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What Is Digital Real Estate And Should You Invest In It?

March 29, 2024 6-minute read

Author: Sam Hawrylack

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Physical real estate is historically a reliable investment, but when the industry struggles, you may wonder where else to invest your money. Today, many investors are trying digital real estate. While this may sound abstract and complicated, if you know anything about domain names, mobile apps and advertising, you know much more about investing in the digital world than you give yourself credit for.

Like any investment, investing in digital assets has its pros and cons. If you’re interested in owning a piece of property online, let’s explore how investing in the virtual world compares to investing offline in the real world.

What Is Digital Real Estate?

Digital real estate refers to any digital assets you own. A textbook example is a website. It's easy to see how this digital property takes up space in the digital universe. Other digital real estate includes non-fungible tokens (NFTs), mobile apps and digital billboards.

Simply put, when you invest in digital real estate, you’re investing in virtual assets in online environments, like the internet or the metaverse. Many investors are turning to digital real estate due to the state of the housing market and its volatility.

Like physical real estate, you can interact with digital real estate, including seeing it, accessing it, using it and even renting it out. But how you buy and sell digital real estate and make money from it will look different.

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How Valuable Is Digital Real Estate?

Like any physical property, there's no way to predict the value of digital real estate beyond its current value. But we can examine the gains observed in digital real estate so far.

With market value in the trillions, it's easy to see why investors are jumping on board with digital real estate investing to diversify their portfolios and safeguard them from the unpredictability of real estate investments in the real world.

However, all investments experience ups and downs, so it doesn’t help to fixate on a period when virtual assets were particularly volatile. A savvy investor will look at the big picture and be realistic about potential earnings or losses.

8 Ways To Make Money From Digital Real Estate

Learning how to buy and invest in digital real estate may not be as complicated as you might imagine. Like any investment, there are a variety of ways to invest your funds.

1. Build Or Buy Websites

Building a successful website or buying an established one is the most common form of digital real estate investing. If you build a large audience, you can sell the website for more than you invested, earning capital gains.

2. Start An E-Commerce Store

Another popular digital property is the e-commerce store. E-commerce, short for electronic commerce, refers to the buying and selling of goods and services over the internet. You can sell products or services online through websites, mobile apps, social media or online marketplaces.

Many stores and companies switched from physical stores to e-commerce platforms during the pandemic. E-commerce stores offer the potential to grow more than physical stores because they can reach more customers, have lower operating costs and are relatively easier to manage.

3. Build A Blog

You can start a blog if you aren’t interested in running an e-commerce store. Once you build a following, you can make money through advertising.

Blog owners can try several revenue streams. With affiliate marketing, they earn commissions promoting services or products for other companies. They can work with other businesses to create and post sponsored content on their website. Bloggers can also build their brand and advertise on other websites to grow brand visibility and potential sales.

If you can build a big enough audience, you can try selling your blog and making a profit by handing over your audience to a new owner.

4. Rent Website Space

You can rent out digital real estate like you rent out investment properties. You can generate profits by renting a website. And at the same time, you’ll gain the capital appreciation the site makes.

5. Use Social Media

Making money on social media is another way of investing in digital real estate. Social media influencers or content creators get paid to produce sponsored videos and posts that promote products or services on their social media platforms.

The key is to know how to build a following. Pick a niche area of expertise or interest that current influencers haven't touched to build your audience. Like a blog, the more followers you have, the more opportunities you’ll get for advertising, sponsored posts, brand partnerships and affiliate marketing.

6. Flip Domain Names

Domain names can be worth money if you know what to look for and how to sell them. To get the biggest returns, look for domain names that are short and easy to remember, easy for companies to brand and end with the “.com” extension.

Like fixing and flipping homes, flipping domain names can be risky. To minimize your risk, you must fine-tune your sense of what will sell – and what won't. You likely won’t make any money if you buy a dud. But buy a premium domain name, and you may be able to sell it for thousands of dollars.

7. Buy And Sell Crypto Or NFTs

While the value of digital currency is a topic that seems to be perpetually up for debate, cryptocurrencies are the primary payment method in the metaverse. Cryptocurrency and NFTs get traded on blockchain marketplaces and offer unique investment opportunities. As more companies enter the metaverse, it may lead to wider adoption and growth in value for these assets.

8. Buy Virtual Land

Virtual reality has ushered in a new world of digital real estate. If you're looking for an investment that mimics investing in physical real estate, invest in virtual land in the metaverse. Decentraland is a popular platform for digital and metaverse real estate investments, but there are other platforms to choose from.

All digital real estate transactions are recorded on the Ethereum blockchain to prevent the replication of the real estate. A blockchain is a public database shared across many computers in a network.

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The Pros And Cons Of Digital Real Estate Investing

Like any investment, you should weigh the pros and cons of virtual real estate investments before buying anything.

The Pros Of Digital Real Estate Investing

  • Digital real estate has a $1 trillion market opportunity. Understanding the potential of digital real estate may make it easier for curious investors to consider investing. While this type of investing is relatively new for many investors, some experts believe it can be a great opportunity.
  • The potential exists for high returns. You may earn high rewards, especially as more investors start to figure out how to make money from digital real estate.
  • Digital real estate appreciates in value. Like physical real estate, digital real estate appreciates. If you own it, you earn that appreciation, which means you can sell the property for more than you bought it, earning capital gains on your investment.
  • It’s an option to diversify your investment portfolio. Diversifying your investment portfolio spreads your risk and minimizes the chances of total For example, putting all your money into physical real estate can be risky, especially if the housing market crashes. Investing money across different assets, such as digital real estate, will likely safeguard you from significant or total losses.

The Cons Of Digital Real Estate Investing

  • Investors are investing in an unpredictable market. Because digital real estate investing is relatively new, there isn’t much historical data available to make forecasts, making the market unpredictable. It's performing well now, but there’s no guarantee this will
  • Investors must “maintain” their digital property. You must maintain your digital property to ensure its value and make money when you sell it, which can be anything from keeping up your follower numbers and maintaining sponsors and advertisers to finding new tenants to keep your digital real estate occupied.
  • Investors must convert blockchain profits into U.S. dollars. Blockchain profits are in the form of cryptocurrency, not U.S. dollars. To access your earnings and calculate your profits, you must convert them to U.S. The conversion costs money and can reduce your profits.

How To Start Investing In Digital Real Estate

Several platforms – like Decentraland, The Sandbox and Axie Infinity – can help you learn how to buy digital real estate.

As you explore the different platforms, consider the type of cryptocurrency they require to purchase digital real estate. Decentraland uses MANA. The Sandbox uses SAND tokens, and Axie Infinity’s token is Axie Infinity Shards. All three platforms use the Ethereum blockchain.

After you buy your tokens, you must store them on the platform. When you’re ready to buy, you use your digital wallet to invest in available digital assets. Like physical real estate, digital properties vary in value, cost and potential, so do your research.

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The Bottom Line: Digital Real Estate Investing Has Profit Potential

Digital real estate is experiencing a popularity boom, and its quick profits will likely entice many investors. But it’s important to weigh the pros and cons of digital real estate before putting your hard-earned money on the line. While digital assets can diversify your portfolio, remember that traditional real estate offers a range of investment opportunities worth exploring.

If you'd like to learn more about investing in physical real estate, contact a financial expert or start an application today with Rocket Mortgage®.

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Sam Hawrylack

Samantha is a full-time personal finance and real estate writer with 5 years of experience. She has a Bachelor of Science in Finance and an MBA from West Chester University of Pennsylvania. She writes for publications like Rocket Mortgage, Bigger Pockets, Quicken Loans, Angi, Well Kept Wallet, Crediful, Clever Girl Finance, AllCards, InvestingAnswers, and many more.