain level of faith that the metaverse will continue to grow and become a significant part of society. If the metaverse doesn’t take off as expected, virtual real estate investments could end up being worthless.
Examples of Successful Virtual Real Estate Investments
Despite the potential risks, there are already examples of successful virtual real estate investments. One of the most well-known examples is the virtual world of Second Life. In Second Life, users can buy and sell virtual land, as well as create and run virtual businesses. Some users have even become virtual real estate tycoons, amassing virtual land holdings worth thousands of real-world dollars.
Another example of a successful virtual real estate investment is the virtual game Decentraland. In Decentraland, users can buy virtual land and build on it, creating their own virtual environments. This virtual real estate can then be sold or rented to other users. In 2021, a virtual plot of land in Decentraland sold for over $2.4 million worth of cryptocurrency.
So, is buying real estate in the metaverse a wise investment? The answer is, it depends. Like any investment, virtual real estate comes with its own set of risks and potential rewards. However, as the metaverse continues to grow and evolve, the potential benefits of investing in virtual real estate could outweigh the potential drawbacks.
As with any investment, it’s important to do your due diligence before jumping in. Research the metaverse and virtual real estate market thoroughly before making any investments. Consider working with a financial advisor or experienced virtual real estate investor to help guide your decisions.
In conclusion, virtual real estate is a new and exciting investment opportunity with the potential for significant returns. However, it’s important to approach this investment with caution and a clear understanding of the potential risks involved. As the metaverse continues to grow, virtual real estate investments could become an increasingly attractive option for investors looking to diversify their portfolios. Only time will tell if investing in virtual real estate is truly a wise investment, but for those who are willing to take the risk, the potential rewards could be significant.
The metaverse is an emerging technology that has the potential to revolutionize the way we interact with digital content. However, investing in metaverse technology is not without risks. It is important to thoroughly research the companies and projects involved in the metaverse space before making any investment decisions.
The value of virtual land in the metaverse can be highly subjective and speculative. Some investors may see the potential for significant long-term growth, while others may view it as a risky investment. It is important to carefully consider the risks and potential rewards before investing in virtual real estate.
There are several ways to make money from metaverse real estate, including renting or leasing the property to other users, selling the property at a profit, or developing the property into a revenue-generating business. It is important to carefully consider the costs and potential returns associated with each strategy.
The metaverse is an emerging technology that is still in its early stages, and it is difficult to predict its long-term potential. While some investors may see the potential for significant growth, others may view it as a risky investment. It is important to carefully consider the risks and potential rewards before making any investment decisions.
Investing in the metaverse carries several risks, including regulatory uncertainty, technological risk, and market risk. Additionally, the value of virtual assets in the metaverse can be highly subjective and speculative, which may make it difficult to accurately value investments. It is important to carefully research and consider these risks before making any investment decisions in the metaverse.