Last year, a fan of American rapper and businessman, Snoop Dog, purchased lands next to his property for a combined total of $1.23 million. The catch? The lands are in the metaverse, the virtual space where, if the trends are anything to go by, we would all soon be spending a greater part of our time.

This investor is not the only one in the last year to sink millions into real estate in the metaverse. Tokens.com, a blockchain technology company focused on NFTs and metaverse real estate, acquired 50 per cent of Metaverse Group, one of the world’s first virtual real estate companies, for about $1.7 million. Although it has its physical office in Toronto, the real estate company operates its headquarters in Decentraland in Crypto Valley, the virtual counterpart of Silicon Valley.

Snoopverse is Snoop Dogg's real estate investment in the metaverse — Snoop Dogg is building a home and community in the Metaverse. He is not the only one. Image courtesy of Luxury Launches

Why exactly are investors snapping up real estate in the Metaverse?

Virtual reality and virtual living, like cryptocurrencies, did not start today. Games like Roblox, Minecraft, and Animal Crossing helped lay the foundation of what we now know as the metaverse, as they allowed physical players virtually interact with one another in real-time.

As gaming rose in popularity, drawing in luxury and lifestyle brands, and also with the introduction of new technologies, including NFTs, a new idea began to take shape. What if we could do more than play games and pay occasional visits to the metaverse? What if we can actually live in it and visit our not-always-desirable real world instead?

All of these thoughts, made even more widespread by the 2020 global lockdown, is why virtual living is today’s next big thing, and, it only makes sense that if it is going to be our new reality, investing in it should be done early enough to reap the maximum benefits in the future.

Real estate in the metaverse will only be profitable if you consider location — Before committing any money to real estate in the metaverse, experts warn that you should consider if it is money you can easily let go of, and the location your property will be located. Image courtesy of NY Post

So, should you become an early metaverse real-estate investor?

Just like cryptocurrencies, investing in the virtual world is fraught with higher risks than other investments that take place in our physical realm.

Granted, business is taking off digitally, and even some of our activities are moving there. For example, Justin Bieber performed at a live concert in December last year, but in the metaverse. Even Paris Hilton DJ’ed a New Year’s Eve party on her own virtual island.

According to Andre Kiguel, CEO of Tokens.com, “Prices (of real estate) have gone up 400% to 500% in the last few months.” This is not only in Decentraland, which is perhaps the most popular ‘city’ in the metaverse but also in other places like Sandbox, Upland and Somnium Space.

Analysts speculate that the digital world may grow into a $1 trillion business in the near future as adoption becomes more popular, However, investing in real estate in the metaverse is more complicated than just buying a piece of land.

Location is the first factor to consider, Kiguel tells CNBC. “There are areas when you first go into the metaverse where people congregate — those areas would certainly be a lot more valuable than the areas that don’t have any events going on,” he explained.

Janine Yorio of Republic Realm, another virtual real estate development company agrees. “I think it absolutely matters who your neighbour is. That’s kind of true of almost anything, right? It’s like a club and you want to be around people that share similar interests.”

However, she also warns investors to be cautious. “[it is] highly, highly risky. You should only invest capital that you’re prepared to lose. It’s highly speculative. It’s also blockchain-based. And as we all know, crypto is highly volatile. But it can also be massively rewarding.”