The metaverse is still risky for investors.
Better Informed in just 3.1416 minutes
Get the daily email that makes learning about current tech and coding trends fun. Stay engaged and on top of your industry, for free.
Brokers Tal and Oren Alexander have sold some of the priciest homes in America to people like Ken Griffin and Kanye West, and they’ve even been the listing agents on the most expensive residential real estate transaction in the United States (a mere $238 million). Now, they are brokering deals in the metaverse, focusing on luxury mega-mansions in the Sandbox, Decentraland, and other metaverse platforms. They’re not the only brokers that have started selling in the metaverse where real estate has become increasingly pricey–sales topped $500 million in 2021, a figure that is expected to double this year. But unless you’re in the market for a million-dollar metaverse listing, a broker is optional for aspiring metaverse homeowners.
There’s no need for a broker to guide your hand through mountains of paperwork, since all the transactions are stored on the blockchain. Plus, buying and selling metaverse real estate usually occurs on a peer-to-peer basis through secondary marketplaces like OpenSea, similar to finding a listing on Zillow. But finding and buying a plot of land in the metaverse can still be confusing, especially since some intrepid soul has yet to write Metaverse Real Estate for Dummies.
Unlike IRL real estate, which is mostly a safe-haven asset, metaverse real estate is as risky as any other crypto asset (which, right now, means very risky). A deed in the metaverse is an NFT, a smart contract on the blockchain, just like a CryptoPunk or Bored Ape. It’s essentially a smart contract that represents ownership of that particular parcel. “First things first, get a wallet. Have the ability to purchase,” Josh Schuster, principal of Silverback Development and a metaverse real estate expert, said. These metaverse platforms, just like real-world countries, all have different currencies. For example, Decentraland transactions use either the native token, “mana,” or ethereum, while the Sandbox supports both ethereum and its own token called “sand.”
Finding a metaverse property starts with exploring the map of a desired virtual world. In Genesis City, the first metropolis in Decentraland, one of the largest metaverse platforms, there are 43,689 private land parcels. The best locations in Decentraland are usually around the plazas, especially the Genesis Plaza, where avatars enter this virtual world. Just like in real life, a studio next to a major downtown area is more valuable than a four-bedroom in the middle of nowhere. Plots around Genesis Plaza are expensive: While the cheapest single parcel in Decentraland, equivalent to 52.5 square feet and far from attractions, is going for 3,990 mana ($3,065 as of this writing) on Decentraland Marketplace, a plot the same size right next to Genesis Plaza is 299,999 mana ($230,419). (The value of mana has been plunging fast these days, so the values of land parcels in dollars change accordingly.)
Deciding on which piece of property to buy depends on the buyer’s ultimate goal for the parcel. “The buyer has to think about, what do they really want to do in this space? Is it an investment? Do they actually want to build something and they become more sophisticated?” Schuster asked. A lot of virtual communities are designed to replicate the real world. For example, in Decentraland, there are districts with different themes. Vegas City is a digital Sin City that emulates the Las Vegas Strip and hosts casinos, clubs, and cinemas. Decentraland also has a Fashion District, which is the hub that recently hosted Metaverse Fashion Week. The best way to flip land and make a quick profit is to buy parcels close to a celebrity who has put down metaverse roots, like Snoop Dogg in the Sandbox or Paris Hilton in Roblox. Then, aside from finding famous neighbors, buying up locations with a lot of digital foot traffic could prove valuable. Buyers in Genesis City believe their purchases ares akin to buying land in New York City in the late 19th century, and Genesis Plaza might be the next Grand Central Station.
Buyers can also build mansions, galleries, or even stadiums to ostensibly add value to the land and generate income. In the physical world, landlords make money by collecting rent, creating advertising space, or selling their properties when they appreciate in value. That’s true in the metaverse, too. Tokens.com bought 116 parcels in the heart of the Fashion District, and its CEO Andrew Kiugel plans to develop the virtual area into a destination for luxury brands and that can be monetized by renting space out.
