Digital Real Estate Investing: Everything You Need to Know
March 25, 2022
What Is Digital Real Estate Investing?
Investing in real estate has always been a popular way to make money, but digital real estate investing is taking the world by storm. If buying land in a virtual environment seems abstract to you, don't worry. It's quickly becoming the norm and is something you might want to learn about sooner rather than later.
What Is Digital Real Estate
Digital real estate or virtual real estate sounds abstract, right? How could you own real estate for something that doesn't exist? The truth is, the digital assets bought and sold in the virtual world are tangible assets. Think of things like blogs, domain names, and mobile apps - they are all pieces of online real estate that might have a return on your investment.
Think of digital real estate as the easier version of investing in physical real estate. You own 'property,' but you don't have to worry about 3 AM phone calls because the pipes burst or the furnace stopped working.
Why Invest in Digital Real Estate
Like any investment, deciding if digital or virtual real estate investing is right for you is a personal decision, but here are some of the top reasons investors enjoy it.
Easy to Diversify
Diversification is the key to a properly allocated portfolio, and it's easy to diversify when buying digital real estate. You can invest in endless categories, giving you opportunities to try new niches and, most importantly, diversify your investments.
Potential to Launch a Business
When you invest in digital real estate, you're likely doing it for passive income, but what if you could eventually launch a business from it?
Many investors start with a small digital investment portfolio while remaining at their 9 to 5 job. However, they do this with the intention of growing property, such as their own website, to something that could replace their full-time income.
Buying and Selling Digital Real Estate Is Easy
Unlike physical real estate, digital real estate investing is liquid. In other words, you can buy and sell virtual land as often as you want. So while you might not have prospective buyers immediately, the turnaround time to sell virtual land is usually much shorter than the turnaround time to sell physical real estate or even redeem your shares early.
How to Get Involved in Digital Real Estate?
You may wonder how digital real estate works. It's easier than it may sound to become a digital real estate investor. Digital real estate requires one to have the desire to invest in a digital asset, and from there, you can choose your path. For example, you can start your own digital world by creating websites or social media accounts or buying existing digital real estate investments, earning passive income right from the start.
What Is the Metaverse?
You've likely heard of the metaverse lately, especially after Mark Zuckerberg announced his plans to become a part of it. You may have also heard it called 'Web 3.0.' Whatever you call it, the metaverse is an alternate digital reality. It's filled with avatars, virtual reality, augmented reality, and video. Users can use the virtual worlds to work, play, and communicate.
Examples of Digital Real Estate
Digital property has endless possibilities, but here are the most common ways digital real estate investors invest.
Websites and Domain Names
Many digital investors buy websites as their digital properties. You can buy an existing website or create your own and become a digital real estate investor. The ways to invest in websites are numerous, including website hosting, e-commerce stores, or blogs. You could even make a business from buying and selling an online business for a profit.
Domain names are another popular form of digital real estate investing. The domain name is the website's address. Every website needs one, so selling domain names is often a lucrative way to make more money.
Smartphone apps are separate from websites because they have their own virtual reality platform. Whether you develop the app yourself or buy an existing app, you can earn cash flow from it by charging for the app and upselling services within the app to increase your earnings.
Ecommerce stores have become even more popular since the pandemic shut everything down. Millions of people shop online for things they normally use to head to the physical store to get. If making money is a critical component of your desire to invest in virtual property, e-commerce stores are often a great place to start. Whether you buy and operate a store or you find websites that might be struggling, improve them, and then sell them for a profit. The profit potential is there.
Intellectual Properties and Courses
Intellectual property is another cash cow for investors. Whether you start a blog, sell items you create or create online courses, there is plenty of room for millions of people to make a profit in the online real estate world.
NFTs are becoming more popular every day, and they can encompass many forms. Otherwise known as digital assets, an NFT might be a piece of the Metaverse, a character, or physical products.
Cryptocurrency isn't actual real estate, but it's a digital asset that can help you invest in the digital world. There are many ways to invest in crypto, and you can buy and sell digital assets to make money or use the crypto to purchase land in the virtual world.
Start a Digital Wallet
To buy land virtually, you need cryptocurrency, starting with a digital wallet. Think of it as exchanging your US dollars for foreign currency, as it's the same concept. You trade physical money for virtual money that you can use to buy virtual land.
Keep in mind that you must buy a currency that is accepted on each virtual reality platform, so do your research first.
Choose a Buying Platform
Just like in physical real estate investing, you have options regarding how you purchase virtual land. You can buy direct or through a third-party marketplace. First-time investors often do best with marketplaces because everything is in one place. You don't have to worry about comparing different platforms and the available internet property. Everything is there for you.
As you gain experience, you may want to buy directly in the metaverse to get to know the area better and make informed decisions.
Make an Offer/Close on Digital Real Estate
Here's the nicest thing about buying digital real estate. The closing is as simple as clicking the 'buy' button, paying the money, and becoming a digital property investor. You don't have to worry about appraisals, title work, or any other stipulations that could stand in the way. You do, however, earn an NFT title that shows your ownership of the land.
Digital Real Estate Investing Pros
Like any investment opportunity, you should know the benefits of digital real estate investing.
- The income potential is endless, especially when you diversify your portfolio.
- You may be able to become self-employed if you buy real estate that offers money-making opportunities.
- Unlike physical property, the start-up costs investing in digital real estate are minimal. For example, you don't need thousands of dollars to buy a piece of land.
- Easy accessibility for most investors. There are very few barriers to entry, and the investments are liquid enough that you could buy and sell at any time.
- Your investments are easily scalable whether you want to scale up or scale down. The investments are liquid enough to offer this option.
Digital Real Estate Investing Cons
It's always important to understand the downsides of investing in digital real estate despite the emerging digital market.
- There's little to no regulation. Unlike when you buy a physical property, with rules and regulations to follow, there is very little oversight when purchasing digital products.
- There's incredible volatility. There isn't a long history of inflation hedging or stable values, unlike real estate in the real world. In addition, the internet can be wildly unpredictable, which could make your investments risky.
- There is a high risk of hacking or cyber security threats. The internet opens up the possibility for many more issues regarding security than other investment options.
Things to Keep In Mind When It Comes to Digital Real Estate Investing
While diversification is the key to successful investing, finding a niche or industry that you excel in, understand, and can succeed at is important. Unless you're just buying and selling digital properties, you want to enter a niche or industry that you can help solve pain points and increase your cash flow.
Think about what monetization method you'll use to earn income. Will you use affiliate marketing, sell ad space, create ebooks, blog content, online courses, or something else? Think about the time commitment involved in the avenue you choose to make sure the money is worth the work.
Traffic and Revenue
How much traffic does the website, social media accounts, course, or e-commerce store receive? More traffic means more revenue and vice versa. While you can't predict 100% what will happen since the internet is so unpredictable, investing in real estate with already high traffic or the potential to have high traffic is essential.
Potential and Viability of the Venture
As is the case with any new investment, do your own research. Find out how other similar ventures have endured and whether there is enough cash flow in the investment to give it a try.
Myths and Misconceptions About Digital Real Estate Investing
It's a Fad
While there have been investment fads throughout the last few decades, digital real estate investing has just begun and isn't going anywhere soon. It's the way of the future, and investors that jump in now will have a competitive edge on those that wait.
Digital Real Estate Will Lose Value
You could say this about traditional real estate too. Any real estate has the potential to lose value. Still, the difference in digital property is the potential for investors to build up the website traffic, create a stronger ad network, or ramp up digital marketing efforts to make digital real estate worth more.
The Metaverse Is Just a Video Game
To outsiders, the metaverse can seem like some alternate universe that's for gamers only, but when big corporations like PriceWaterHouseCooper and Prager Matis are getting involved, you know it's not 'just a video game.'
Digital Real Estate FAQ
Can You Make Money With Digital Real Estate?
Like any investment, there are risks of a total loss when you purchase digital real estate. The key is to diversify your portfolio to ensure that any loss doesn't become a total loss for you.
Where Can I Get Started?
You can start buying land in the virtual world directly or through a third-party marketplace. Most digital real estate investments will require cryptocurrency, though, so your first stop may need to be a digital wallet to start investing in the digital world.
What Is Digital Real Estate Really Worth?
No one can put a number on what digital real estate is worth right now. It's a new adventure, but one that's not going anywhere anytime soon. Just like values of traditional real estate increase and decrease, the same happens with digital real estate. So do your research, know what the potential of a property is and diversify your portfolio for the best results.
What’s the ROI in Digital Real Estate?
Just like you can't predict the ROI in traditional real estate, the same is true of digital land. While you've likely heard stories of crazy cryptocurrency trades resulting in millions of dollars in profit, that's not typical. So instead, take it on a case-by-case basis and do your own research to determine an investment's potential.
Is Digital Marketing Important for Digital Real Estate Business?
Digital marketing is essential to success in the digital real estate business. Digital marketing can consist of affiliate marketing, sponsored content, social media marketing, and search engine optimization.
Digital real estate investing is a new and exciting adventure with the potential for high rewards. However, as with any investment, there are risks involved. Do your research, diversify your portfolio, and invest wisely to maximize your chances of success. With a little bit of know-how, digital real estate investing can be a great way to make money in the digital world. Check out our blog to learn more about investing in real estate.
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