Why is Digital Real Estate a Good Investment?

Investing in real estate has always been very popular. However, the traditional market for such investments has many challenges that make this option impossible for many people. First and foremost, it has a high entry threshold and low liquidity, although, thanks to technology, these problems are gradually being solved.

With the rise of the digital world, the horizons of investment opportunities are expanding, and digital real estate is becoming a dynamic and profitable market. This new asset class covers virtual objects in online universes — spaces where people communicate, work, and have fun. There are several ways to make such investments. This article will discuss the main methods of generating income, how to invest in digital real estate, and why investing in digital real estate is profitable.

What is Digital Real Estate?

Digital real estate is highly valued for its potential to appreciate in value and generate passive cash flow, just like physical real estate. Managing and trading it can involve strategies similar to those used in the traditional real estate market but adapted to the unique aspects of the digital environment.

1. Websites and domains. Owning a domain name or website can be considered a form of digital real estate. Websites can generate revenue through advertising, sales of goods or services, or subscription models.
2. Social media accounts. Accounts with a large following or significant influence can also be considered digital real estate because they can generate revenue through endorsements, advertising, or sponsored content.
3. Virtual land and assets in metaworlds. In virtual worlds or metaworlds such as Second Life and Roblox or blockchain-based platforms such as Decentraland or The Sandbox, users can buy and own virtual land or assets. These can be developed, sold, or leased like physical real estate.
4. NFT. Digital assets such as art, music, video, and other types of creative content sold and bought as NFTs are a form of digital real estate. The ownership of these assets is recorded on the blockchain, which guarantees the authenticity and copyright of the owner.

How Digital Real Estate Works

Digital real estate works similarly to physical real estate but exists completely in the virtual world. This form of real estate includes online properties that can be bought, sold, or developed. Owning digital real estate, such as websites, domain names, and even virtual spaces online, has value, often based on their potential for commercial use, traffic generation, or social impact.

When you manage a piece of digital real estate, such as a domain name, you control what content is displayed on that domain and how it is operated. This control allows owners to generate revenue in various ways, such as advertising, selling products or services, or renting to other companies. The value of digital real estate can increase due to factors such as high traffic volumes, a desirable domain name, or strategic importance to specific industries.

Benefits of Investing in Digital Real Estate

Digital real estate investment has risks, such as technological changes or changes in online consumer behavior. Still, it represents a good opportunity for those who want to diversify their investment portfolio or enter the real estate market with less capital.

Availability of Investments

Investing in tokenized assets means the investor does not need to buy the entire asset. It is enough to buy only a particular share. The claim may be small, but its cost will be appropriate. Asset tokenization provides a low barrier to entry, which is great for private investors.

Passive Income Without Expenses

As a rule, real estate is bought to receive passive income. However, the property is an asset that requires significant capital investment. In addition to buying it, it is also necessary to carry out repairs to the property, furnish it, spend time searching for tenants, manage the facility, etc. You can hire a property manager, but in this case, you must pay at least 25-30% of your property income.

Real estate tokenization solves this problem. It is enough for an investor to buy a token and receive passive income immediately. You do not need to manage the property, look for tenants, and bear the costs required to repair the facility. All these problems are solved by the company that issued tokens to raise funding.

Simple Tokenization Process

Tokenizing assets is easy, especially when turning to special consulting agencies like Stobox. This is important for property owners who want to transfer their assets to the blockchain. Using tokenization, a company can free up capital, raise funds from investors, buy new real estate, and so on.

Investor Protection

Unlike cryptocurrencies and utility tokens, a company issues security tokens during tokenization. These tokens are recognized as securities in many countries. Accordingly, all guarantees from state regulators apply to them, providing reliable investor protection.

Higher Liquidity

It isn't easy to sell real estate sometimes. This process can take several months, given the need to find a client, complete the necessary documents, etc. Selling tokens is much easier, especially with the development of products such as DS Swap by Stobox, which opens up a secondary market for security tokens. Interest in tokenized real estate is growing in the world, and the liquidity of digital assets is growing accordingly.

Methods of Investing in Digital Real Estate

Is digital real estate a good investment? Yes, sure. Digital real estate investing is one of the most convenient and simple ways. There are ample opportunities for investors here, including the ability to buy or sell assets without leaving home. There are three main ways to invest in real estate through digital assets.

Purchasing Digital Real Estate in the Metaverse

One of the most effective ways to generate revenue in the metaverse is to buy and sell virtual land. It is predicted that in 2024 the metaverse will be worth $800 billion, but in 2021 alone, sales in the metaverse exceeded $500 million. Many projects in the Metaverse are attracting increasing interest and investment, even though the initial cost may be high. To mitigate this, some investors are starting with less popular projects that, while cheaper, may carry more risk.

Related: What is Metaverse, and how to leverage it for business?

Renting Out Digital Real Estate

Leasing it out is a viable option for those who own virtual land. This method is becoming increasingly popular as companies like Nike explore leasing opportunities in the metasphere. The profitability of such leases can vary significantly depending on the initial cost and the terms of the fractional ownership agreements.

Real Estate Tokenization

This approach involves converting real estate rights into blockchain tokens, divided and sold like shares. Tokenization reduces barriers to real estate investment, making it more accessible to individual investors. The benefits include earnings from rents and potential profits from the sale of tokens if the value of the property increases. Payments are usually distributed monthly and can be made in various digital currencies.

Investor Protection and Security

The legal and regulatory framework protecting investors in the digital real estate market includes various components aimed at overseeing the issuance and trading of digital assets, providing transparency, and protecting investor rights. This system contains securities laws, consumer protection laws, anti-money laundering (AML) and know your customer (KYC) protocols, and property rights laws adapted to the digital environment.

Securities law is key because many digital real estate investments are treated as securities, especially when structured as security token offerings (STOs). These regulations ensure that all offerings meet the necessary registration or exemption requirements, providing a structured and safe investment environment.

AML and KYC protocols prevent financial crimes. These protocols help verify investor identity and track transactions to detect and prevent illegal activity.

Security Token Offerings (STOs)

STOs involve the issuance of digital tokens on a blockchain. These tokens represent an investment contract for an underlying asset, such as company shares, real estate property ownership, or other assets. 

One of the main benefits of STOs over other forms of blockchain-based crowdfunding is their compliance with regulatory standards. STOs are designed to comply with securities laws, which means they must undergo rigorous due diligence, disclose key information about the investment, and often must be sold only to accredited investors. These requirements are designed to protect investors and add a layer of security not typically found in other cryptocurrency businesses.

Summary

Digital assets make real estate investment more accessible. People can invest in three main ways – purchasing, renting real estate in the Metaverse, or buying tokenized assets. Tokenization will be an excellent choice for companies attracting private investors. As a result of tokenization, the company issues security tokens analogous to securities. This protects investors and the issuing company, lowering the investment threshold. Please contact our specialists if you want to learn more about real estate tokenization and consider this option for your company.

FAQ

Is it possible to make money on digital real estate?

Sure. The field of digital real estate is actively developing and brings good income to investors and property owners.

How to invest in digital real estate?

There are several options for buying digital real estate. For example, you can buy tokens during the Security Token Offering (STO). You can also make a deal through the DAO.

How to make money on digital real estate?

Earnings on digital real estate can be achieved in two ways: dividends from the rental of property (distributed by your share) or the sale of assets after their price rises.

Is digital real estate a good investment?

Yes. Real estate is always attractive because it will never lose its relevance. However, virtual real estate helps solve the disadvantages of investing in physical properties. Namely, it provides high liquidity, easy purchase, etc.