Virtual vs. Physical Real Estate: Which is the Better Investment?

In this day and age, virtual and physical real estate exists within the same realm, this has, indubitably, led to a constant debate: Is virtual or physical real estate the better investment?

That being said, here’s a breakdown of the two — from what they are, the pros and cons, and finally, our final recommendation on which of the two would be a sounder investment.

Virtual Real Estate 

Real estate has been a popular yet reliable form of investment for many years. Recently, the Internet recently presented an innovative and new opportunity to acquire assets that act as a digital version of traditional real estate, but without the physical location.


What is it? 

Virtual real estate, otherwise known as virtual lands, are terms used to describe the purchase of land and property in a virtual environment — examples of this include online games, or in the case of Decentraland, the metaverse. It has rapidly become the new frontier for wealth creation in the 21st century

Virtual real estate is similar to owning real-life land in various ways. The value of your land increases over time; it can be sold as and when you like, and you can build on it to create something more valuable. 

Like a coin, there are always two sides to everything. Here are some of the pros and cons of investing in virtual real estate.

Benefits  

1. Lower costs
   Virtual real estate costs anywhere from hundreds to thousands of dollars, making it more affordable than physical property.
2. Faster transactions
   Unlike traditional property transactions, which can take months to complete, virtual real estate transactions are often completed within minutes.
3. Tax advantages
   As virtual real estate is not subject to state or federal tax laws, owners are not required to pay capital gains taxes when selling their property.
4. No regulations or restrictions
   There is no limit to the number of properties an investor can purchase as there are no regulations on land ownership in the metaverse.

Drawbacks  

1. Metaverse data is limited
   Virtual real estate is relatively new; having only been around for a few years, there are no publicly available records and history of the prices. Prices in the metaverse are only visible for a short duration of time, which makes it hard to conduct fundamental research or analyse market trends.
2. No central authority to record your ownership 
   Despite being registered in the blockchain, no central governing bodies keep a track record of your land ownership. All property records are merely stored in virtual wallets.
3. Lack of liquidity
   Most crypto companies have yet to reach the threshold of users to gain liquidity — this means there aren’t enough users to buy and sell properties on the platform yet. The lower the number of users, the less likelihood of buying and renting land. This could pose a financial bottleneck, especially if you need to cash out quickly.

Physical Real Estate

Physical real estate refers to the traditional physical assets we’ve grown to be familiar with. From houses, apartments, lofts, commercial buildings, and even undeveloped land.

These investments can be very lucrative, especially if you own a physical asset that appreciates in value over time. Given if the property does not increase in value, you can still profit by renting it out or flipping it.

That said, the vast majority prefer to invest in physical real estate as it is relatively easier to comprehend the benefits that come with it (eg: location, accessibility) You can also leverage by familiarising yourself with the local market while working with professionals whose aim are to guide you to the best substantial opportunities.

Just like many things, physical real estate has both perks and drawbacks, which will be listed below.

Benefits  

1. Greater control
   The greatest advantage is that you have control over every aspect of the purchase — this includes management, alterations and improvements of the property.
2. Stability
   The value of the physical real estate will always be present in the market as it’s less volatile than virtual real estate. You have the opportunity to rent out physical space; there will be a demand as people require living spaces to create a home or for businesses. In this regard, it’s evidently more consistent than virtual lands, which is often subject to trends and shift in technology.
3. Liquidation potential when you need to raise cash quickly Profiting from real estate can be a tedious process; when you’re looking to profit quickly, the last thing you want are illiquid assets that remain stagnant in the market. 

Limitations  

1. High start-up cost
   Starting capital is needed prior to investing in physical real estate. To buy a property, you are required to have a down payment, which is approximately 20% of the total cost of the property. This may be tricky if you don’t have money saved up or a good credit score to take out loans from banks or financial institutions.
2. Requires long-term commitment
   Unlike stocks, purchasing a house and land requires long term commitment; you are not given the freedom to sell as and when you like. Traditional real estate investments require decades worth of commitment. Remember, this is not a get-rich-quick scheme; it’s a long game, after all.

The Better Investment 

Thus, both Virtual Land and physical real estate are great investment options. Eventually, it comes down to what you want from your investment, your financial goals, and the type of investor you aim to be.

Physical real estate offers storage of value to your investment. It provides you with opportunities to rent out extra rooms or sell them for a significantly larger sum of money.

On the other hand, virtual real estate costs less per m² to own or purchase in comparison to physical real estate. You’re given the opportunity to invest without having to pay commission or fees associated with the sale of the property.

Ultimately, we strongly believe physical real estate is the ideal way to a more consistent and fruitful investment. Though it requires significant resources and effort to set up, it eventually provides you with a stable cash flow and capital growth in your investment with a mitigated volatility risk.
 

Suited to cater to your every property investment needs, unveil the world of real estate and begin your journey today with Juwai.Asia!