What Is Digital Real Estate and How Can It Help the Average Investor?

21st-century investors have an endless stream of new investment options. From cryptocurrency to NFTs to cell tower leases, there are many ways to invest capital that weren’t an option half a century ago. Tech tools are even transforming traditional investment channels, like stocks and peer-to-peer lending.

Real estate is another area where tech is making a huge difference. From rental tools like Airbnb to platforms streamlining residential real estate purchases, technology is tearing down barriers and opening new and exciting frontiers for smaller investors interested in the real estate sector.

One particularly innovative area is digital real estate. Let’s break down this quickly growing corner of the real estate market and consider how it can help the average investor.

What Is Digital Real Estate?

Despite the constant use of the term in recent years, the definition of digital real estate is, well, a work in progress. Many define the term strictly as the metaverse equivalent of purchasing land in the physical world. In other words, digital real estate consists of specific, limited parcels of digital “space” in the metaverse — and this is certainly a form of digital real estate. But the definition shouldn’t stop there.

Rocket Mortgage broadens the definition to include “any digital assets you own.” It then goes on to point to websites, non-fungible tokens, digital billboards, and mobile apps as forms of digital real estate. 

The difference here is important. Investors should view digital real estate as more than a pixelated building on an online server. It can be a wide variety of digital items, each of which has one key attribute: ownership of a digital asset.

How Do You Invest in Digital Real Estate?

With such a broad definition, it should come as no surprise that there are many ways to invest in digital real estate. 

Some of the simplest and most affordable of these are to purchase a website or even a domain name. There are ways, like GoDaddy’s domain value appraisal tool, to see what a domain is worth all on its own. You can use websites to generate passive income in countless ways, as well, such as creating a lifestyle blog, an affiliate site, or an e-commerce shop.

Cryptocurrency and NFTs are also fairly accessible investment options. Tools like the Binance and Coinbase exchanges make it easy to set up and verify an account. Transfer money into the application, and you’re ready to make a purchase.

Tokenizing Digital Real Estate Opens Up More Options

You can also purchase actual real estate (both physical and digital) in the form of a digital real estate transaction. For instance, virtual property in the metaverse is purchasable and continues to gain traction.

As far as actual real estate is concerned, many companies are tokenizing the ownership of physical properties to lower the barrier to entry. For instance, RedSwan is a popular startup that is splitting multi-million dollar commercial real estate (CRE) properties into smaller, more accessible shares. Rather than an up-front price tag of $20 million or more, this allows smaller investors to purchase a portion of an expensive CRE building at a fraction of the cost (sometimes as little as $1,000). 

Whether it’s buying an NFT, setting up a website, flipping a domain name, or purchasing a piece of tokenized ownership for a real-world property, there are plenty of ways to invest in digital real estate. The question that remains is: is it worth it to do so?

Is Investing in Digital Real Estate a Smart Move for Investors?

For investors considering making the jump into digital real estate, there’s no doubt that you’re looking at a high-risk, high-reward scenario. On the one hand, digital real estate is an excellent way to diversify a portfolio, and it is dripping with immeasurable future potential. 

On the other hand, a lot of the promise of digital real estate is still just that: potential. The investment option is still unpredictable at best (although to be fair, projects that tie the digital property to physical, real-world alternatives do ameliorate at least part of this risk).

Before investing in digital real estate, ask yourself the following questions to gauge if it’s a good idea or not:

  • Are you investing in digital real estate to balance your portfolio? Don’t add to a high-risk situation. Instead, use digital real estate as a way to increase your chance of a high-return investment without eroding your overall stability.
  • Have you done your homework? Digital real estate projects should either be backed by a transparent company (as with metaverse properties) or have a clear and proven path to success (as with a website). In either case, read roadmaps, glean advice, and do your homework before making a decision.
  • Are you risking money you can’t afford to lose? It is advice repeated ad nauseam in the investment world. And it holds true here as much as anywhere else. Don’t gamble with digital real estate. Make smart investments with money you can leave alone until the time comes to sell on your terms.

Digital real estate is a powerful investment option. It enables investors to diversify their portfolios without the complexities or barriers to entry of traditional real estate. However, it isn’t a magic bullet. Nor does it assure investing success. 

Instead, make sure to approach digital real estate investing as an innovative and exciting new investing frontier with legitimate risks and plenty of upside. It’s an investment option that is well worth any serious investor’s consideration.

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