Digital Real Estate: What You Need To Know
Looking to buy a single-family home or apartment building, but not happy with any of the properties available in your local neighborhoods? Maybe it’s time to look online for a virtual mansion, penthouse, department store or amusement park.
That might sound ridiculous: Why would anyone want to buy a retail center or apartment complex that only exists in cyberspace? But digital or virtual real estate has become a real investment opportunity.
And don’t think that you can only invest in virtual land. You can also invest your dollars in domain names, buy existing websites or purchase a mobile app. This is all part of the world of digital real estate.
Some digital properties hold value. Others do that and generate income while doing so. You might be able to sell the digital real estate you buy today for a profit in the future.
How does this work? Here’s a primer on the ever-evolving world of digital real estate.
What Is Digital Real Estate?
You might think of virtual condo buildings, ranch homes and urban apartments when you think of digital real estate. But the truth is, digital real estate doesn’t just refer to virtual properties. It can also mean websites, NFTs, digital billboards and any other online asset that has the potential to hold value or generate income.
Say you build an entertainment or celebrity gossip blog. Over the years, you publish new content, add videos and hire staffers to write additional stories and interviews. Five years after starting your blog, you sell it to an investor for a hefty profit. That’s an example of digital real estate that has grown in value over time.
You might also buy a domain name and then sell it for a profit to an entrepreneur. For instance, you might buy the domain name clevelandbulbs.com and sell it to a Cleveland-based entrepreneur who wants to open a lightbulb or tulip store.
And in one of the more unusual ways to make money with digital real estate? You might buy a piece of virtual land in the Metaverse, an immersive online world in which people gather to socialize, play and learn. You can hold onto this land and sell it to a Metaverse visitor who wants to build a Victorian home, carnival or museum on the site. This transaction might be done with cryptocurrency.
Or you maybe you open your own virtual amusement park in the Metaverse. You might charge online visitors admission, again in the form of cryptocurrency.
The key is that digital real estate must have the potential to generate value or income. Buying a well-known website fronted by a brand-name retailer or organization could generate value. Buying an unknown individual’s rarely updated blog probably won’t. Because of this, that mostly ignored blog isn’t considered a true digital real estate opportunity.
These, and many more, are all ways to make money from digital real estate.
How Does Digital Real Estate Investing Work?
Digital real estate might not sound legitimate. After all, why would people pay for a slice of land that doesn’t exist in the physical world? But digital real estate does offer opportunities to generate income.
How? There are several ways:
- Domain flipping: You can buy a domain name, hold onto it and hope someone wants it badly enough to pay more for that name. For instance, you might buy a domain name such as chicagorestaurantcritic.com in the hopes that someone starting his or her own restaurant blog will be willing to pay big bucks for the domain name.
- Buy websites: Maybe you find a website covering real estate investing. The site isn’t attracting many visitors and its content hasn’t been updated recently. But you see potential. You might be able to buy it cheaply, boost its content – by adding new stories, hiring freelance writers to generate content or adding short videos – and then sell it for more than what you spent on it.
- Mobile apps: Maybe you can create a new mobile game, budgeting tool or dieting app. If you nab a big enough user base, you might then be able to sell this app for big money. You can also make money by charging people to use your app or charging them for in-app purchases, such as enhanced armor in mobile games or extra recipes in a cooking app.
- Virtual land or property: You can invest in digital land in the Metaverse, the virtual world that Meta, formerly Facebook, is focusing so much of its efforts on. You might then be able to sell that land to someone who wants to build a virtual mansion, amusement park or retail center on it. You might even purchase a virtual apartment building in the Metaverse and charge rent to virtual tenants.
- E-commerce stores: You can create an e-commerce store, a website in which you sell a product you create. Products can vary. Maybe you write self-help ebooks. You can sell them in your e-commerce store. Maybe you sell handcrafted chew toys for dogs. You can sell these from your e-commerce store, too.
- Cryptocurrency: You can invest in cryptocurrency, which is virtual money. The hope is that your virtual currency will rise in value. Be aware, though, that cryptocurrency is highly volatile. Its value can rise or drop sharply.
Should You Invest In Digital Real Estate?
Is investing in digital real estate a smart move? That depends. As with all investments, there are risks and rewards.
- Lower capital requirements: Buying physical real estate is expensive, and often requires a mortgage loan. Buying digital real estate usually requires a far smaller upfront investment.
- Global reach: When you buy a website, open an ecommerce store, purchase a domain name or buy a piece of virtual land, you can market this digital real estate to Internet users across the globe. It’s a great way to increase the potential market for your real estate.
- Investment diversification: It’s always wise to sink your dollars into several different investment vehicles. To protect your dollars, don’t invest only in physical real estate or the stock market. Instead, invest your money in a variety of investment vehicles, including digital real estate. This will protect you if one type of investment – say the stock market – suffers a drop.
- Scalability: You’ll have more flexibility with digital real estate. You’ll be able to quickly modify your investment, perhaps tweaking a website that you purchased so that it covers a new topic or adding more acres to that plot of virtual land that you purchased.
- Cybersecurity risks: As with anything having to do with the Web, you will have to worry about hackers and other cybercriminals. Hackers, could for instance, hijack a website that you own or disable your ecommerce store.
- Technological changes: Technology advances quickly in the online world. You might find that an ecommerce store that you own, blog that you publish or domain names that you purchase are quickly outdated.
- Market volatility: Volatility is another common trait of the virtual world. Take cryptocurrency: Its value can rise sharply one day and drop by just as much the next. You’ll need a high tolerance for volatility if you invest in digital real estate.
- Asset maintenance: As with physical real estate, you’ll need to spend time and money maintaining your digital real estate. Say you own an online store. You’ll need to constantly supply it with new content and products for people to buy. If you own a website, you’ll need to continually update it to keep visitors coming.
How To Invest In Digital Real Estate
Purchasing digital real estate requires some of the same steps you’d take to buy physical property.
Researching potential acquisitions is a key part of any investment strategy. That applies to the world of digital real estate, too.
The first step is to identify the types of digital real estate that might interest you. Maybe you don’t want to put a lot of effort into your investment. Purchasing domain names and then selling them might be your best investment strategy.
If you are willing to spend more time maintaining and building your digital real estate, you might consider purchasing a website that you can boost with new content or videos or opening an ecommerce store in which you will sell ebooks or online courses.
You’ll need to set a budget, too. As when investing in physical real estate, you don’t want to spend more than you can afford when purchasing digital real estate. Some types of digital real estate, including cryptocurrency, virtual land or NFTs, can sell for high prices. Make sure that whatever piece of virtual real estate you buy fits within a budget that you set before making the acquisition.
The acquisition phase is a key step: It’s when you close the purchase of a digital asset, whether that be a domain name, website or virtual apartment building.
The good news here is that purchasing digital real estate is a much simpler process than buying a single-family home or multifamily building.
When you buy physical real estate, you’ll often need to apply for a loan, something that could take a month or longer. When buying a domain name, though, you’ll simply do a search on a site such as GoDaddy.com or Squarespace to find if the domain name is available. If it is, you can also purchase it through that site.
If you want to buy a website, you can usually contact the site’s owner and make an offer. Buying virtual land in the Metaverse is a bit more complicated. Usually, though, you'll do this through the online world's real estate marketplaces, places like Decentraland, Treeverse and The Sandbox.
Maintenance And Growth
Depending on the digital real estate that you purchase, you’ll have to work to maintain and grow it. If you buy a blog, you’ll need to add content to it on a regular basis or you won’t attract readers. If you are running an ecommerce store, you’ll have to continually add new products to keep your sales strong.
Just as with physical real estate, you’ll need to maintain any digital real estate that you buy.
Alternatives To Investing In Digital Real Estate
Not quite ready to jump into the digital world? There are plenty of real-world assets in which you can invest:
- Real-world real estate: It can be expensive to purchase a single-family home or multifamily building. But if you buy the right property, you can earn rental income and sell it later for a big profit. And if you can’t afford to buy real estate on your own, you can pool your dollars with other investors in real estate investment trusts (REITs), which let you invest in real estate without purchasing a property on your own.
- Commodities: You might consider investing in commodities such as precious metals, including silver and gold. The hope is that these commodities will increase in value after you buy them.
- Retirement accounts: An easy way to invest is to deposit dollars regularly in a retirement account, such as a private IRA or employer-sponsored 401(k) plans. Regular deposits in these investments can pay off big once you hit retirement age.
- Stocks: If you can handle the risk, you might invest in the stock market. Just be patient: The value of stocks can rise or fall quickly. Sell a stock at the wrong time and you could lose thousands of dollars.
FAQs About Digital Real Estate
Investing in digital real estate can be confusing. Here are answers to some of the more common questions you might have about the process.
What’s the difference between virtual property and digital real estate?
Digital real estate is any type of virtual property, including virtual land, websites, blogs, ecommerce stores and domain names, that has value. Not all virtual property is digital real estate because not all online property has value.
Can you own digital real estate?
Yes. You can buy domain names, blogs, websites, online stores and even virtual plots of land in the Metaverse.
How much does it cost to buy digital real estate?
The cost of digital real estate depends on what you are buying. Buying a domain name could cost you $2 – $20 a year. If you want to buy virtual real estate in the Metaverse, you might spend as much $5,200 or more. The price of virtual land can vary widely.
Can I make passive income from digital real estate?
Yes. You might buy a mobile app that needs no additional work and simply collect the income from players making in-game purchases. You might open an ecommerce store that only sells ebooks that you’ve already written. Every sale would count as passive income.
The Bottom Line: The Rewards Of Digital Real Estate Investing Can Be Very Real
Interested in buying digital real estate? The potential is there for big profits … or losses. Make sure to research any investment before committing to a digital acquisition.
And don’t forget the gains you might earn by buying real-world real estate, including a single-family home that might increase in value while you own it. If you are ready to make this kind of brick-and-mortar investment, start an application with us to begin the process.