Should You Invest in Metaverse Real Estate in 2023
Best selling author David Britton and co-founder of Door Loop, provides his unique perspective on the pros and cons to real estate investing in the Metaverse in 2023.
The Metaverse is being seen as the future of the Internet and it’s giving virtual real estate a whole new definition. Ever since making its rounds on the radar of stakeholders, it has been seeing steady growth. Metaverse land prices have drastically increased, and with giant tech companies such as Apple, Microsoft, and Meta (Facebook) investing millions in it, more investors also grow interested in this field. However, even though anyone with the cash can buy Metaverse real estate, it may not necessarily be for everyone.
Top reasons to invest in Metaverse real estate in 2023
You want to promote your brand or business to the younger generation
Generation Z is poised to shape the future of the Internet as their usage of digital platforms is bound to dictate technology trends. This tech-savvy demographic tends to interact with each other on platforms that are either part of the Metaverse or have characteristics similar to it, as they generally have a lower interest in mainstream social media. As such, the metaverse has the potential to be an excellent place to connect with Generation Z.
Furthermore, the majority of GenZ are already employed. Recent estimates show that the collective buying power of Gen Z is approximately $150 billion. From a marketing perspective, it would be wise to target this population when advertising products and services.
You want to build and become a landlord
Although still in its infancy, it seems the Metaverse is here to stay. Forward-thinking investors are bound to see its potential and it will only grow in popularity. However, there’s generally a limited supply of virtual lots, and as with physical real estate, when demand outgrows the supply, the early investors are in the best position to make a profit.
Investors who are already dabbling in unconventional investments such as cryptocurrencies may want to take their investing adventures a notch further by buying a piece of digital land. Although for now, it may just be a way to spend (or store) their extra money, they can develop their land and build spaces that can potentially attract brands and businesses in the future. For instance, they can develop a virtual office building complete with online workspaces and conference rooms. These properties can be rented out or sold at the perfect time.
You want to become a specialized Metaverse expert or consultant
Tech-savvy investors who already have a good idea of the ins and outs of the Metaverse can buy pieces of land and experiment with various projects. They can become experts in the field and help brands and businesses establish a presence in the Metaverse. As SMEs, they can advise on what properties to acquire, what projects to develop, or when to rent out or sell.
Metaverse real estate risks and threats you should know about
The Metaverse is an unpredictable realm
Users collectively spent millions of dollars on digital real estate on metaverse platforms in 2021, creating a virtual land rush. The combined sales of virtual land on major platforms reached about $500 million that year. However, in 2022, the average price of land in Decentraland, one of the popular Metaverse platforms, dropped by about 60% from over $37,000 in 2021 to around $14,000 in 2022.
Given the tendency of Metaverse real estate prices to rise and fall drastically, it’s easy to say that it is as unpredictable as cryptocurrency. Because of this, investors should only invest if they’re prepared to lose to some extent.
Platform operators have control over the properties
Virtual real estate only exists on a platform. In the event that a platform’s operator restricts a virtual land owner’s access to the platform or deletes it entirely, owners would be left without property rights. Furthermore, constitutional safeguards that protect traditional real estate owners do not apply to virtual real estate. Platform operators may outline usage conditions, which owners of virtual real property must accept as-is.
In all, platform operators have greater influence over virtual real property rights, inherently diminishing the owners’ property rights. In addition, the lack of regulation permits platform operators to act with broad discretion and minimal liability. The absence of an insurance industry for virtual real property prevents owners from transferring risks and liabilities to another party.
Metaverse scams abound
The Metaverse is a relatively new concept, and the majority of users do not have much knowledge about it. This is being exploited by malicious actors, who are creating fraudulent links disguised as links to popular metaverse platforms. These activities are meant to give the scammers access to the consumer’s virtual wallet as soon as the link is activated, at which point they will be able to transfer their consent using a smart contract. Because of this, it is nearly impossible to make any changes to the transactions, which means that the stolen funds and properties cannot be recovered.
Before investing in virtual real estate, one should be fully cognizant of certain risks, such as the platform operator’s potentially extensive control over your virtual property rights. Furthermore, there are no assurances that your Metaverse investment will yield a profit. At this early stage in development, it is impossible to predict which platforms will continue to gain popularity and which ones won’t. However, if you’re the gambling type or have a business plan that may benefit from having a metaverse presence, you should give it a shot.
David Bitton is the Co-Founder and CMO at DoorLoop, a property management software for the real estate PropTech industry that has raised $30M. He is also a member of the Forbes Technology Council.