The Real Estate Metaverse Could Be the Next Big Thing

Do you want to purchase a home but are frustrated by the high prices? Are you concerned that the housing market may be in a bubble situation?

Consider this beautiful piece of real property that is currently available for $4,873 as of this writing. There are no HOA fees. No noisy neighbours. You might be eligible for a mortgage. It's a lovely plot of land known as "Parcel 148-35", and it only exists in Decentraland.

The real estate metaverse has been booming for a lot of the crypto bull runs. It will reach $500 million in 2021. It is not clear where it will go. The Sandbox saw a $450,000 purchase of land near Snoop Dogg's virtual "Snoop verse," and Tokens.com has created a metaverse real-estate company. You can now get a metaverse mortgage. (More to come.)

Why would people want to buy land in the metaverse?

There is a lot of absurdity in crypto. The idea of "digital property" can be particularly bizarre for those who are not paying attention.

The short answer is that people expect the price of metaverse land to rise. This has so far been a profitable bet for many. Forced scarcity is one reason. Decentraland has only 90,601 parcels, just as Bitcoin's total supply (BTC) is limited to 21 million. The land value will appreciate if it becomes a destination where millions of people hang out. According to Dan Reitzik (CEO of Terrazero metaverse real estate company), supply and demand are both important. The company now has 30 employees.

You can do things with virtual real estate, unlike when you purchase many cryptocurrencies. It can be used to build games. It displays advertisements on it. Put your non-fungible tokens (NFT) on top of it. You can even host a virtual Kendrick Lamar concert there. You could even rent it out to others who need the space. These activities can all lead to passive income.

This is where beer comes in. Miller Lite launched a virtual bar in Decentraland at halftime of the Super Bowl. Dan Reitzik's company was instrumental in making that happen. Reitzik says that between 20,000 and 30,000 avatars visited the bar over the course of the day. Many brands, from Adidas to Clinique, Fidelity, and Adidas, are trying to "enter" the metaverse. Reitzik states that virtual shops can only be set up by brands that own or rent land space to interact with customers.

If you are willing to work hard and put in the effort, virtual land can be a great way to increase its value. It is similar to the way you can renovate an old house. Janine Yorio is the CEO of Everyrealm. She says you can increase virtual land's value by adding to it. This is a very different approach than a traditional cryptocurrency token. Your creativity and the technical limitations of the platform.

Mortgages in Metaverse

Dan Reitzik's Terrazero was the first to offer a metaverse mortgage. This led to a flood of headlines, including Curbed's headline, "Now you can get a mortgage in the metaverse." It's one thing for you to risk a few of your investment assets to make a bet that has a high upside. It's quite another to purchase virtual land using the money you don't have. It's easy to see how a system of interlocking and highly leveraged mortgages could sink the crypto economy in 2008, especially after the Terra system collapsed.

Reitzik admits that the headline "Metaverse Mortgage" is provocative but quickly clarifies that it was not to give people an opportunity to speculate. He said that the first mortgage was given to a young entrepreneur who had plans to deploy advertising boards to generate revenue.

Reitzik says, "We looked at the business and decided it was viable." We gave him a 2-year loan. It's not a mortgage. Terrazero bought the parcel for the client and held the NFT (when land is purchased, it's an NFT). Then, he granted him the right to develop the land. He can make his dream come true, and then pay us back. Reitzik explains that once he has paid us off, he will own the land. Terrazero received "thousands" of inquiries as soon as the mortgage news was made public. Most of these were speculations. All of them were ignored by Reitzik. Reitzik said now that he doesn't want to create another 2008 for the metaverse.

Real estate in the metaverse can present some hidden risks, even if you forget about mortgages. Platform risk is the first. If you are considering a real estate purchase, it is essential that you can be certain that the land you want will exist in the future. It may not be appreciated in Queens, N.Y. as much as you had hoped, but it will still be there.

This is not true in the metaverse. This is not a bet on Decentraland's pixels, but on the possibility that Decentraland will remain relevant in the future. What if Decentraland becomes MySpace? And all that energy goes to The Sandbox instead. What if there is a new metaverse that renders both of these obsolete?

Yorio's team now includes 45 people and invests in a portfolio that contains 27 metaverses. It also tracks "a few hundred" virtual worlds, including some that haven't yet been launched. The company's name, "Everyrealm," suddenly makes sense. "You need to view it as a VC would," Yorio says. She's assessing startups in their early stages. "We are looking at the team." Are they able to build something similar? Are they able to come up with a new idea? Are they familiar with video game mechanics?

Teleportation is another issue that you should be aware of when purchasing a Nashville condo. As with other metaverses, Decentraland allows you to simply enter coordinates and teleport anywhere. This disrupts the usual real estate strategy. Yorio says that the adage "location, location, location" doesn't apply to him. It doesn't matter what you build. "

Reitzik agrees. "Location doesn't matter as much as it does in the real world." It is more important that there is traffic and people engaged. This is why Terrazero and Everyrealm don't just buy land and hope it appreciates. They actually "develop" the land to attract more traffic. Yorio says, "We invest, but then we also think about how we can help the community so that it's not just a barren wasteland." It is a real-life investment.

Some people consider it even better. Reitzik says, "In the real world, I can put 20,000 people at Rogers Arena [in Vancouver] for a Drake concert." But in the metaverse, we could have 20 million people there. Consider the potential for revenue generation and commerce that a virtual world offers. "

Nearly all of this rests on a single assumption: that people care about the metaverse. This is essentially a wager on the growth and viability of crypto. Your "land" will be worthless if the metaverse crashes. In the real world, even if your home is sold and the market tanks are purchased, you still have four walls and a roof to protect you from the storms. You will only have a few pixels if you spend a lot on Parcel 148, the market tanks, and -35.

Is metaverse real estate speculation crazy?

I have asked for Decentraland's de Cata's reply. De Cata replies, "It's okay to not understand different communities." De Cata acknowledges that digital ownership is not for everyone and that it sounds far removed from what most people are thinking. De Cata says that the idea behind building a decentralized metaverse is that users will create the content. The metaverse is the future, and we will all spend more time there, so shouldn't the users own the land?

De Cata says that the metaverse is similar to other social media platforms that they use every day, such as Twitter, Facebook, or Instagram. It might not be so crazy to purchase a piece of Harvard-era Facebook if you think the metaverse is today what social media was in 2007.

What is the Metaverse Real Estate Valuation?

Virtual property ownership is, in many ways, different from physical property ownership. First, real estate is finite. This is why the old saying "They can't make it anymore" applies to virtual property ownership. Second, you can create virtual land with code on any existing platform. And there are no limits to the number of new metaverse platforms that will be developed and released in the future.

There is also much debate about another old saying: "location, location, and location." Janine Yorio of Everyrealm, the CEO of metaverse investment platform Metaverse Group, states that you can teleport to any location, so it doesn't matter where you are. Lorne Sugarman, CEO of Metaverse Group, a Toronto-based virtual reality company, claims that properties located in Decentraland's Fashion District have a higher value than properties anywhere else in Decentraland. Another phenomenon is the $450,000 price tag for the property located next to Snoop Dogg's virtual sandbox mansion.

There has already been some cross-over between the virtual and physical real estate sectors. Yorio was a former partner at a private equity company and a real estate developer for Standard Hotels. Sugarman says that Metaverse Group wants to be Brookfield Properties in the virtual reality world. A closer rival, Bjarke Ingels Group, an architectural firm that was behind the KING Toronto condo development by Allied Properties, and Westbank Corp, has worked on a few virtual projects for clients. Virtually all the skills, talents, and instincts that have been developed in the real world have the same value.

The lure of investing in metaverse reality may seem too appealing or too good to pass up. It all depends on how full or empty your glass is. There are many caveats to digital real estate investing. The deals are not backed by tangible assets; they are made in cryptocurrency, which is extremely volatile and you may not be able to sell your property later on at a higher price, unlike in the Toronto real estate market. However, major players such as Meta/Facebook and Nvidia have already invested significantly in the metaverse. Even multi-national apparel brands like Nike and Adidas are now creating virtual clothing that avatars can purchase.

The metaverse is a new world that doesn't limit us and extends the realm we already live in. This is a complex concept for many, but we are still trying to understand what the metaverse holds for us and what it means for real estate.