What is digital real estate? Definition, examples, tips, and pros and cons

Have you ever considered owning digital real estate, such as a website or another type of online asset? The digital market continues to change shape, and as it grows, it offers endless opportunities to those who want to invest in it. Learn more about your options and how to access opportunities within this exciting market.  

What does ‘digital real estate’ mean?

So what is digital real estate, exactly?

Digital real estate refers to virtual properties or assets that exist online which have monetary value, such as websites, domain names, non-fungible tokens (NFTs), and virtual land.

In today’s digital economy, digital real estate works like physical real estate – you purchase it, and it can grow in value over time.

Is digital real estate a good investment?

Digital real estate investment can be good because it offers a low barrier to entry, a potential for passive income, and portfolio diversification. Digital assets can offer a great return on investment, especially if they attract followers and traffic. Your initial investment might be lower than physical real estate; you may not have to invest thousands of dollars to get started.

Current digital trends include decentralized finance (DeFi), or blockchain-based financial services, a system in which computers maintain a record of transactions across computers in a peer-to-peer network. The metaverse (a combination of augmented reality and real-life experience) is also another current trend in digital real estate.

However, it’s important to recognize that no investment is guaranteed, and some types of digital assets are unregulated, meaning a federal authority doesn’t apply specific laws or other control measures to them. For example, blockchain activities aren’t regulated.

While Rocket Mortgage® does not offer services related to digital real estate, you can consider your digital assets as part of your overall real estate investment portfolio.

Types of digital real estate investments

What types of digital real estate investments are available to you? Your options include:

• Websites: You can build or buy websites, make money from rental fees by renting out website space (based on the site’s capital appreciation), or advertise on other websites or blogs.
• Virtual land: Virtual land, including the digital landscape, geography, and other spaces, exists in the metaverse. Virtual land could include simple or complex environments, from a box to a mountain or ocean.
• Domains: A domain is the web address you use to access a website. You can flip domain names, meaning you look for domains for sale and resell them, possibly for thousands of dollars, particularly if you know what to look for.
• NFTs: NFTs involve owning a digital form of art, trading cards, comic books, games, and more, through photos, videos, audio files, and other digital assets. NFTs contain a unique identification code on a blockchain, ensuring it’s an original.  
• E-commerce stores: E-commerce involves buying and selling online, and it takes place through websites, apps, email ordering, social media, and marketplaces.

Digital real estate vs. physical real estate

Trying to decide between digital and physical real estate? Keep in mind this fun fact: The housing market grew about 5.5% annually from 1992 to 2024 (and the stock market delivered an average annual return of 10.39%, including dividends).

Digital real estate can earn millions (for example, consider the website lasvegas.com, which was registered in 1994 and sold for $90 million in 2005), but it’s never a guaranteed moneymaker.

Check out some of the major differences between the two investment types.

How to invest in digital real estate

Once you’re sure you’re interested in investing in digital real estate, you can take the following steps to learn how to invest in digital real estate:

• Choose your investment type. It’s important to choose the right investment for your needs. Do your research to decide whether you might want to invest in a website or domain, virtual land, NFTs, e-commerce store, or another type of investment.
• Research platforms and make a selection. Depending on the type of investment you choose, you’ll need a platform to build on or purchase from. For example, if you plan to build on social media, you’ll need access to Instagram, Twitter, or TikTok. If you want to set up a virtual storefront, you’ll need to access Amazon or Etsy. You can also access virtual real estate storefronts like Decentraland (a social virtual world) or OpenSea (a marketplace for NFTs).
• Set up a crypto wallet: A crypto wallet stores your private keys (not cryptocurrencies themselves) which allow you to send and receive cryptocurrencies like Bitcoin and Ethereum. The platform and investment type you choose may require you to use cryptocurrency. However, if you choose a website as your investment type, you won’t need a crypto wallet.
• Use Ethereum or other blockchain currency: If your digital asset requires payment using Ethereum or other blockchain currency, you can purchase it on Coinbase or another type of account and add your payment information. You could keep your assets there or use it to purchase a different digital asset.
• Purchase and manage your asset: Purchase your asset and manage it. For example, if you were to build a social media account, you’d want followers to build advertising, sponsored posts, brand partnerships, and affiliate marketing opportunities.

8 ways to make money with digital real estate

What is the process for making money with digital real estate? How can you buy, build, or monetize it? Read on to learn more about how you can build something through online property investing that will generate income or appreciate in value.

1. Build or flip websites

Owning and monetizing websites can generate income. First, decide whether you want to buy or build a website. Purchasing an existing website may be expensive, whereas building one from scratch may cost less. Consider choosing a profitable niche, like food, travel, business, technology, or health and wellness. Buy a website through a website marketplace or negotiate with the existing owner directly. Once you have a website, transfer ownership to yourself, improve it with SEO techniques, and monetize it. Once done, price and sell your site.

2. Start an e-commerce store

If you’ve ever dreamed of creating an online store, e-commerce can be a great way to make money. Starting an e-commerce store involves finding product opportunities, researching the competition and coming up with a business plan. Next, choose a business name, set up an online store, choose a shipping strategy, and set your marketing goals. Finally, launch your business.

3. Monetize a blog with ads or affiliate links

Blog owners can generate income through display ads (for example, through Google AdSense) and affiliate marketing partnerships. Advertisers will pay to gain exposure to your audience, including direct advertisers through direct deals. Display ads through AdSense show ads relevant to your niche content and the organic traffic you generate. The more content you generate, the more traffic you might receive.

Affiliate marketing involves posting links in your content for another site. When someone clicks on the link and buys the product you endorse, you earn a commission on the sale. For example, if you write an article about a cutting board for your cooking blog and insert a link, you’ll earn a commission if readers buy one.

4. Rent digital ad space

Website or blog owners can rent space (like sidebar banners or sponsored content slots) to advertisers as a recurring income stream, similar to renting physical property. If your blog or website has a lot of traffic, high-quality content, a professional design, or a loyal audience, you can rent digital ad space.

5. Grow and monetize social accounts

You can also turn platforms like Instagram, TikTok, or YouTube into digital real estate by building a following and partnering with brands. You can also grow revenue from sponsored content, affiliate links, or ad platforms like YouTube AdSense. You can also work with creator funds, which are platforms that pay creators for the content they create based on certain metrics (likes, views, favorites, shares).

6. Flip domain names

Domain investing (buying desirable or brandable domains to resell at a profit) involves searching and evaluating the domain, registering it, finding a buyer, and selling the domain. Consider buying domains that you can easily brand, and that are search friendly, relevant, and short and memorable. You can purchase one from a trusted domain registrar like GoDaddy, NameCheap, or Domain.com. 

7. Trade NFTs or crypto-based currency

NFTs and cryptocurrencies can be considered virtual assets tied to digital ownership. If you want to buy or sell digital art or metaverse real estate traded on blockchain marketplaces, you need a browser wallet that supports NFTs and cryptocurrency. Next, choose an NFT marketplace that allows you to buy, sell, and trade NFTs and purchase. You may or may not need cryptocurrency to purchase an NFT – some sites allow you to purchase crypto with a credit card.

8. Buy and develop metaverse land

You can also purchase virtual plots in platforms like Decentraland or The Sandbox and then build structures (virtual stores, event venues, etc.). This is one of the closest ways to mimic traditional real estate investing.

The pros and cons of digital real estate investing

It’s important to weigh the benefits and drawbacks of digital real estate investing before you choose to invest in digital properties. Let’s take a look:

Beginner tips for digital real estate investors

If you think you might want to invest in digital real estate, it may be wise to start small, such as with a website you build up yourself. A few other tips:

• If you’re thinking about investing in cryptocurrency, follow crypto trends so you know how they move in the crypto market.
• Diversify your assets as well, which means spreading your money across several different types of investments.
• It’s also important to watch for scams, which can lurk in any digital space. Do your homework to ensure product safety – check reviews and other user feedback to ensure you make the right decisions.
• Stay informed so you’re aware of all the tax and legal considerations involved with your digital real estate.

FAQ

What is the minimum investment required for digital real estate?

Investment amounts can vary based on the asset type and platform, with some opportunities available for as little as a few dollars. For example, registering a domain name can cost $10 – $20, but premium domain names can cost thousands or even millions. Ensure the asset fits your budget before you invest.

How do I ensure the security of my digital real estate assets?

You’ll want to ensure that whatever digital platform you purchase is secure. You may need a secure wallet for crypto, opt for two-factor authentication for your website, and choose reputable platforms for whatever digital investment you choose. For example, you can adopt SSL certificates to secure your website with data encryption (and build trust with your customer).

Can digital real estate generate passive income?

Yes, digital real estate can generate passive income, such as through renting virtual spaces, affiliate marketing on websites, and through earning royalties from NFTs. The amount of passive income you generate depends on a wide variety of factors, including the type of digital real estate you invest in.

Are there taxes associated with digital real estate investments?

You may pay taxes on your digital real estate investment. Keep records of your digital assets to calculate them as a capital gain or loss. Consult with a tax professional to receive a summary of the taxes associated with your digital real estate investments and to help you understand your tax obligations.

How does the value of digital real estate appreciate over time?

Like physical real estate, digital real estate can increase in value over time. This means you can sell your property for more than you spent to buy it. Factors influencing value appreciation can include increased traffic on your digital asset and the popularity of the platform you use. The more diligently you build your digital asset, the more likely it will increase in value.

The bottom line: Is digital real estate right for you?

Digital real estate can be an exciting way to make money, particularly if you’re looking for a way to make passive income online. Whether you’re considering domain flipping or crypto real estate, consider digital real estate as part of a diversified investment strategy, but not as a replacement for traditional investments.

Thinking of buying physical real estate to round out your portfolio? Start an application today with Rocket Mortgage®.