Digital Real Estate: NFT Land & the Future of Investing (2023)
The future of crypto exchanges and investing is taking a sharp turn towards virtual property and digital collectibles.
Analysts seem to agree that the market will explode with the advent and adoption of non-fungible tokens (NFTs).
Same as the introduction of bitcoin mining software a few years back, the advent of owning digital real estate using NFT is currently one of the methods to allow the mainstream audience to enter the crypto sphere.
NFTs have been made possible by blockchain technologies and have a variety of potential use cases.
These range from making games more immersive by giving your character various properties through an NFT, to creating a tradable collectible that can be bought or sold.
But now, it seems that the time is right for NFTs to bring the virtual real estate revolution to the next level.
In fact, while commercial real estate loans have been around for decades, it might also soon be time to explore digital real estate loans.
But what does it exactly mean now that real estate has gone meta? What are the benefits of NFT land ownership? And how can you get in on the action right now?
These are all discussions that I’ll explore in this post. Let’s get right into it.
Investing in NFT Real Estate
One of the great things about NFT is that it allows investors to earn back on their blockchain properties investments in a relatively short period of time.
This stands in sharp contrast to conventional real estate, where investments are tied up for long periods without any significant increases in value being seen.
Also, with current crypto exchanges being mostly unregulated and volatile at best, you can make a profit on your investment by trading your digital land through the available marketplaces.
What’s more, buying virtual property can prove advantageous to various types of investors – those looking for long-term passive income opportunities and those looking for shorter (yet still good) returns on their actively traded cryptocurrencies.
Investing in NFT real estate starts with having the right type of NFT wallet.
Not all exchanges support NFT tokens; the only way to hold your digital property is through a wallet.
Having an ERC20-compatible wallet will allow you to store digital real estate on the blockchain and keep it safe from hackers.
NFTs In The Real Estate Industry
If you want to buy digital real estate, it pays to know exactly what types of crypto-assets are available.
Since NFTs are digital assets available on the blockchain, people can purchase them through the same exchanges like any other type of cryptocurrency.
And just like all cryptocurrencies, NFT trade is also subject to volatility and price manipulation.
With that said, there are various ways to invest in digital real estate. Let’s explore some of the most common ones below.
Virtual Businesses
Building virtual businesses means turning your crypto fortune into a valuable NFT.
This can be done by either purchasing an already existing NFT or creating your own virtual business and earning from commissions on sales of NFT assets.
Building your own business in the metaverse group is theoretically easy.
All you need to do is find a piece of land and buy it.
Creating virtual businesses is one of the most lucrative ways to benefit from NFT real estate, as you can start earning commissions as soon as someone wants to land on your property.
The only downside is that this can take some time.
Yet, it is still usually faster than opening up a traditional brick-and-mortar store.
Cryptovoxels Properties
With Cryptovoxels being an Ethereum virtual world, it’s one of the most promising NFT real estate options.
Cryptovoxels can be found in different locations around a map, which you can explore using your VR device or any regular web browser. To purchase a Cryptovoxel property, you’ll need to pay in Ether (ETH).
You can do this either through MetaMask or any other ERC20-compatible wallet. Just choose a location and then click BUY. The map works similarly to Google Street View, so you can use your mouse or VR controller to navigate around the land.
At the time of writing, most Cryptovoxels locations are still available for purchase. The price of a Cryptovoxel varies according to its location and size.
There are currently three ways how you can purchase land on Cryptovoxels:
- Buy a parcel of your own and begin to develop that.
- Build your virtual estate on one of the available plots in the sandbox.
- You can also modify a non-grid area to be fully editable according to your liking.
Virtual Countries/States/Cities
For big corporations that want to dive deep into the real estate market in this digital world, investing in virtual countries might be one of the best options out there.
The same rules apply to virtual states, cities, and other locations entirely governed by a single entity.
The upside of purchasing virtual land, in this case, is that you acquire all the rights that come with being the owner.
This type of crypto-investing requires thorough research about both the platform itself and the government policies, so do your homework before making any decisions.
Gaming Maps and Land
If you want to invest in NFT real estate, buying gaming maps is a great way to move forward.
Map owners can “claim” tiles on the map, which they can then sell to other players.
This process is similar to how Cryptovoxels works.
Map owners can also create quests and stories surrounding each tile, making exploring their maps an entirely new experience for gamers.
Many people who bought NFT property aren’t gamers but investors looking to make money off virtual real estate markets.
So if you’re looking for a less risky investment opportunity with potentially high rewards, this might be the best choice for you, ensuring that you’re surrounded by people who have a similar mindset.
The Pros And Cons Of Owning Land On The Blockchain
Let’s now look at the pros and cons of NFT land ownership.
Pros of NFT Real Estate
Starting off, let’s explore the pros of making such an NFT investment.
NFT Real Estate Is Versatile
A great attraction to owning digital land is that it’s just like regular real estate, only much more versatile.
In SuperWorld, one can buy this type of digital real estate much more flexibly than currently available in any physical location.
More than 64 billion plots of land were curated for sale.
With each plot ranging in terms of sizes and cost, there’s something for every kind of buyer.
As new plots are continuously being released and only a fixed number is available at any given time, you can be sure that your investment will appreciate over time rather than depreciate like other cryptocurrencies on the market.
Your digital property will be yours to use, trade, or sell to other users in this virtual reality.
NFT Real Estate Is Secure
Being involved in the digital real estate business is undoubtedly much safer than entering any other digital investment.
With every transaction being recorded on the blockchain, it’s impossible for anyone but yourself to access your digital property.
Once a transaction has been tokenized and stored on an NFT wallet, it’s yours to keep.
That way, you can rest assured that hackers won’t get their hands on a digital asset and that you’ll be able to manage such properties without any problems.
NFT Real Estate Is Tradable
What’s great about digital land is that it allows users to buy and sell these digital properties with ease.
Thanks to blockchain technology and its decentralized nature, one can complete transactions of this kind in a matter of seconds through the use of innovative contract protocols.
As such, there’s no longer a need to wait days, months, or even years, for bank transfers between countries or long periods before you receive the title deeds to your new property.
If you’re looking to buy or sell virtual real estate, you can do so with just a few clicks through any of the major exchanges.
NFT Real Estate Can Be Built Up However You Want To
Just like Nike aims to sell sneakerheads in the metaverse, you can use your NFT land to its fullest potential.
For example, a virtual store or a casino could easily be placed by the owner of the digital property in their virtual world.
Likewise, architects and interior designers can craft their buildings for sale in the marketplace.
There are multiple ways to turn a single property into a profitable business venture.
Whether it’s selling ad space, being part of active affiliate sites that earn affiliate marketing commissions when buyers make specific purchases, or even selling your digital products, cash flow is possible for digital landowners.
NFT Real Estate Brings A Passive Income
Another great thing about owning land on the blockchain is that it allows passive income from your investment over time.
This is done through the use of smart contracts and other similar setups.
You can also lease your NFTs out to other users by setting up smart contracts that allow others to put specific amounts of tokens into your wallet every week, month, or year.
By doing so, you’ll be able to generate income just like you would if you were to purchase property and rent it out in the real world.
When you buy your online real estate digital assets, you can also set them up to automatically sell themselves at a higher price once they’ve reached the value you want.
Most NFT marketplaces (including Decentraland’s Marketplace) allow users to quickly buy and sell digital land.
For example, if you have a small plot of land that is just big enough for a small store or office space, others can pay to enter your virtual world and use its contents.
If you want to make some extra money on the side by having a rental property that is rented to other users online, all you need to do is put up an ad or two in the marketplace with photos of what’s being offered.
From there, it’s as simple as accepting any incoming requests, which will then be paid for using various tokens.
NFT Land Is Perfect For Investors Who Want To Buy Low & Sell High
Thanks to blockchain technology and cryptocurrency exchanges, one doesn’t need millions of dollars to own their pieces of digital property.
By buying virtual land and placing houses or businesses on it, anyone can take advantage of the value that this real estate has to offer.
Like in the non-virtual world, investing in NFT land allows you to buy low and sell high, making money from price fluctuations and inflation over time.
At the same time, if you ever wanted to cash out your investment for fiat currency, all you need to do is put up your digital assets for sale.
In short, opportunities abound in this world full of cryptocurrency and NFT real estate.
With the metaverse soon potentially worth trillions of dollars, the only thing stopping you from getting your slice of the pie is a lack of action.
Cons Of Digital Real Estate Investing
The purchase of digital real estate does not come without any disadvantages.
Compared to traditional real estate or even to another type of crypto investment, owning NFT land is still not as straightforward as other investments.
Let’s look at some of the disadvantages involved.
Digital Real Estate Investors Are Still Finding Their Feet
Even though the purchase of digital land is possible with just a few clicks, not many people like spending money on virtual assets without knowing whether or not it will pay off.
This is especially true if you compare NFT real estate investment to other areas such as day trading and long-term stock investment.
In general, these have historically offered a proven ROI time after time.
As such, those looking for something certain may want to look elsewhere.
However, those who look long-term into this area could be in for some huge profits as more and more people start using blockchain technology.
It Can All Go Down In Smoke
When you purchase digital real estate (as opposed to physical real estate), you’re placing your money and trust into a third party instead of investing directly into a tangible item.
The fact that the market value depends on various factors makes it an unpredictable investment tool, unlike traditional real estate, where the value is usually more stable.
While any single entity does not directly control the price of digital land, it still depends on many factors which can quickly change.
For example, if a popular game goes offline entirely, its user base will drop overnight, and so will its web traffic (and therefore virtual land prices).
While there are some cryptocurrencies out there that seek to improve this issue, they are not widespread enough at this time to make much of an impact.
Also, if the price of Bitcoin ever drops beneath a set amount, this could seriously affect all other cryptocurrencies. Furthermore, any crash in value will also directly impact any crypto-assets that depend on Bitcoin as an underlying platform.
Virtual Land Ownership Still Comes With A Degree Of Legal Uncertainty
NFT digital real estate has been largely unregulated by any state power.
At the same time, there haven’t been any significant court cases or legislation that directly pertain to owning virtual land either.
As such, you never know if a government body will suddenly decide to intervene and change everything in a few months.
So even though cryptocurrency exchanges have begun offering NFT real estate investment options, there’s always an element of risk when it comes to investing in virtual assets without regulatory oversight.
While digital real estate refers to all types of virtual land, understanding the legal status of these assets can be beneficial to any potential investor.
NFT Real Estate Sold At Outstanding Prices
At this point, you might be wondering just how much it costs to buy digital real estate.
Remember that the price of land will depend on various factors, including gameplay elements, scarcity or lack thereof, and location.
While some NFT properties are sold at relatively low prices (like an in-game currency that one can buy with fiat currency), there are also cases where people have paid big money for a single piece of virtual property.
In fact, in March 2021, an NFT house was sold for half a million dollars.
Image credit: Superrare.com
Being the first sale of an NFT property, it left many contemporary NFT skeptics scratching their heads in disbelief.
Known as Mars House and created by Krista Kim, this property is one of the initial wonders of augmented reality.
It’s encased in floor-to-ceiling windows with a mountain view in the backdrop.
Platforms Offering NFT Real Estate For Sale
One of the initial platforms that offered the possibility of investing in digital real estate was Minecraft.
This platform is one of the most popular online games in history.
NFTs that exist on the Minecraft platform are only those purchased with Minecraft Coins, which can also be bought with fiat currency.
There are other common platforms where you can buy NFT real estate, including Decentraland, Roblox, Cryptovoxels, Upland, Axie Infinity, and Somnium Space.
Types Of Tokens Available When Buying NFT Real Estate
While one can purchase various NFT tokens when acquiring virtual land, this will depend on the blockchain platform of choice.
In addition, it’s essential to understand the difference between various types of tokens available.
Two of the most common tokens are Entire Asset (EA) and Fractional Ownership (FO). Let’s explore these two types of tokens in more detail.
EA Tokenization
When a virtual home is tokenized, the title document — which specifies who owns the property and when it was built — must be transformed into an NFT.
While progress is being made, it is still challenging to accomplish this process due to real estate investments’ regulatory environment.
To overcome these challenges, steps are being taken by making NFT digital real estate transactions more efficient.
FO Tokenization
Here, the process of tokenizing your assets is similar to a crowdfunding platform or any other comparable structure that allows investors to purchase shares.
Depending on the arrangement, a fractional owner holds a certain quantity of tokens representing shares in the project.
This allows for a quicker and more direct process to tokenize real estate.
In the real estate sector, this technology is already in use in certain instances, and thus, it makes sense to bring it over to the NFT world.
Who Are The Primary Buyers Of NFT Real Estate?
The NFT real estate investor might be a developer, a newbie investor, or someone just curious and wants to experiment with the technology.
In addition, an NFT real estate investor may be a passive holder of tokens who is following the market’s movement and waiting for a price increase before selling their tokens.
Meanwhile, others might be more active traders seeking short-term gains through reinvestment.
While some investors will only buy digital land to sell them later on at a higher value, others see it as investments with long-term benefits.
These people are interested in the potential innovation that can come out of these virtual lands.
As you can see, there is no one right type of NFT real estate investor.
How To Purchase NFT
Learning how to buy NFT is a process that every investor must follow.
First, you must own crypto assets (BTC, ETH, etc.) to use them to invest in digital real estate.
You can buy NFT Real Estate using fiat currencies or other cryptocurrencies, but it is more complicated than using Bitcoin or Ether.
The next step is to choose the platform where you want to make your purchase.
This will depend on what tokens you are looking for and which offers the fastest transactions.
While some platforms allow for instant exchanges, others require both parties involved to be online simultaneously.
Once you’ve chosen the platform, you need to create an account by providing basic information such as your name and email address.
Then, it’s just a matter of selecting the specific tokens you wish to invest in, sending your currency of choice, and waiting for the transaction to complete.
The NFT assets will appear on your portfolio’s dashboard when the purchase is complete.
You can use these tokens to buy digital land, thus opening opportunities to interact with other users through games or apps.
The top markets to buy NFTs from right now are:
What Fuels The NFT Real Estate Trend?
In a nutshell, it’s the global economy.
As the NFT market continues to grow at an impressive rate, real estate investors will see that it is now easier than ever to invest in virtual real estate.
This means that the demand for digital assets has become more significant with each passing day.
Since digital assets are tradable across all types of exchanges, owning NFT property makes economic sense for many different kinds of people and numerous reasons.
Another thing to remember is that the NFT market is expected to become even more valuable as time progresses.
What this means for investors is that if they don’t buy digital assets now, then there’s a good chance that they will regret it later on.
The more people who want to own these tokens and cryptocurrencies, the higher the demand and price.
And since this technology does not require a complicated process to conclude things, those who invest early will benefit from lower prices during what could be described as a buying frenzy.
With all this in mind, it’s safe to say that very shortly, the world of NFT real estate may look very different than today.
Other Virtual Real Estate Factors
In this new world, avatars play a significant role in everything.
For example, when it comes to owning a piece of virtual land, the avatar is usually the owner of a specific piece of land.
Therefore, each land parcel will have a unique address generated from the metadata saved in an NFT token, part of which might correspond to the avatar.
In addition, the domain name used, and the social media presence of such avatars, make choosing the right ones important.
This might be even more important than if such a transaction happened in the physical world.
In addition, it’s essential not to forget about the real world and how this can better your NFT virtual realm.
For example, if you’re the co-founder (or even involved in partnerships) of a well-known company, this would help your reputation as a digital property owner.
Reputation in digital marketing is already a significant factor. It helps to rank and attract people to a site in terms of digital marketing and SEO, social media accounts (including LinkedIn), and other channels.
The same ideas apply when investing in metaverse real estate properties.
The Benefits Of Diversifying With Traditional Real Estate
While virtual real estate investing has become all the rage in recent years, there are still plenty of opportunities to be had by investing in more traditional forms of real estate.
By diversifying your portfolio with a mix of virtual and traditional investments, you can maximize your potential for profit while also mitigating your risk.
Some traditional real estate investment solutions are even considered passive income in the sense that they can provide you with a consistent stream of income without a lot of work on your part.
For example, ArrivedHomes is a solution that helps you buy property shares and earn rental income without being a landlord.
Here are some of the benefits of diversifying your portfolio with traditional real estate:
1. Less Volatile Than Virtual Real Estate
The big advantage of virtual real estate is that it can be bought and sold quickly and easily, which means that it can be a great way to make money in a short period of time.
However, this also means that virtual real estate is more volatile than traditional real estate.
While you can make a lot of money quickly with virtual real estate, you can also lose money just as quickly.
By diversifying with traditional real estate, you can offset some of the volatility in your portfolio and reduce your overall risk.
2. More Predictable Income Streams
Another advantage of traditional real estate is that it offers more predictable income streams than virtual real estate.
With traditional real estate, you’ll typically earn rental income from tenants who sign a lease agreement.
On the other hand, virtual real estate can be a great way to make a lot of money quickly, but it’s not always as consistent.
3. More Control Over Your Investments
When you invest in traditional real estate, you have more control over your investment than you do with virtual real estate.
For instance, if you buy property shares with ArrivedHomes, you can choose how much you want to invest and when you want to sell.
You also have the option to be an active or passive investor.
With virtual real estate, on the other hand, you’re at the mercy of the market.
4. Tangible Asset
Another advantage of traditional real estate is that it’s a tangible asset.
You can see and touch your investment, which can give you a greater sense of security than investing in something that exists only online.
Check out ArrivedHomes if you’re interested in diversifying your portfolio with traditional real estate.
Wrap Up.
NFTs real estate is still in its infancy compared to the traditional real estate industry.
However, this is likely about to change over the next few years.
The critical difference is that you can now invest in digital land without buying physical property and going through a complicated process to get this done.
If someone wants to buy or sell NFT property now, all they need is Internet access and a crypto wallet.
In addition, if somebody buys an asset now, there’s a good chance they will see it appreciate as time goes on.
On top of that, there will be innovations and technologies that can make NFT property even more appealing.
The bottom line is that the future of digital land looks bright, which is why more people are buying into it each day.
And while some are hesitant about these investments, others see them as a way to boost their economic productivity in the years ahead.
What do you think? Have you invested in NFT real estate?
Do you expect this trend to continue?
If so, do you think it will cause the price of cryptocurrencies to rise over time?
Let me know your thoughts in the comments below.
