What To Look For When Investing In Digital Real Estate

Published on
July 31, 2022

Digital real estate is a growing asset class and has shown to be as profitable as its physical real estate counterpart. But, they're slightly different in terms of what to look for.

In summary, you should think about the following:

  • What project you're buying into
  • The community of that project
  • What utility is available with the land
  • Understand the profitability of previous landowners
  • Do any celebrities or important figures own land in that project?

Let's dive right into it!

What Digital Land Project Will You Be Buying Into?

The first thing to consider is what project will you be buying into? The two main projects, of course, are Sandbox and Decentraland, both of which, on the surface, are incredibly similar. But, when you go into the nitty-gritty of the two, they come across quite differently.

You can read an in-depth comparison of the two here. But, for a quick summary, check out our comparison below.

Also, they're not the only digital real estate projects out there. There are plenty of promising digital real estate projects, including Star Atlas, Axie and of course Parcl

Does The Project Have A Thriving Community?

Similar to when you're choosing which coin will make you rich, the same goes for digital real estate projects.

Community is a huge area that people overlook. If you're investing in digital real estate for the first time without looking at any guides, you'll most likely favor the project that has 5000 Twitter followers over the one with 50.

And for a good reason, the larger community validates the understanding that a larger community makes a coin or project more valuable and trustworthy as more people buy into the idea.

But, also keep an eye on the engagement of that community as an engaged community is an interested and real one. In today's digital world, it's easy to buy followers, so make sure that the Discord servers are filled with real people who ask many questions about the project.

What Can You Do With Your Land?

Another important question. If you invest in digital real estate, you should at least be able to go and do something with it.

Whether that be rent it out, build on it, or just stand there with your avatar. Of course, plenty of metaverse projects are early in their development, and currently, you might only be able to stare at your digital real estate from your wallet or platform account.

If you want to jump straight in and expose yourself to a virtual land, it'd be recommended that you don't wait about for a smaller project and just begin by buying real estate in an already operating and popular digital world such as Decentraland and Sandbox.

Considering that there aren't many digital worlds that are fully operating at the moment, buying digital real estate will come with a premium; you could try and time the market but considering that up to 90% of traders make a loss on their investments, it wouldn't be recommended.

Has It Been Profitable For Others Previously?

Considering what we discussed last, digital real estate is getting expensive due to its popularity and the lack of virtual real estate. In theory, digital assets are unlimited. If the creators decide to mint more land, they can. But, capping the land available is a smart way to ensure prices are high and the market isn't saturated.

Yes, digital real estate investing has been highly profitable for thousands of people out there, and the digital land grab wouldn't continue if it weren't. Prices will only increase in the long-term as more people flood into Web3 and the Metaverse.

At the time of writing, the average price of land in Sandbox is $8.3K. For Decentraland, it's $27.7K for digital property.

This is completely out of budget for the average person, which is why it might be ideal to look for smaller projects or invest in the land over a longer period to see a higher ROI.

Are There Any Big Hitters Investing In The Same Project?

Over the past few months, we've seen news articles about celebrities or even huge multi-national companies entering the digital realm such as Snoop Dogg buying digital real estate or Nike, Rolex, or Addidas buying land in the metaverse to advertise their products and create NFTs for digital avatars to wear.

The same goes for team members; if the founding team are some reputable Web2 names, it's worth spending some more time researching the project; typically, if there is a name attached to a project with a reputation of business success in the physical world, investors are more likely going to buy into the project, ultimately driving prices.

Researching the team and larger investors will be a great indication of the project's chances of success and increase your likelihood to make money.

What Type Of Digital Real Estate?

Of course, digital real estate investing isn't just the metaverse. It's investing in digital real estate to gain exposure to real-world real estate. Investing in physical real estate for the average person has quite honestly become unattainable due to the high financial costs.

That's why Parcl is utilizing Web3 technology to make investing in real estate cheaper, faster, and easier than ever before.

We do this using technology such as smart contracts, price oracles, and synthetic derivatives; we've explained this tech in previous articles if you'd like to learn more.

But essentially, we'll make it possible for the average person to trade real estate like it was a stock or cryptocurrency and for a fraction of what it'd typically cost to buy a property.

If you'd like to learn more about how we do this, check out our "What is Parcl" and our "Five reasons why Parcl is the future of real estate investing" article.

Shared content and posted charts are intended to be used for informational and educational purposes only. Parcl does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. Parcl does not accept liability for any financial loss or damages. For more information please see the terms of use.

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