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There\\u2019s a real estate boom going on in the metaverse! They hit $500 million dollars last year, and are expected to double this year, to one billion. The uptrend took off recently when Facebook announced plans to expand into the metaverse and changed its corporate name to Meta Platforms. CNBC reports that virtual real estate sales have gone up ninefold since Facebook\\u2019s announcement in October. (1)

Hi, I\'m Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

According to metaverse data provider, MetaMetric Solutions, investors spent a total of $83 million in January sales alone. Analysts based their 2022 projections on that amount of spending throughout the year. But some analysts are anticipating more growth. Analytics firm BrandEssence Market Research expects the virtual real estate market to grow at a compound annual rate of 31% a year through 2028.

What is the Metaverse?

But what exactly is the metaverse? And why are investors buying real estate that has no corresponding plot of land on this earth? Facebook explains it like this:

\\u201cThe \\u201cmetaverse\\u201d is a set of virtual spaces where you can create and explore with other people who aren\\u2019t in the same physical space as you. You\\u2019ll be able to hang out with friends, work, play, learn, shop, create and more. It\\u2019s not necessarily about spending more time online \\u2013 it\\u2019s about making the time you do spend online more meaningful.\\u201d (2)

Andrew Kiguel of the Toronto-based Tokens.com told CNBC: \\u201cYou can go to the carnival, you can go to a music concert, you can go to a museum.\\u201d This activity is carried out with a cartoon-like character called an avatar that represents you in your virtual world. (3)

Many celebrities have already ventured into the metaverse with their avatars, including Justin Bieber, Ariana Grande, DJ Marshmello, and Paris Hilton. She threw a New Year\\u2019s Eve party on her own virtual island.

Real Dollars for Unreal Properties

To capitalize on this idea of social interaction in the metaverse, investors are paying real dollars for unreall properties in prime locations that could, some day, be worth tons of money. Maybe. Prices are going up fast right now. Kiegel says that many properties are up 4 to 500% in just the last few months.

Popular Metaverse Platforms

There are many metaverse platforms, and new ones are launching every day, but there are just four that are attracting most of the land sales right now. The \\u201cBig Four\\u201d are Sandbox, Decentraland, Cryptovoxels, and Somnium.

The Sandbox is the biggest metaverse real estate platform. It has more than 166,000 parcels of land that measure 106 yards by 106 yards each. In December, they each sold for an ether equivalent of $12,700. An ether is the token used for Ethereum transactions, much like a bitcoin.

Investors can use cryptocurrency to buy, develop, and sell parcels of land. Like the real world of real estate, their value can rise as they are upgraded and turned into more desirable properties.

Metaverse real estate investor and advisory firm, Republic Realm, is creating 100 so-called \\u201cFantasy Islands\\u201d with dream-like villas and amenities that include boats and jet skis. The company sold 90 of the properties for $15,000 apiece on the first day of sales, and some of the buyers are relisting them for more than $100,000.

Republic Realm recently paid a record $4.3 million for land in the Sandbox. According to the Wall Street Journal, the company now owns more than 2,500 plots of virtual land in 19 different meta-worlds. It bought the $4.3 million dollar property from Atari SA.

Two Ways to Buy Virtual Land

There are two ways to buy virtual land \\u2013 directly from the platform or from a developer. Investors can also make changes, although it\\u2019s not as easy as picking up a paint brush, because you have to change the code.

Tokens.com set the previous record when it bought digital land for $2.43 million in the \\u201cfashion district\\u201d part of Decentraland. The metaverse real estate market is becoming a high-stakes investment play, although it\\u2019s also highly speculative.

Republic Realm\\u2019s CEO Janine Yorio says it\\u2019s a very risky business and you should only invest what you can afford to lose. She says: \\u201cIt\\u2019s highly speculative. It\\u2019s also blockchain-based. And as we all know, crypto is highly volatile. But it can also be massively rewarding.\\u201d

Choosing Your Property

As for how to choose your property, she doesn\\u2019t believe that location matters. She believes that values will increase depending on what people do with the land. That\\u2019s apparently because getting from one place to another is as simple as \\u201cteleporting.\\u201d

But other investors follow the real world real estate rule on location. One example is a $450,000 purchase of a property in the Sandbox so the buyer could be Snoop Dog\\u2019s neighbor, according to Seeking Alpha. (4)

There are some who feel that metaverse land sales are a crypto ponzi scheme. Investors buy land at increasingly higher prices, but there\\u2019s no underlying value because there\\u2019s no limit to the amount of virtual land you can create. Metaverse skeptics say the last man out might end up with a worthless piece of virtual space.

Whatever \\u201cmight\\u201d happen to the value of real estate in the metaverse, it\\u2019s going through a boom phase right now. And some of the biggest tech names are positioning themselves to be part of the metaverse future.

Facebook is only one of those names. Seeking Alpha lists a few of those relationships. Disney is working on the creation of virtual theme parks. Microsoft plans to incorporate virtual reality into its Teams platform. Many game companies are expanding rapidly into the virtual reality space. As I mentioned previously, several celebrities have already held big events in the metaverse. And now, some very brave real estate investors are snapping up these imaginary properties.

If you\\u2019d like to read more about this, you\\u2019ll find links in the show notes for this episode at newsforinvestors.com.

You can also join RealWealth for free while you are there. As a member, you have access to the Investor Portal where you can view sample REAL WORLD properties and their pro-formas. You can also connect with our network of resources, including experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

Thanks for listening, and please remember to hit the subscribe button, and leave a review!I\'m Kathy Fettke.

Links:

1 -https://www.cnbc.com/2022/02/01/metaverse-real-estate-sales-top-500-million-metametric-solutions-says.html

2 -https://about.fb.com/news/2021/09/building-the-metaverse-responsibly/

3 -https://www.cnbc.com/2022/01/12/investors-are-paying-millions-for-virtual-land-in-the-metaverse.html

4 -https://seekingalpha.com/article/4479857-who-wants-to-become-a-digital-landlord