On a trajectory to double in 2022, virtual real estate sales in the metaverse exceeded $500 million in 2021. While the risks are numerous, the potential for rewards is also great. As virtual land prices continue to defy gravity, metaverse mortgage lenders have cropped up on the scene, providing investors with an opportunity to pay a downpayment and join the realm of metaverse real estate investment.
Welcome to the Metaverse
The metaverse is a collection of technologies that include virtual reality, augmented reality (which includes elements of both the digital and physical world), and the digital economy. Simply put, it’s a digital place that invites virtual experiences, ownership and entertainment. More than art galleries, concerts and video games, the metaverse is increasingly a place where users can buy and sell services, products and virtual land. Expected to generate over $1 trillion in annual revenues, JPMorgan predicts that almost every sector will be impacted by opportunities in the metaverse.
Despite high prices, many investors have turned to virtual real estate as an alternative investment. The majority of real estate is parked on four platforms including Decentraland, Sandbox, Cryptovoxels and Somnium. The average price for a parcel of land on any of the Big Four platforms is eye-wateringly high, ranging from $10,000 to over $225,000. If you’re wondering why investors are pouring money into virtual real estate, it’s primarily because of the utility and potential profits offered by these parcels of land.
First, as a landowner, the option to rent a parcel of land to other players or companies becomes a reality, potentially earning the landlord a handsome profit in the long run. Additionally, landlords have the option to develop or build structures on their land, ranging from shops, art galleries, casinos or any other establishment that can bring in additional revenue. Evidently, much like in the physical world, owning virtual land offers a path to a return on investment.
Priced out of virtual real estate?
The rise of Metaverse Mortgages and REITs
In light of soaring virtual land prices, lenders have entered the scene, offering loans against equity in cryptocurrency or NFTs, including virtual real estate. Several companies, including TerraZero, currently offer borrowers mortgage funds in return for collateral (or security). Metaverse mortgages offer a path to virtual real estate ownership. For example, if $15k is out of your budget, you can apply for a metaverse mortgage and purchase virtual real estate assets with only a downpayment. If you’d like to see TerraZero’s mortgage application process, you can check it out here. As always, investors should do their own research, and decide for themselves whether the risk of virtual real estate is suitable.
If you’re not interested in signing up to a metaverse mortgage but are still interested in investing in metaverse real estate, then check out Metaverse Real Estate Investment Trusts, or MREITs. A Canadian-based company, MetaSpace Real Estate Investment Trust (MREIT), has built and developed a native token that allows token owners to gain exposure to high-traffic virtual assets across the metaverse. In its whitepaper, MetaSpace claims to be the first estate investment trust built for the metaverse. As digital landlords, the owners aim to provide a simplified solution in the world of DeFi. Much like traditional REITs, MREIT focuses on the acquisition and management of virtual real estate. Since its launch in December 2021, MetaSpace’s MREIT achieved average liquidity of over $500k and average daily volumes of $100k+. With over 800+ token holders at the time of this writing, the company’s roadmap is packed with new developments across Q1-Q4 2022, including property acquisitions, retail and architect partnerships, quarterly rewards and workroom/coworking creation.
The future of metaverse real estate continues to unfold with key players taking advantage of the strong interest. As with all investments, it’s important to do your own research and homework before diving into an opportunity.