As Web3 emerges, a new asset class can be found in digital real estate that many are considering as potential investments in their portfolios. There are many different ways to invest in digital real estate, but first it’s important to understand how it works. If you want help determining how digital real estate investments could fit into your financial plan, talk to a financial advisor about your unique situation.
How To Invest In Digital Real Estate
In the past, many have thought of digital real estate as a website domain name or social media handle. But with the advent of Web3, that definition has grown to encompass parcels within the metaverse and using blockchain technology for physical real estate investments.
Before you can invest in digital real estate, you’ll need to create a virtual wallet. A popular virtual wallet is MetaMask. Another option is to use WalletConnect to link your existing virtual wallet to digital real estate investment opportunities. A virtual wallet can hold various kinds of money, including cryptocurrencies. Many platforms selling digital real estate require you to make purchases in a particular kind of cryptocurrency. So, it’s important to choose a wallet that supports the appropriate kind of cryptocurrency.
Here are two options to start investing in metaverse real estate:
- Decentraland: This is a software running on Ethereum that lets you buy and sell digital real estate, create estates and sell wearable products. The Estates and Parcels section of the site offers a look at what virtual properties are for sale. Two types of tokens govern Decentral operations, LAND and MANA. LAND is a non-fungible token (NFT) that defines ownership of digital real estate; MANA is the currency used in Decentraland.
- The Sandbox: This is a game that allows you to monetize virtual assets and experiences you create on virtual property you own. Other users might pay you to put up a billboard on your property or pay for the opportunity to play the game you created.
Harnessing the Power of Blockchain for Physical Investments
If buying a piece of property in the metaverse feels too speculative, you can still use the power of the internet to make investments in physical real estate. With blockchain technology, you can opt into tokenized ownership opportunities of properties in the real world. Here are two ways to pursue this investment opportunity:
- Parcl: Parcl uses blockchain technology to make investing in physical real estate more affordable than traditional investing. You can get started with just $1 and add real estate to your portfolio.
- RealT: RealT offers fractionalized ownership of tokenized property. This ownership gives you the right to a portion of rental payments, which RealT pays out daily.
Is Investing In Digital Real Estate Safe?
The reality is that digital real estate is a highly speculative investment opportunity. Although there is a possibility of real rewards at some point, it’s hard to know which virtual properties will rise.
Plus, none of the various digital real estate ownership platforms are considered the standard option. With time, one of these platforms will likely become the preferred option, which means a potential payoff for investors within that universe. Ultimately, digital real estate is a risky investment. You’ll have to decide for yourself if the risk is worth the potential reward.
Digital real estate is a new investment opportunity that could diversify your portfolio. But before you add this highly speculative investment into your portfolio, consider speaking with a financial advisor. They can help you ensure your money plans are on track, even if you don’t strike it big in the world of digital real estate. While advisors can take some unknowns out of the investment opportunity, the risk will remain and should be weighed against the potential reward.
Tips for Digital Investing
- Learning how to invest in digital real estate is exciting, but consider speaking to a financial advisor before jumping into this opportunity. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Digital real estate may serve as one portion of a well-rounded portfolio. However, a more known and safer investment option might be to invest in physical real estate.
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