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New opportunities are changing the way we see the world, conduct business, and invest: cryptocurrency. Blockchain. Bitcoin Mining. NFTs.
The latest opportunity?
Buying virtual land.
Yes, you heard that correctly: buying land in the metaverse.
Did you know:
- A plot of virtual land in the online game Axie Infinity recently sold for $2.3 million
- Republic Realm, a virtual real estate developer, paid $4.3 million for property in the Sandbox metaverse.
- In Decentraland, a piece of land sold for more than $900,000.
- Virtual land tokenized as an NFT sold for $60,596
What’s more, Grayscale, a crypto asset manager, recently released a report that estimates the digital world may grow into a $1 trillion business in the near future.
In this article, we’ll break down everything you need to know about buying land in the Metaverse, including the advantages and disadvantages of investing in this new virtual land rush.
Let’s get started!
What is Virtual Land?
Virtual land is land bought, sold or owned in what’s called the metaverse.
The metaverse, first mentioned in Neal Stephenson's 1992 science fiction novel, Snow Crash, is a virtual reality universe that exists on the internet.
In it, the “metaverse” is a digital world that people can visit and interact with others online.
Unlike other virtual reality universes, the metaverse has a strong social component. This is because it's an MMO (massively multiplayer online) game that allows users to connect with others and play together in real-time.
The metaverse is also an open world, which means that users can explore it at will.
You may have encountered the metaverse before without realizing it:
- The popular video game, Second Life, is based on the metaverse
- Oculus 2, the sequel to the popular Oculus Rift virtual reality headset — which is quickly becoming a household name for entertainment and collaboration — will also include a metaverse
How Real Estate in the Metaverse Works
In the Metaverse, users can purchase virtual land, which is a new type of digital real estate.
The possibilities for what you can do with your virtual land are endless but will generally fall into one of two categories:
Unlike a traditional online game where players buy gear or additional character slots, in a metaverse each user purchases their very own parcel of real estate that they can build on and use for whatever purpose they see fit.
Just like physical real estate, the goal of investing in virtual real estate is to build a large portfolio that generates long-term passive income.
The price to purchase virtual land varies greatly from one metaverse server to another depending on:
- the size of the land
- it’s location
- how developed it is
Some virtual reality worlds have a fixed price to buy digital property, while others allow users to bid or auction for parcels of land.
Highlights of How Virtual Real Estate Works
Buying and Selling Property
In most cases, users can buy virtual land from other players at any time they wish.
In some metaverses though, the owner of the property cannot transfer ownership to a third party unless it's through a game mechanic.
This prevents players from simply selling their virtual land and walking away with the profits.
Developing Your Virtual Land
One of the best parts about owning virtual land is that you can build on it (virtually, of course).
This way, gamers create their own experiences and make each metaverse server unique from one another.
For example, some users may choose to turn their virtual property into a nightclub or a restaurant, while others may build an amusement park.
In the metaverse, the possibilities are endless.
Taxation
Just like in the real world, virtual landowners must pay property taxes on their parcels.
The tax amount varies depending on the metaverse server, but it's generally a small percentage of the total value of the property.
Why Invest in Virtual Land or Real Estate?
Now that we’ve discussed how virtual real estate works, let's explore some of the explicit advantages of investing in virtual land over other types of competing investments like stocks or physical real estate.
Advantages of Buying Land in the Metaverse
- Virtual land and real estate are assets that can be used, enjoyed and updated, unlike other forms of investment such as stocks
- It's cheaper to invest in virtual land than it is to buy physical property
- The price of virtual land is fixed. Unlike the stock market or real estate, there's no chance that the price of your property will decrease overnight due to natural disasters or economic issues
- Virtual land is unique and can't be replicated by another user, which means its value remains secure over time instead of depreciating like other forms of digital property (such as music and movie downloads)
- You can use your virtual land for whatever you want, giving you more creative freedom than with other types of investments
- Blockchain technology makes virtual real estate investments secure
Disadvantages of Buying Land in the Metaverse
- The market is still new and unproven, so there's no guarantee that the value of virtual land will continue to increase
- Since virtual land is digital, there's always the possibility that it could be lost or stolen if your account is hacked
- Most metaverses are still in development, so not all of them offer the same level of functionality and security
- Virtual land is intangible, which means you can't touch it or see it with your own eyes unless you're using a VR headset to experience the metaverse
What to Consider When Buying Land in the Metaverse
When it comes to buying virtual land, there are several things to consider before making a purchase.
Here are some factors you'll want to take into account:
The Server
Make sure the metaverse server you choose has low transaction fees and is easy to use.
The Currency
The metaverse server you choose should accept the currency you want to use to buy virtual land.
The Safety of the Server
Make sure the metaverse server you choose is safe and secure, using blockchain technology or other security measures.
Ease of Use
Make sure the buying platform is easy to use and navigate.
How to Buy Land in the Metaverse in 5 Steps
Let's take a deep dive at how you can buy land in the metaverse.
Step 1: Determine your virtual land goals and strategy
Just like with any investment, before you begin it’s critical to determine your overall strategy. For example:
- How much are you willing to pay for virtual land?
- Will you use the virtual land as residential property or commercial property?
- Do you want to be an active or passive virtual investor?
- How much time and effort will you put into your virtual property?
- How long will you keep the property?
- What is your exit strategy?
Once you have your goals and strategy, you can move to step 2.
Step 2: Choose a metaverse server and virtual land to purchase
There's no shortage of metaverses on the market, but not all of them are created equal.
In order to maximize your chances for success as an investor, choose one with low transaction fees that allow players to easily buy and sell virtual land.
Step 3: Create a digital wallet for your metaverse account and purchase your first parcel of virtual real estate.
If you don't already have one, create an Ethereum-compatible wallet to store the currency that you'll use in the metaverse (Ether).
Then, fund it using either cash or cryptocurrency depending on what the metaverse server accepts.
Step 4: Choose a buying platform
Here are some popular metaverses that accept virtual land investments:
Decentraland
Decentraland is one of the most popular virtual reality metaverses where users can buy land using MANA tokens.
Metaverse Group
Metaverse Group is a virtual economy where players can buy and sell land using the blockchain.
Etheria (World of Ether)
Etheria is a decentralized world where players can buy and sell virtual real estate using the Ethereum blockchain.
Future Fables
Future Fables is an augmented reality metaverse that lets users purchase virtual real estate in the form of islands, houses and castles using cryptocurrency or fiat currency.
Inworldz & Sansar.com
These sites are also both virtual worlds that accept investments of cryptocurrency or fiat currency in the form of USD, EUR and INR.
Step 5: Buy your Virtual Land
Just like any real estate transaction, you'll submit an offer to a seller, and once you've come to an agreement, you'll close the sale and take possession.
Once you've acquired your parcel of virtual real estate, you can enact your strategy from step 1.
The Bottom Line: Virtual Land Investing
Investing in virtual property comes with many benefits that aren't offered by other types of digital or physical assets but might not be the right investment for those risk-averse to digital assets like cryptocurrency or NFTs.
If you determine that virtual land investing is right for you, follow our 5-step blueprint for wise investing.
If it isn’t, keep in mind there are other and less risky opportunities with high ROI, like physical real estate and stocks.
Whichever investing method you choose — whether it's a new opportunity like virtual land or a proven method like physical real estate and stocks — education is key.
