Got a few thousand dollars to burn on digital land? Here’s how you can do it
Brokers Tal and Oren Alexander have sold some of America’s most expensive homes to the likes of Ken Griffin and Kanye West, and they’ve even been the listing agents for America’s most expensive residential real estate transaction (just $238 million). Now they are brokerage agreements in the metaverse, focusing on luxury mega-mansions in Sandbox, Decentraland, and other metaverse platforms. They’re not the only brokers who have started selling in the metaverse where real estate has become more and more expensive – sales have exceeded $500 million in 2021, a figure that is expected to double this year. But unless you’re looking for a million dollar metaverse listing, a broker is optional for aspiring metaverse owners.
There is no need for a broker to guide you through mountains of paperwork, since all transactions are stored on the blockchain. Additionally, buying and selling metaverse real estate is usually done on a peer-to-peer basis through secondary marketplaces like OpenSea, similar to finding a listing on Zillow. But finding and buying land in the Metaverse can still be confusing, especially since an intrepid soul has yet to write Metaverse Real Estate for Dummies.
Unlike IRL real estate, which is primarily a safe-haven asset, metaverse real estate is as risky as any other crypto asset (which, for now, means very risky). An act in the metaverse is an NFT, a smart contract on the blockchain, just like a CryptoPunk or Bored Ape. It is basically a smart contract that represents ownership of that particular parcel. “First, get yourself a wallet. Having the ability to buy,” said Josh Schuster, director of Silverback Development and metaverse real estate expert. These metaverse platforms, just like countries in the real world, all have different currencies. For example, Decentraland transactions use either the native token, “mana”, or ethereum, while Sandbox supports both ethereum and its own token called “sand”.
Searching for a metaverse property starts with exploring the map of a desired virtual world. In Genesis City, the first metropolis of Decentraland, one of the largest metaverse hubs, there are 43,689 private plots of land. The best Decentraland locations are usually found around plazas, especially Genesis Plaza, where avatars enter this virtual world. As in real life, a studio next to a major city center is worth more than a four bedroom in the middle of nowhere. Plots around Genesis Plaza are expensive: While Decentraland’s cheapest individual plot, equivalent to 52.5 square feet and far from attractions, goes for 3,990 mana points ($3,065 at the time of this writing) on Decentraland Marketplace, a similarly sized lot just off Genesis Plaza is 299,999 mana points ($230,419). (The value of mana has dropped rapidly these days, so dollar plot values change accordingly.)
Deciding which property to buy depends on the buyer’s ultimate goal for the plot. “The buyer has to think about what they really want to do in this space? Is it an investment? Do they actually want to build something and become more sophisticated?” Schuster asked. Many virtual communities are designed to replicate the real world. For example, in Decentraland, there are neighborhoods with different themes. Vegas City is a digital Sin City that emulates the Las Vegas Strip and is home to casinos, clubs and cinemas. Decentraland also has a neighborhood of fashion, which is the hub that recently hosted Metaverse Fashion Week.The best way to flip land and make a quick profit is to buy plots near a celebrity who has put down roots in the metaverse, like Snoop Dogg in the Sandbox or Paris Hilton in Roblox. Then, in addition to finding famous neighbors, buying locations with lots of digital foot traffic might prove precious. Genesis City buyers think their purchases are akin to buying land in New York City at the end of the 19th century, and Genesis Plaza could be the next Grand Central Station.
Buyers can also build mansions, galleries or even stadiums to ostensibly add value to the land and generate revenue. In the physical world, landlords make money by collecting rent, creating advertising space, or selling their properties when they appreciate in value. This is also true in the metaverse. Tokens.com purchased 116 plots in the heart of the Fashion District, and its CEO Andrew Kiugel plans to develop the virtual space into a destination for luxury brands that can be monetized by renting space.
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But not all experts agree that the “location, location, location” adage of IRL real estate applies to the metaverse. In Decentraland, avatars don’t need to walk; they can simply teleport from Vegas City to Fashion District, for example, by typing in the coordinates of the destination. “In a world where you don’t have to walk, why does location matter?” David Goldberg, co-founder of luxury real estate platform Web3 RLBLC and former metaverse real estate owner, asked. So, instead of opting for a property near Genesis Plaza, he bought a virtual plot of land that he thought was relatively cheap, spending 5 ETH (about $20,000) in October 2021 for a single plot of land. . Goldberg ended up selling it after realizing there wasn’t much point in owning a metaverse plot of land. It’s just “a piece of code in a particular world,” he said.
Just as stock investors tune in to read earnings reports, metaverse land buyers also need to do their research. Goldberg thinks it’s important to research and understand the concept and mission of each metaverse platform. Join Discord, follow a few channels and understand the community. “Who are the founders? Who are the people running the show? He asked. Choosing a metaverse platform to invest in itself is a difficult question. There is no guarantee of being profitable.
As celebrities and corporations invest heavily in the metaverse, larger IRL real estate agents are expected to enter the nascent virtual real estate industry. In December, a company called The Metaverse Group announcement stands out as the first virtual real estate complex. ONE Sotheby’s International Realty is sell a mansion in the sandbox that comes with an 11,000 square foot actual home in Miami slated for completion in the fourth quarter of 2022. There are bound to be more brokers to follow.
But even if people get help from a broker, buying land in the metaverse isn’t for everyone. Schuster compares the metaverse real estate hype to the California Gold Rush of 1849. We believe there may be gold. Buying metaverse real estate is nothing more than playing with a risky crypto asset. As of April 9, the average price of a parcel of land sold in the Decentraland metaverse has fallen at $7,100, the lowest in nine months. At the same time, all cryptocurrencies are depreciating. Mana is trading at $0.77 at the time of writing, which is a far cry from its record high market value of $5.88 in November 2021.
The greatest promise of the metaverse is that it will seamlessly connect the physical world and attract people with similar interests across the physical world to connect in this virtual space. Investors are betting on first-mover advantage and the artificial scarcity of virtual land to win big in the long run. But the reality is that the metaverse is still a niche concept, and all of these metaverse platforms are in different stages of development. It takes a lot of waiting to see infrastructure come out of the ground and regain a sense of community in virtual worlds. Claiming pixel space and putting a flag on that virtual piece of land with real money is now less fun than playing the Monopoly board game, and a whole lot more risky. For someone who isn’t a white-collar executive or a long-time crypto investor, now is probably not the best time to buy a virtual home yet.