What is Digital Real Estate?
Investing in real estate has been a long-standing strategy to create wealth. However, when the real-world real estate industry experiences downturns, investors might start to look for alternative options. This is where digital real estate comes into play.
Although the concept may sound somewhat intricate at first, those with a basic understanding of domain names, mobile apps, and online advertising are already acquainted with the fundamentals of digital assets.
|What is Digital Real Estate?
|Appraising Digital Real Estate
|Generating Revenue from Digital Real Estate
|Evaluating DRE Investing
|Starting with Digital Real Estate
What is digital real estate?
Digital Real Estate Defined: Broadly speaking, digital real estate encompasses any digital assets you own. It’s a form of digital property that can range from websites and mobile apps to non-fungible tokens (NFTs) and digital billboards. It is, in essence, an investment in the virtual universe of the internet, which is attracting investors due to the volatility of the physical housing market.
Though this ephemeral form of real estate is intangible, it can be used, and even leased out, like physical properties. However, the processes involved in buying, selling, and profit generation differ significantly from traditional real estate.
Appraising Digital Real Estate
Predicting the value of any real estate, whether digital or physical, is inherently uncertain. However, observing the performance of digital real estate thus far can provide some insights. With market values in trillions, digital real estate has become an attractive alternative investment avenue, particularly given the instability of physical real estate.
Generating Revenue from Digital Real Estate
There are various ways to generate income from this 21st-century real estate type.
Here are some common strategies:
Websites: One can either build a website from scratch or purchase an established one to make a profit.
Blogs: Another avenue is blogging. Upon garnering a substantial following, the blog can be monetized through advertising.
Advertising: Even without owning a website, digital advertising provides income opportunities through strategies such as affiliate marketing.
Renting Website Space: Just as physical properties can be leased, digital real estate can be rented out for generating passive income.
Social Media: Social media platforms can become profitable forms of DRE, with a large follower base opening opportunities for advertising and sponsored posts.
Domain Flipping: Much like flipping houses in the physical world, domain names can be bought and sold at a profit, given one understands what sells.
Digital Currency and NFTs: Despite their volatility, digital currencies and NFTs have gained popularity as investment avenues.
Virtual Land: Virtual land on metaverse platforms like Decentraland provide opportunities for a more traditional-feeling real estate investment.
All transactions in the realm of digital real estate are recorded on the Ethereum blockchain, a publicly shared database, which ensures the integrity and uniqueness of each digital property.
Evaluating DRE Investing
Before diving into digital real estate, one must consider its advantages and disadvantages.
On the plus side, it offers the potential for high returns and diversifies investment portfolios. On the downside, market unpredictability, the necessity for continual upkeep of digital properties, and conversion costs from cryptocurrencies to conventional currencies could pose challenges.
Starting with Digital Real Estate
To embark on digital real estate investing, platforms such as Decentraland, The Sandbox, and Axie Infinity are commonly used. These platforms use different types of cryptocurrencies for transactions. Once the tokens are purchased, they can be stored in a digital wallet on the chosen platform and used for investing in digital assets.
The Bottom Line
With its potential for quick returns and increasing popularity, it has emerged as an intriguing investment opportunity. However, it’s essential to weigh its pros and cons and not to invest all your funds into it exclusively.
Like physical real estate, digital assets can contribute to a diversified investment portfolio. That said, opportunities in traditional physical real estate investment should not be overlooked.