Metaverse Real Estate Mortgages: The Future of Property Investment?

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Metaverse virtual real estate is continuing to be one of the biggest winners of the crypto world, maintaining the impressive traction it garnered in 2021 by growing at a fast pace — both in interest and in pricing. On Jan. 27, metaverse tech company TerraZero announced the completion of one of the first-ever “metaverse mortgages” with platform Decentraland, in an effort to enable more people to acquire virtual real estate.

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TerraZero said it will offer a newly designed metaverse mortgage service to its clients who intend to finance the acquisition and purchase of virtual real estate — represented as a non-fungible token or NFT — with the help of the company’s metaverse mortgage loans collateralizing each transaction with the respective underlying NFTs as digital assets, per a press release.

Dan Reitzik, CEO of TerraZero, told GOBankingRates that the company’s infrastructure products fast-track secure transactions and eliminate barriers to entry for any business or any person looking to experience and explore the metaverse.

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“Not only does TerraZero empower real estate for companies, artists and individuals — we help our clients and customers profit off of their real estate through advertising, what can be built on their virtual land, and more,” Reitzik said. “All of this will come together, full-scale, as we launch TerraZero’s Amadea platform — which will bridge the virtual world and the real world together for everyone, everywhere.”

Reitzik explained that as land is finite in most decentralized metaverse worlds, the cost of land is increasing over time.

“TerraZero recognized early on that in order to expedite the growth and adoption of the metaverse, the same tools that are available in the real world, need to be available in the metaverse, and this includes financing of assets,” he said.

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Metaverse Real Estate Buyers Both Big and Small

In terms of interest, he said that that it comes from a slew of groups, from real-world mortgage companies to individuals looking to start new companies.

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“We have no specific audience per se at this time — it is the early days of the metaverse and the industry is learning and evolving,” he said. “We are already working with well-known brands, entrepreneurs and companies to assist them as they build out their metaverse presence. In the real world retailers rarely buy their properties outright, they either lease or finance their storefronts. We feel the same business rules will apply in the metaverse.”

Asked about the mortgage rates, Reitzik said that interest rate and the term of the loan vary “based on many factors including size of loan, location of property, down payment, and due diligence.”

“We’re looking at shorter terms than real world mortgages with competitive rates to ensure this is viable for all parties. As the metaverse matures, we will adapt accordingly,” he added.

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How Metaverse Mortgages Work

According to the announcement, prospective clients can go online to the TerraZero platform and explore offerings as well as listings. Once a client signs the mortgage contract, TerraZero approves the client to take out the mortgage on the property, with the land NFT to be held with TerraZero as the registered owner until the loan is paid back based on the agreed-upon terms. At the same time, TerraZero grants the client “deployment rights” so the client can — without delay — build on their land, organize events, run digital storefronts, and host their internal company office.

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“For this service, clients make monthly payments until such time that the mortgage is paid off, upon which the virtual land (NFT) will be fully transferred to the client,” the company’s press release reads.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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