It’s a whole new world.
Literally.
Real estate investors, pay attention. You’re probably going to hate this. But there’s a ton of money to be made.
When most folks buy a chunk of land or a home with the intention of generating some income from it, they do it because, well, it’s “real.” They’re buying a physical chunk of the Earth or a structure on it, knowing that real estate has long been one of the most reliable and lucrative investments on the planet.
It’s a real, tangible, physical asset. Unlike so many investments today, real estate investors can touch, hold and dance around on their property.
As they do, they’ll breathlessly repeat their creed. “They’re not making any more of it.”
But it’s darn near 2022. And everything is changing – in some very weird ways.
It turns out they are making new real estate… a heck of a lot of new real estate.
But it’s not real. Far from it.
It’s virtual.
The profits are anything but.
Like so many earlier land grabs… this one is minting millionaires.
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Zuck’s New HOA
In the few weeks since Facebook changed its name to Meta and promised us all a new reality in what’s dubbed the “metaverse,” virtual real estate has become red-hot.
We’ve been watching it unfold for months.
Virtual worlds like Decentraland and Axie Infinity are in the midst of a true seller’s market.
In fact, a single plot of “land” in Decentraland – a virtual world with an economy that functions much like the real one – just went for an incredible $2.43 million.
That’s up more than 100% from the previous record.
So what do folks get when they plunk down real money for virtual land?
Well, that’s an interesting question.
They get one of 90,000 or so parcels in the gaming environment. Technically, they get a nonfungible token (one of those NFTs so many folks are talking about) that represents a parcel on the virtual world’s map.
Since the game functions much like the real world, the owners of the land are free to do what they want with their little slice of heaven. They can put up a house, build a concert hall or start a store.
Even virtual people need butter and entertainment.
And just like in the real world, the better the location… the more valuable the land.
In Decentraland, for example, some 10,000 folks join in on the action each day. The properties closest to the center of the action get the most eyeballs… and therefore the most value.
The big $2.43 million purchase last month was in the heart of Decentraland‘s fashion district. The new owner is looking to expand into the digital-fashion industry.
Your guess is as good as ours as to what that means.
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A Buying Opportunity?
But here’s why all of this is so important. A recent study by Grayscale (the company behind the popular Bitcoin trust) just put the value of the metaverse at a whopping $1 trillion.
It all raises a question…
Should we be piling into this trend?
If you have to ask, then you know the answer.
No.
If you feel this is all very similar to the dot-com boom in the late 1990s, you’re not alone. Valuations are insane. Just like in the real world, you can easily get burned in the fake world of digital real estate if you don’t know what you’re doing.
But that’s not to say we’re not watching it all very closely. There’s tremendous opportunity here.
We say there are two things worth taking away from all of this.
First, there’s far too much money in this world.
Plain and simple.
That adds to our thesis that ultra-speculative assets will continue to soar in value as long as money is cheap and the Fed has its printing press running.
That’s why we like cryptos. There’s a tremendous slug of money behind them… making them some of the most lucrative opportunities on the planet.
But digital real estate is different from the cryptos we’re investing in. We’re buying coins that have utility… that do something. That’s not yet the case in digital real estate. It’s perhaps the most speculative investment trend we’ve seen yet.
That will change, though. And when it does, oh boy, the savvy investor will have a new playground.
There’s something else to all this, though. It is very intriguing.
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Yes, a lot of inexperienced and uninformed investors got slammed when the dot-com bubble imploded. But their general thesis was correct… We were on the cusp of something big and revolutionary.
We’re seeing the same thing here. This metaverse stuff isn’t going away. Trillion-dollar markets don’t tend to evaporate. They merely evolve into something new.
That’s certainly the case here.
So while it’s wise not to buy any digital real estate quite yet – unless you’re a wild-eyed gambler – it is very wise to pay attention to this sector.
In real estate, knowledge is a very valuable asset.
Follow what’s happening. Track the valuations. And learn what makes for a good plot of fake land.
We are.
Things are strange out there. Most definitely. But a lot of money is changing hands.
It’s a whole new world.
And they don’t come around all that often.
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