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April 15, 2022

Metaverse Real Estate: How Does It Work?

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The metaverse is a 3D version of the internet where users can connect with other users, play games, attend events, accumulate digital possessions, and even go to virtual concerts. It’s kind of like an augmented, expanded version of the internet that simulates real-life pursuits and actions.

This includes the act of owning land in the form of metaverse real estate. As the metaverse has grown, this has become a crucial part of this expanding 3D universe.

In this post, we’ll break down what metaverse real estate is, how it works, how NFTs are used, why you should buy it, and how you can buy or sell it.  

What Is Metaverse Real Estate?

Metaverse real estate is land that’s located within the metaverse; in other words, it’s a certain amount of 3D space that occupies some part of the metaverse. It’s also known as: 

  • Digital real estate
  • Digital land
  • Virtual real estate
  • Virtual land
  • Metaverse land

It’s actually not so different from real estate in the outside, non-virtual world; it just so happens to be located in a virtual environment. 

Additionally, much like real-world real estate, virtual land is a type of digital commodity that’s highly valuable. According to the investment and analytics firm MetaMetric Solutions, metaverse real estate sales reached over $500 million in 2021. As impressive as those figures may be, they’re actually projected to hit over $1 billion in 2022. 

Of course, digital real estate isn’t the only commodity that you can find in the metaverse. In fact, users are buying, selling, and trading various digital commodities, including art, collectibles, and music NFTs.These are all part of the growing economies that you can find in the various metaverse platforms as users spend more and more time in these virtual environments.  

How Do NFTs Work With Metaverse Real Estate & Virtual Land?

The basic units of metaverse real estate are parcels. These are plots of virtual land within the metaverse that are secured and sold with real deeds that come in the form of non-fungible tokens (NFT). Plus, the deeds and NFTs for your virtual land are recorded on the blockchain that corresponds with the metaverse you choose.

If you buy a piece of metaverse real estate, then the deed - an NFT that’s usually in the form of a metaverse token - will be transferred into your crypto wallet. This denotes ownership of the parcel of virtual land and is essentially the same as possessing the deed to a real-world house or building. This means that you should never transfer this NFT to another person’s crypto wallet unless you sold that virtual land to them. 

Since each parcel of metaverse land is an NFT, it is totally unique and cannot be forged or duplicated. This is essentially the same as pieces of land in real life - these can’t be forged or reproduced either. Plus, these tokens have the precise coordinates that correspond to a specific location on that metaverse’s map. Additionally, if you own and connect adjacent parcels of virtual land, then this is a larger unit of metaverse land known as an estate. 

The development of metaverse real estate is becoming increasingly complex and is even mirroring real-world land development to a certain degree. For example, certain metaverse platforms have burgeoning housing markets and are even forming prototypical cities. In 2018, Decentraland hosted The Terraform Event to sell off metaverse tokens known as LAND and create Genesis City, the world’s first metaverse city. 

Is Virtual Land In The Metaverse Unlimited?

This may come as a surprise to many people, but no, it’s not unlimited. You would think that a digital world created by programmers would have the capacity for limitless expansion, including any virtual land within that world, but that’s emphatically not the case. 

The amount of virtual land is determined beforehand by the metaverse creators and developers. In most cases, they’ll release regular updates telling prospective buyers how many parcels of virtual land are still available within that specific metaverse.

Why don’t the developers offer unlimited virtual land? Because metaverse real estate derives a good chunk of its value from its scarcity. In other words, it’s more valuable because it’s limited and finite, much like how NFTs are valuable because they’re unique and irreproducible. If the developers made metaverse real estate infinite, then there would be no real value to each parcel of virtual land. 

Additionally, most metaverses and their virtual lands are not controlled by a central entity or governing body; instead, they’re governed by a decentralized autonomous organization (DAO). While it’s still possible for developers to expand the virtual land on their metaverse platforms, the governing DAO would need to agree on any expansion plans.

A DAO is a critical part of how the metaverse real estate system works. These internet-native organizations are:

  • Totally transparent on the blockchain
  • Free from centralized leadership
  • Governed by organization members
  • Fairly egalitarian in their power structure
  • Defined by their member-owned communities

The DAO’s total transparency means that all rules, financial transactions, and changes in ownership are recorded and maintained on a blockchain. 

Plus, these DAOs determine zoning restrictions for given parcels of virtual land. Much like how a city council determines how pieces of real land are developed for a growing city, DAOs can zone parcels of metaverse land as residential, commercial, industrial, or recreational. 

For example, the Decentraland DAO has zoned all 90,601 parcels of LAND in Genesis City. This includes:

  • Regular parcels. These are used for residential or commercial purposes, 
  • Districts. These are themed communities.
  • Plazas. These are commercial areas with lots of users passing through. 
  • Roads. These make it easier to navigate and separate all the metaverse parcels. 

The value of a given parcel of virtual land will depend heavily on its location. For instance, if it’s located in a busy area - also known as an area with high footfall - then this will increase its value. This is because it makes it theoretically easier for the virtual landowner to monetize this digital real estate. 

Why Should You Buy Metaverse Real Estate? 

Metaverse real estate might seem like an odd concept to a lot of people. What’s the point of owning virtual land? Why has it become such a valuable commodity?  

There are several primary reasons: 

Develop the virtual land to lease it out

You can develop the metaverse real estate in various ways, including building an amusement park, casino, or museum. These can even be monetized - for instance, you can charge visitors admission in cryptocurrency to the museum that you fill with pieces of NFT art. Plus, if you’ve bought music NFTs and are looking for somewhere to exhibit them, then owning your own virtual land makes it easy to do so.

You can also lease out your virtual land for special events. For instance, Tokens.com actually hosted the first Metaverse Fashion Week in March of 2022 in the Decentraland metaverse. This event was a success, drawing many premier apparel brands and substantial ad buys.  

Make money by "flipping" the properties

If you’re not interested in long-term investments, you can also make a quicker buck by “flipping” metaverse real estate properties. 

This is virtually identical to how investors flip real-world properties, including either: 

  • Buying an empty parcel of virtual land and developing housing or commercial space. 
  • Buying an already developed parcel of virtual land and upgrading or expanding it. 

You can even hire metaverse architects to design interesting developments that are then implemented by a programmer.  

Let companies advertise on your virtual land

This is similar to how websites nowadays will have banner ads. This is prime space that’s rented out to companies looking to advertise to readers and visitors to a given website. Of course, the more visitors that website has, the more you can charge the companies for the advertising space. 

The same is true for any virtual land you may own in the metaverse. However, since this is a 3D environment, you may actually rent out something more visual, like a billboard, banner, or large screen.

Own a piece of the metaverse

Remember that the metaverse is more immersive than the regular internet - its primary purpose is to combine your virtual life with your “real” life. By owning a piece of virtual land, you become even more deeply enmeshed within this VR environment. 

Have your avatar “live” on the property

You can have your personal avatar “live” on the parcel of virtual land that you’ve purchased. This is similar to how people had personal home pages in the late 1990s, social media profiles in the 2000s, and Instagram feeds in the 2010s. If you want, then you can even develop an amazing house or mansion where your avatar lives.

In other words, you can let your personal identity expand and develop within your own little corner of the metaverse. However, just remember that virtual land in the metaverse will be zoned by the DAO according to residential, commercial, industrial, or recreational use. 

That being said, there’s a growing community of metaverse enthusiasts who see all kinds of investment opportunities within the wider metaverse, beyond just digital real estate. Consequently, there are various stocks for NFT-related companies that have also become exciting investments. 

How Do I Buy Digital Real Estate In The Metaverse?

If you want to buy digital real estate in the metaverse, just follow these simple steps: 

  1. Pick a metaverse. There are multiple metaverse platforms that are being developed. Many - but not all - are located on the Ethereum blockchain. 
  2. Pick a crypto wallet. You need a crypto wallet for two reasons: the parcels of metaverse real estate come in the form of NFTs and you use cryptocurrency to purchase this virtual land.
  3. Convert your fiat currency. You’ll need to convert your currency into the right crypto for that metaverse. The best exchanges include Coinbase, Binance, and Changelly.
  4. Choose the right parcel. You’ll need to find which parcel is right for you, including considering the size, price, location, and zoning designation. 
  5. Speak with a metaverse real estate broker. You can find a virtual land broker or agent to help you find the perfect parcel for your needs. 

It’s important to point out that if you don’t want to deal with a real estate broker or agent, then there are some metaverse platforms that allow you to buy virtual land directly from them. This is done with cryptocurrency and is basically the equivalent of paying for a real-world house in cold, hard cash. 

How Do I Sell Real Estate In The Metaverse?

Currently, there are two primary ways to sell metaverse real estate: 

  1. Directly on the metaverse platform’s marketplace. This will depend on the blockchain and metaverse you own the virtual land in, but most will take a transaction fee. For instance, The Sandbox will take a 5% transaction fee (in SAND) for every virtual land sale you make. 
  2. Via an outside NFT marketplace. You can also sell metaverse real estate via an NFT marketplace that’s independent of the metaverse in which you own the land. In most cases, there will also be a percentage transaction fee that will depend on the marketplace you use. 

However, when selling metaverse real estate, you’ll need a crypto wallet, just like when you’re buying virtual land. This is because the cryptocurrency you’re being paid has to be deposited in your wallet and the NFT deed of the virtual land that you’re selling has to be transferred to the buyer via your crypto wallet. 

In other words, your crypto wallet facilitates every aspect of the transaction. Without it, you can neither buy nor sell any metaverse real estate. If you’re wondering about a good option to use, MetaMask is very popular, especially for the Ethereum blockchain.   

What Are Metaverse Real Estate Prices?

The metaverse real estate prices have grown steadily over the past several years, creating a dynamic and expansive market. These prices have been further driven up by greater consumer awareness about the metaverse:

  • The average metaverse real estate parcel in The Sandbox was $2,620 in mid-October of 2021.
  • After Facebook’s Meta announcement, this increased to $11,042 in November of 2021. 

Additionally, let’s take a look at some high-profile sales: 

  • In June 2021, Republic Realm spent $913,000 (1.295 million MANA tokens) on 259 Decentraland parcels. At the time, it was the largest metaverse real estate purchase. 
  • Tokens.com bought a prime plot in the fashion district of the Decentraland metaverse for $2.4 million in November of 2021. The company plans to develop the parcel of virtual land and then rent it out to fashion and entertainment companies as retail and event space.  
  • In late November 2021, Republic Realm paid $4.3 million for prime metaverse real estate in The Sandbox metaverse. 

The value of these virtual land parcels is linked directly to how potentially profitable they can be. Much like land in the real world, metaverse real estate prices all come down to location, location, and location. This means that parts of the metaverse that get more visitor traffic and have high footfall - for instance, a downtown area in a virtual city or a busy plaza - are going to command higher prices. 

In other words, the more users pass through a certain part of that metaverse, the more valuable the real estate will be. A high-traffic area makes it easier to monetize the virtual land, whether it’s because you lease it for special events or let companies advertise to users. 

Additionally, the metaverse real estate prices are inextricably linked to the cryptocurrency prices. Potential investors are attracted to the volatile and speculative nature of these crypto prices since those can result in outsized returns. In other words, if you bet big, then you can win big.    

Do I Need A Metaverse Real Estate Agent Or Broker?

That depends. If you’d rather not look over the metaverse map on your own, then finding a virtual real estate agent or broker can help you choose the perfect parcel for your needs. 

It’s a bit like buying real estate in the real world. Sure, you can do it on your own and cut out the middleman, but it’s certainly more work for you. Plus, the prices on metaverse real estate are highly volatile, especially now that it’s booming, so it’s possible that you won’t get the best deal on price if you do it on your own. 

Ultimately, it’s up to you and how you want to use your virtual land. If you’re looking to build up an investment portfolio, then it might be best to go through a metaverse real estate agent or broker. 

For example, the Metaverse Group has plans to use a real estate investment trust to build a portfolio of properties in various metaverses. Luckily, investments in these parcels of virtual land will be open to regular users who might otherwise be priced out of some of the premium metaverse real estate locations. This gives regular users the opportunity to also make money off the virtual land boom.

Buy Real Estate In The Huslverse

The Husl is an NFT marketplace on the Ethereum (ETH) blockchain with unique music products, collectible NFT albums and access to exclusive events. Our primary mission is to connect musicians and creators with their biggest fans in the growing metaverse. 

We’re also launching our own metaverse, the Huslverse. It will allow our users to have a more lifelike and fulfilling experience with the creators that they know and love. It will also include a Play-to-Earn game  as well as the opportunity for users to buy virtual real estate in the Huslverse.   

Follow The HUSL and stay tuned for the upcoming Huslverse!