When most people think of virtual real estate investing, they think of ways that they can use the internet to leverage their real-world real estate investing business, whether they buy and sell properties, teach and mentor would-be investors or track down and sell leads on deals. However, a new kind of virtual real estate investor is entering the arena and converting their virtual money created in a pretend world into cold, hard, U.S. dollars[1]. Second Life, a virtual reality game that allows players to create avatars that navigate a literally boundless world and live any type of life in any type of avatar they choose, actually has a U.S. currency conversion rate (270 Linden dollars (SL currency) to 1 U.S. dollar) and is creating a small but significant population of virtual land barons and real estate moguls operating their real estate investing businesses entirely within a virtual world.
These virtual real estate investors have paid real money to obtain plots of land that they have parceled into smaller pieces for homes or developed to represent virtual paradises, complete with waterfalls, beautiful natural and developed scenery and, in some cases, mythical creatures or real-life mirrors of places like Dublin or London. Once you own a piece of land in Second Life, you can develop it, sell it or live on it just as you can in the real world. However, unlike in the real world, you will always pay a monthly fee on that land. You will never pay off your mortgage, and you will never not be “renting” in a sense since you have to continue to pay the monthly fee once you have paid the up-front purchase price. This means that if a virtual real estate investor succeeds in creating an attractive area in which to live that is in high demand, they can recoup their original investment and then continue to indefinitely generate profits that can be converted to real, U.S. dollars.
It should be noted that this summary makes the process sound a lot easier than it may actually be. There is a huge customer service requirement since Second Life players want to live in beautiful areas with entertainment, new scenes and often themed areas of development. Fail to keep them interested, and your rents go out the window as they move elsewhere. Additionally, there are currently only about 58 of Second Life’s 7 million users are generating more than $5,000 a month in any area of virtual business, indicating that the process simply is not as easy as it appears. On the other hand, many people view this low number as an indicator that there is a lot of opportunity still out there, and a number of “real” real estate businesses agree, with businesses like Coldwell Banker opening a brokerage in Second Life that has nearly 500 homes on the market right now. Coldwell Banker representatives indicate that the company is viewing its virtual office more as an advertising and promotional activity than a wealth generation tactic, but its presence could potentially impact Second Life land prices.
What do you think that games like Second Life mean for virtual real estate investors? Would you invest in real estate in a virtual world?
Thank you for reading! Your comments and questions are welcomed below.
[1] http://realestate.msn.com/article.aspx?cp-documentid=13107800