Digital Real Estate, Metaverse Investing Tips: Republic’s Janine Yorio
- Republic.co is an alternative investment platform that gives investors access to unique offers.
- You have set up a digital real estate fund for invitations for accredited investors only.
- The real estate co-lead breaks up the strategy and what investors need to know about digital land.
- You can find more articles on Insider’s business page.
When interest rates hit all-time lows in the developed world in 2020, investors expanded their risk appetite to a range of alternative and sometimes seemingly insane trends from cryptocurrencies like Dogecoin to SPACs and NFTs.
Since 2016, the investment platform Republic has aimed to democratize alternative investments by providing access to a range of nontraditional investment offerings from private startups to crypto, real estate and video games.
The company recently launched a fund that provides access to one of the wildest and perhaps least popular investment trends of this year and last: virtual real estate.
What is virtual real estate?
Virtual real estate is the ability to invest in virtual real estate and land in virtual worlds, also known as metaverse.
Metaverses are similar to virtual games like SimCity and Minecraft. However, they usually don’t have a set purpose. They are simply virtual worlds that are developed and owned by their users.
Virtual real estate prices boomed on Decentraland, one of the most famous and popular metaverses, which was founded in 2017.
NonFungible.com told Bloomberg that the average price of land in Decentraland was $ 2,703, which is more than three times the 2020 price.
Decentraland initially divided the virtual land into a limited number of parts called parcels. Users can buy and sell packages with Decentraland’s MANA crypto token, as well as build on the packages.
According to the 2017 whitepaper, packages were originally sold for 1,000 MANA. That equates to around $ 1,000 today and $ 100 in 2017. MANA has seen prices rise 3,264% over the course of a year.
However, packages can be sold on the secondary market at much higher prices. The cheapest package is currently selling for around 6,700 MANA on the secondary market.
According to NonFungible.com, the most expensive second sale this year was $ 74,300, up 115% from the first sale in 2017.
The Fonds der Republik is currently only open to accredited investors by invitation and is limited to 99 people.
“Given the small number of participants we can have in the fund, we are restricting it to people who we believe are strategic and who are fully aware of the risks of investing in an asset class as speculative as this,” said Janine Yorio. Republic Real Estate Co-Head.
The Republic team initially launched an accredited fund to quickly capture the trend, Yorio said. However, you could open the fund to all investors at a later date.
“When I realized that digital real estate is more than just a fad and that real investment money is flowing into the sector, I thought that our company is truly uniquely positioned to create a very sophisticated financial product that brings both real estate experience and crypto experience “said Yorio.
And while metaverses and digital packages sound like these crazy and complex concepts, investing in digital real estate is very similar to investing in traditional real estate, Yorio said.
The fund has an investment committee process and they look for the following three characteristics when buying packages, Yorio said:
- Relative value: Yorio wants to buy digital packages that are not overpriced compared to comparable sales.
- Place and activity: The team looks for packages that are in interesting areas where there is activity and community.
- Development opportunities: Yorio is looking for packages large enough to have development opportunities or where they can be sold or rented to other groups that want to develop them.
“You’re not concerned about the condition of the property … we don’t have these issues with digital real estate, but the point is to evaluate the price and location which is very similar to real-world real estate evaluation,” Yorio said.
What investors need to know
For investors starting to delve into the world of digital real estate investing, Yorio recommends that investors consider the following three components:
1) Price development
Investors should have an idea of the price history of this property and comparable sales.
2) Metaverse layout
In some virtual worlds, everyone will enter at the same starting point. This means that in some metaverse, getting as close to the starting point as possible is really important just because there is more pedestrian traffic, Yorio said.
In other worlds, individuals can teleport or enter a destination to reach it instantly. In this case, they do not have to travel across the country.
“It’s important to understand how the mechanics of the world work,” said Yorio. “How can people get around inside and what is the pedestrian traffic like? And how does that affect the value of a parcel?”
3) Build skills
Different worlds have different rules about what can and cannot be built. For example, how tall a building can be.
“Every virtual world has nuances and it is important to understand that when you invest so you understand what the ultimate value of your package could be,” said Yorio. “Often related to what you can and can’t do on this package.”
Investors can definitely see digital real estate as a way to buy and flip, Yorio said, but there are also plenty of opportunities to get income from renting land, selling advertising space for buildings, and renting out the virtual space for other people’s events .
However, investors need to take into account that this is still a very young asset class, Yorio added.
“There’s just a lot of creativity where people think about really creative ideas to implement in the virtual worlds. They hire real-world architects and build really tricky spaces and events,” said Yorio. “I think a really exciting time because it’s still kind of a wild west, but it’s starting to get more organized and rich in content and community.”